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

Lehi Rental Property in Front of a WildfireWhat makes a property unmortgageable – and what does that mean? As soon as you have viewed a Lehi rental property supposed to be “unmortgageable,” you may stop and question why. In clear terms, an unmortgageable property is one for which buyers are unlikely to be able to obtain traditional financing, particularly a mortgage.

In most real estate transactions, that will make completing the sale almost unattainable and impossible. As an investor and Lehi property manager, it’s critical to comprehend what things could cause your property to be unmortgageable so that you can very carefully steer away from them. The last thing you want is to fail to sell or refinance your single-family rental properties on grounds of the 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 key rooms in any home is the kitchen. The same can be said for the bathroom. These are two rooms that potential homebuyers will closely inspect when pondering on a purchase, and if either is in a terrible state, it can make a property unmortgageable. If you’re designing to sell one of your rental properties, make sure to update any out-of-date or damaged kitchens and bathrooms in preparation for putting it on the market.
  2. Too Many Kitchens. In some cases, having too many kitchens can be just as bad as having a worthless one. It can be a headache to finance if a property has multiple kitchens – for example, in a duplex or triplex. That is because lenders note multiple kitchens as a potential liability, and they may be opposed to extending a mortgage for such a property. If you’re looking to sell or refinance a rental property with several kitchens, you will be obliged to find a cash buyer or look for a specialty lender.
  3. Too Close to Commercial Property. Lenders oftentimes choose properties that are located in residential areas. That is because they consider them a safer investment. If your rental property is too close to commercial property – for instance, 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 – for example if tenants only stay for six months or a year. This happens because lenders see it as a higher-risk investment. The apparent fix is to do everything you can to realize 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 a case in point if it has a steel frame or is a concrete pre-fabricated build. Even if it may not make a property unmortgageable, it will probably slow things down a whole lot.
  6. Natural Hazards. If your rental property is stationed in a region with a history of natural disasters – for example, in a flood or an earthquake zone – it, in all likelihood, makes mortgage lenders hesitate. The same can be said if the property is infested with invasive plants or there is a nearby visible flood or fire damage. Alas, there isn’t a whole lot you can do about elements out of your control.
  7. Undesirable Location. If your rental property is found in an unacceptable area – particularly, in a high-crime neighborhood or an area with considerable environmental contamination – it may be really hard to finance. Other issues, particularly being too close to a landfill or a government land development can cause problems during a sale.
  8. Very Low Property Values. It’s, in all likelihood, difficult to finance your rental property if it’s found in an area with very low property values – by way of example, in a rural area or an economically depressed neighborhood. This is all the 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, renovating it will help. There are some budget-friendly renovations you can do that are very useful in increasing property values in a short amount of time.
  9. Weak Infrastructure. If your rental property is located in an area with weak infrastructure – for instance, if the roads are in terrible shape or there is a lack of public transportation – it may be tricky to finance. That is because lenders see weak infrastructure as a signal that the area is undesirable, and they may be afraid to offer a mortgage for such a property.
  10. Significant Damage. If your rental property has significant damage – such as, if the foundation is broken-down or needs a new roof or other major repairs – it may be tedious to finance. If the damage is significant, it may make the property completely unmortgageable. The best thing to settle this is to safeguard that the property is in good condition before you try to sell it.

At the end of the day, consistent property maintenance and regular improvements can be of advantage to you, and keep you away from plenty of these issues on this list. It is furthermore foremost to study your investment properties carefully before buying any with these red flags, both now and in the future. As no one can foresee everything that might happen, by completing extensive market evaluations and caring for the properties you own, you can better ensure 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 Utah County today.

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