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

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

In nearly all real estate transactions, that will make completing the sale almost unworkable and impossible. As an investor and Hillcrest property manager, it’s necessary to be informed of what things could cause your property to be unmortgageable so that you can avoid them. The last thing you want is to fail to sell or refinance your single-family rental properties owing to nuisances 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 necessary rooms in any home is the kitchen. The same can be said for the bathroom. These are two rooms that potential homebuyers will highlight and focus on when contemplating a purchase, and if either is in poor condition, it can make a property unmortgageable. If you’re planning to sell one of your rental properties, see to it to update any antiquated 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 an inoperative one. It can be complicated to finance if a property has multiple kitchens – as an illustration, in a duplex or triplex. This is because lenders view multiple kitchens as a potential liability, and they may be reluctant to present a mortgage for such a property. If you’re looking to sell or refinance a rental property with lots of kitchens, you have got to find a cash buyer or look for a specialty lender.
  3. Too Close to Commercial Property. Lenders often prefer properties that are positioned in residential areas. This is because they consider them a safer investment. If your rental property is too close to commercial property – such as, if it’s in a mixed-use development – it may be taxing to get financing.
  4. History of Short Leases. It may be complicated to finance if your rental property has a history of short leases – such as if tenants only stay for six months or a year. The thing is that lenders see it as a higher-risk investment. The evident fix is to do everything you can to secure longer leases and encourage tenants to stay.
  5. Non-Standard Construction. It may be exhausting 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. Even while it may not make a property unmortgageable, it will potentially slow things down.
  6. Natural Hazards. If your rental property is set in a place with a history of natural disasters – as an illustration, in a flood or an earthquake zone – it probably makes 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. Sad to say, there isn’t a lot you can do as regards elements out of your control.
  7. Undesirable Location. If your rental property is spotted in a distasteful area – such for instance, in a high-crime neighborhood or an area with multiple environmental contaminations – it may be grueling to finance. Other dilemmas, such as being too close to a landfill or a government land development, can create problems during a sale.
  8. Very Low Property Values. It is probably difficult to finance your rental property if it’s established in an area with very low property values – by way of illustration, in a rural area or an economically depressed neighborhood. This applies particularly 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 a large number of budget-friendly renovations you can do to support increased property values in a short amount of time.
  9. Weak Infrastructure. If your rental property is located in an area with weak infrastructure – for an instance, if the roads are bad or there is a lack of public transportation – it may be taxing to finance. This is because lenders see weak infrastructure as a clue that the area is undesirable, and they may be reluctant to offer a mortgage for such a property.
  10. Significant Damage. If your rental property has significant damage – particularly, if the foundation is crumbling or needs a new roof or other major repairs – it may be quite tough to finance. If the damage is great, it may make the property completely unmortgageable. The best means to resolve this is to fix the property until it is in good condition before you try to sell it.

In the end, consistent property maintenance and regularly scheduled improvements can help you get away from many issues on this list. It is, on top of everything else, principal to study your investment properties carefully before trying to procure any with these red flags, both now and in the future. Even supposing no one can foretell everything that might happen, by executing total and extensive market evaluations and caring for the properties you own, you can better see to it 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 Realevate Specialists today.

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