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

Dacula Rental Property in Front of a WildfireWhat makes a property unmortgageable – and what does that mean? You might have found a Dacula rental property touted as “unmortgageable,” and you may think why that is the case. In basic terms, an unmortgageable property is one for which buyers are unlikely to be able to acquire traditional financing, like a mortgage.

In some real estate transactions, that will make completing the sale almost unrealistic or impossible. As an investor and Dacula property manager, it’s integral to take into account what things could cause your property to be unmortgageable in such a way that you can avoid them beforehand. The last thing you want is to be unable to sell or refinance your single-family rental properties because of these matters 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 essential rooms in any home is the kitchen. The same can be said for the bathroom. These are two rooms that potential homebuyers will focus their attention on when considering a purchase, and if either is in terrible condition, it can make a property unmortgageable. If you’re planning to sell one of your rental properties, ensure to update any worn-out looking or damaged kitchens and bathrooms just before 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-functional one. It can be hard to finance if a property has multiple kitchens – such as, in a duplex or triplex. This is because lenders consider multiple kitchens as a potential liability, and they may be unlikely to offer a mortgage for such a property. If you’re looking to sell or refinance a rental property with more than one kitchen, you may want to find a cash buyer or look for a specialty lender.
  3. Too Close to Commercial Property. Lenders often desire properties that are positioned in residential areas. The reason for this is that 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 a headache to get financing.
  4. History of Short Leases. It may also be a real challenge to finance if your rental property has a history of short leases – case in point is if tenants only stay for six months or a year. This is because of fact that lenders see it as a higher-risk investment. The sure fix to this is to do everything you can to encourage tenants to stay and offer longer leases.
  5. Non-Standard Construction. It may be burdensome to finance your rental property if it has non-standard construction – for example if it has a steel frame or is a concrete pre-fabricated build. Even supposing it may not make a property unmortgageable, it will, in all likelihood, slow things down.
  6. Natural Hazards. If your rental property is set in an area with a history of natural disasters – such as a flood or an earthquake zone – it would possibly make mortgage lenders hesitate. In the same way, if the property is infested with invasive plants or if there is a nearby visible flood or fire damage. But sad to say, there aren’t multiple things you can do regarding elements out of your control.
  7. Undesirable Location. If your rental property is situated in a bad area – by way of illustration, in a high-crime neighborhood or an area with some environmental contamination – it may be arduous to finance. Other bad locations, by way of illustration, being too close to a landfill or a government land development can likewise make problems during a sale.
  8. Very Low Property Values. It could most certainly be difficult to finance your rental property if it’s established in an area with very low property values – to cite an instance, in a rural area or an economically depressed neighborhood. This is more 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, remedying it by appropriate renovation will help. There are considerable budget-friendly renovations you can do 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 – in particular, if the roads are in a sad state or there is a lack of public transportation – it may be a headache to finance. The reason for this is that lenders see weak infrastructure as a suggestion that the area is undesirable, and they may be doubtful and hesitant to guarantee a mortgage for such a property.
  10. Significant Damage. If your rental property has significant damage – by way of example, if the foundation is worn out or needs a new roof or other major repairs – it may be toilsome to finance. If the damage is quite extensive, it may make the property completely unmortgageable. The ideal practice to overcome this is to fix it up so that the property is in good condition before you try to sell it.

After all is said and done, consistent property maintenance and scheduled, regular improvements can help you prevent a large number of negative issues on this list. It is helpful and pertinent to study your investment properties carefully before looking at buying any with these red flags, both now and in the future. Even while no one can see everything that might happen, by running full market evaluations and caring for the properties you own, you can better guarantee 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 Executives Greater Atlanta today.

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