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10 Things That Make a Property Unmortgageable (and How to Avoid Them)

Issaquah Rental Property in Front of a WildfireWhat makes a property unmortgageable – and what does that mean? If you have found an Issaquah rental property assessed as “unmortgageable,” you definitely may wonder why. In ordinary terms, an unmortgageable property is one for which buyers are unlikely to be able to acquire traditional financing, such as a mortgage.

In many real estate transactions, that will make completing the sale almost impossible. As an investor and Issaquah property manager, it’s beneficial to find out what things could cause your property to be unmortgageable so that you can successfully avoid them. The last thing you want is to fail at trying to sell or refinance your single-family rental properties for the reason of the problems that make them unmortgageable.

To get the most out of your investments, here are ten things that could make your property unmortgageable and how to avoid them.

  1. Unusable Kitchen or Bathroom. One of the relevant rooms in any home is the kitchen. The same can be said for the bathroom. These are two rooms that potential homebuyers will pay special attention to when thinking about a purchase, and if either is in bad shape or disarray, it can make a property unmortgageable. If you are planning to sell one of your rental properties, make sure to update any shabby-looking or damaged kitchens and bathrooms before ever putting it on the market.
  2. Too Many Kitchens. In some cases, having too many kitchens can be just as bad as having a nonviable one. It can be complicated to finance if a property has multiple kitchens – for an instance, in a duplex or triplex. The reason is that lenders consider multiple kitchens as a potential liability, and they may be seriously unwilling to offer a mortgage for such a property. If you’re looking to sell or refinance a rental property with multiple kitchens, you will be required to find a cash buyer or look for a specialty lender.
  3. Too Close to Commercial Property. Lenders naturally like properties that are located in residential areas. That is because they view them as a safer investment. If your rental property is too close to commercial property – for example, if it’s in a mixed-use development – it may be complicated to get financing.
  4. History of Short Leases. It may also be complicated to finance if your rental property has a history of short leases – in particular if tenants only stay for six months or a year. This happens because lenders see it as a higher-risk investment. The simple fix is to do everything you can to get longer leases and encourage tenants to stay.
  5. Non-Standard Construction. It may also be quite exhausting to finance your rental property if it has non-standard construction – for instance if it has a steel frame or is a concrete pre-fabricated build. Much as it may not make a property unmortgageable, it will slow things down essentially.
  6. Natural Hazards. If your rental property is situated in a location with a history of natural disasters – for instance, in a flood or an earthquake zone – it could easily make mortgage lenders hesitate. The same holds if the property is infested with invasive plants or there is a nearby visible flood or fire damage. Unfortunately, there isn’t a great deal you can do about elements out of your control.
  7. Undesirable Location. If your rental property is placed in a horrible area – take one example, in a high-crime neighborhood or an area with certain environmental contamination – it may be too difficult to finance. Other hindrances, like being too close to a landfill or a government land development, can furthermore cause problems during a sale.
  8. Very Low Property Values. It can be difficult to finance your rental property if it’s in an area with very low property values – as an illustration, in a rural area or an economically depressed neighborhood. Especially applicable if the property has liens close to or over the property’s current value. If the property’s condition has caused property values to go down, repairing it will help. There are innumerable budget-friendly renovations you can do that will be helpful to increase property values in a short amount of time.
  9. Weak Infrastructure. If your rental property is located in an area with weak infrastructure – such as, if the roads are in poor condition or there is a lack of public transportation – it may be difficult to finance. That is because lenders see weak infrastructure as a particularly obvious sign the area is undesirable, and they may be indisposed to give a mortgage for such a property.
  10. Significant Damage. If your rental property has significant damage – such as, if the foundation is weak or needs a new roof or other major repairs – it may be laborious to finance. If the damage is critical, it may make the property completely unmortgageable. The appropriate means to sort this out is to always do whatever you can to ensure the property is in good condition before you try to sell it.

In summary, consistent property maintenance and regular improvements can be completely helpful for you to successfully dodge these negative issues on this list. It is, in addition, important to study your investment properties carefully before procuring any with these red flags, both now and in the future. While it is a matter of fact that no one can foresee everything that might happen, by executing meticulous market evaluations and caring for the properties you own, you can better nail down that you reap the rewards of your investments when the time is right.


If you’d like to learn more about how to optimize your investment properties, contact Real Property Management Eclipse today.

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