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

Magnolia Rental Property in Front of a WildfireWhat makes a property unmortgageable – and what does that mean? If, certainly, you have found a Magnolia rental property seen as “unmortgageable,” you may ask yourself why. In understandable terms, an unmortgageable property is one for which buyers are unlikely to be able to achieve traditional financing, that is to say, a mortgage.

In quite a lot of real estate transactions, that will make completing the sale almost beyond the bounds of possibility. As an investor and Magnolia property manager, it’s essential to ascertain what things could cause your property to be unmortgageable so you can get very far away from them. The last thing you want is to fail to sell or refinance your single-family rental properties due to negative issues 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 principal rooms in any home is the kitchen. The same can be said for the bathroom. These are two rooms that potential homebuyers will have primary concerns with when deliberating on a purchase, and if either is in very bad condition, it can make a property unmortgageable. If you’re coordinating to sell one of your rental properties, really make sure to update any outmoded or damaged kitchens and bathrooms preparatory to putting it on the market.
  2. Too Many Kitchens. In some cases, having too many kitchens can be just as bad as having a non-effective one. It can be a headache to finance if a property has multiple kitchens – for instance, in a duplex or triplex. This is for the reason that lenders see multiple kitchens as a potential liability, and they may be hesitant to put forward a mortgage for such a property. If you’re looking to sell or refinance a rental property with several kitchens, you might need to find a cash buyer or look for a specialty lender.
  3. Too Close to Commercial Property. Lenders most often select properties that are set in residential areas. The reason is that they think of them as a safer investment. If your rental property is too close to commercial property – take one example, if it’s in a mixed-use development – it may be tricky to get financing.
  4. History of Short Leases. It may be a headache to finance if your rental property has a history of short leases – like if tenants only stay for six months or a year. Because of that, lenders see it as a higher-risk investment. The best fix is to do everything you can to obtain longer leases and encourage tenants to stay.
  5. Non-Standard Construction. It may be toilsome to finance your rental property if it has non-standard construction – for illustration if it has a steel frame or is a concrete pre-fabricated build. Granting that it may not make a property unmortgageable, it will quite possibly slow things down hugely.
  6. Natural Hazards. If your rental property is positioned in a vicinity with a history of natural disasters – for instance, in a flood or an earthquake zone – it most likely might make mortgage lenders hesitate. The same is true if the property is infested with invasive plants or there is a nearby visible flood or fire damage. Too bad, there aren’t so many things you can do concerning elements out of your control.
  7. Undesirable Location. If your rental property is settled in a rather unpleasant area – such as, in a high-crime neighborhood or an area with particular environmental contamination – it may be really hard to finance. Other disadvantages, for instance, being too close to a landfill or a government land development, can, in particular, lead to problems during a sale.
  8. Very Low Property Values. It could be difficult to finance your rental property if it’s found in an area with very low property values – for example, in a rural area or an economically depressed neighborhood. Particularly true 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, fixing it up will certainly help. There are various budget-friendly renovations you can do to effectively help increase property values in a short amount of time.
  9. Weak Infrastructure. If your rental property is located in an area with weak infrastructure – for example, if the roads are in very bad shape or there is a lack of public transportation – it may be tricky to finance. The reason is that lenders see weak infrastructure as a beacon that the area is undesirable, and they may be resistant to bestow a mortgage for such a property.
  10. Significant Damage. If your rental property has significant damage – such as, if the foundation is damaged or needs a new roof or other major repairs – it may be tedious to finance. If the damage is too huge, it may make the property completely unmortgageable. The effective method to easily fix this is to make sure the property is in good condition before you try to sell it.

When all is said and done, consistent property maintenance and regular improvements can be of great use to keep away any negative issues on this list. It is, as well, essential to study your investment properties carefully before taking possession of any with these red flags, both now and in the future. While it’s indeed acceptable that no one can think ahead about everything that might happen, by applying full-scale market evaluations and caring for the properties you own, you can better ascertain 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 Republic today.

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