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

Troy Rental Property in Front of a WildfireWhat makes a property unmortgageable – and what does that mean? If you have detected a Troy rental property believed to be”unmortgageable,” you may wonder why. In simple terms, an unmortgageable property is one which buyers are unlikely to be able to get conventional financing, for instance, a mortgage.

In almost all real estate transactions, that will make completing the sale almost impossible indeed. As an investor and Troy property manager, it’s essential to know what things could cause your property to be unmortgageable so you can evade them. The last thing you want is to not be able to sell or refinance your single-family rental properties due to concerns 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 important rooms in any home is the kitchen. The same can be said for the bathroom. These are two rooms that potential homebuyers will usually focus on when considering a purchase, and if either is in a poor state, it can make a property unmortgageable. If you’re planning to sell one of your rental properties, try to update any outmoded or damaged kitchens and bathrooms before putting it on the market.
  2. Too Many Kitchens. In some cases, having too many kitchens can be just as bad as having an unserviceable one. It can be toilsome to finance if a property has multiple kitchens – for example, in a duplex or triplex. It has something to do with the fact that lenders observe multiple kitchens as a potential liability, and they may be averse to giving a mortgage for such a property. If you’re looking to sell or refinance a rental property with different kitchens, you should find a cash buyer or look for a specialty lender.
  3. Too Close to Commercial Property. Lenders regularly pick properties that are found in residential areas. It has something to do with the fact that they think of them as a safer investment. If your rental property is too close to commercial properties – for a case in point, if it’s in a mixed-use development – it may be tedious to get financing.
  4. History of Short Leases. It may be toilsome to finance if your rental property has a history of short leases – to cite an instance if tenants only stay for six months or a year. This is the reason that lenders see it as a higher-risk investment. The direct fix is to do everything you can to achieve longer leases and encourage tenants to stay.
  5. Non-Standard Construction. It may be unmanageable to finance your rental property if it has non-standard construction – like if it has a steel frame or is a concrete pre-fabricated build. Though it may not make a property unmortgageable, it will perhaps slow things down.
  6. Natural Hazards. If your rental property is found in an area with a history of natural disasters – for example, in a flood or an earthquake zone – it could make mortgage lenders hesitate. In the same manner, if the property is infested with invasive plants or there is a nearby visible flood or fire damage. Sadly, there isn’t something you can do when it comes to elements out of your control.
  7. Undesirable Location. If your rental property is positioned in an unsuitable area – specifically, in a high-crime neighborhood or an area with numerous environmental contamination – it may be demanding to finance. Other nuisances, for instance being too close to a landfill or a government land development, can equally make problems during a sale.
  8. Very Low Property Values. It may be difficult to finance your rental property if it’s stationed in an area with very low property values – for instance, in a rural area or an economically depressed neighborhood. This applies, in particular, 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 help. There are several budget-friendly renovations you can do to 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 – as an illustration, if the roads are in poor condition or there is a lack of public transportation – it may be tedious to finance. It has something to do with the fact that lenders see weak infrastructure as a hint that the area is undesirable, and they may be unenthusiastic to tender a mortgage for such a property.
  10. Significant Damage. If your rental property has significant damage – in particular, if the foundation is weakening or needs a new roof or other major repairs – it may be a headache to finance. If the damage is serious, it may make the property completely unmortgageable. The appropriate way to correct this is to get the property in good condition before you try to sell it.

At length, consistent property maintenance and conventional improvements can make you eliminate plenty of hindrances on this list. It is, on top of that, crucial to study your investment properties carefully when having any of these red flags, both now and in the future. Even though no one can see the future of everything that might happen, by completing extensive market evaluations and caring for the properties you own, you can better make sure 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 Metro Detroit today.

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