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

Milwaukee Rental Property in Front of a WildfireWhat makes a property unmortgageable – and what does that mean? If, as it happens, you have viewed a Milwaukee rental property determined to be “unmortgageable,” you may reckon why. In clear terms, an unmortgageable property is one for which buyers are unlikely to be able to obtain regular financing, like a mortgage.

In various real estate transactions, that will make completing the sale almost impossible. As an investor and Milwaukee property manager, it’s great to discover what things could cause your property to be unmortgageable so that you can avoid them. The last thing you want is to be unable to sell or refinance your single-family rental properties due to the problems 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 be immersed in when mulling over a purchase, and if either is in very poor condition, it can make a property unmortgageable. If you’re planning to sell one of your rental properties, determine to update any out-of-style 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 an impractical one. It can be stressful to finance if a property has multiple kitchens – particularly, in a duplex or triplex. That is because lenders take into consideration multiple kitchens as a potential liability, and they may be hesitating to give a mortgage for such a property. If you’re looking to sell or refinance a rental property with multiple kitchens, you must find a cash buyer or look for a specialty lender.
  3. Too Close to Commercial Property. Lenders customarily fancy properties that are situated in residential areas. This is because they note them as a safer investment. If your rental property is too close to commercial property – like if it’s in a mixed-use development – it may be hard to get financing.
  4. History of Short Leases. It may be hard to finance if your rental property has a history of short leases – specifically if tenants only stay for six months or a year. The thing is that lenders see it as a higher-risk investment. The perceivable fix is to do everything you can to provide longer leases and encourage tenants to stay.
  5. Non-Standard Construction. It may be tough to finance your rental property if it has non-standard construction – for instance if it has a steel frame or is a concrete pre-fabricated build. Although it may not make a property outright unmortgageable, it will most likely slow things down a lot.
  6. Natural Hazards. If your rental property is in a region with a history of natural disasters – particularly, in a flood or an earthquake zone – it can make 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. Unfortunately though, there aren’t a lot of things you can do concerning elements out of your control.
  7. Undesirable Location. If your rental property is located in a less than pleasant area – by way of example, in a high-crime neighborhood or an area with a few environmental contaminants – it may be burdensome to find financing. Other problems, such as being too close to a landfill or a government land development, can cause problems during a sale.
  8. Very Low Property Values. It would also seem to be difficult to finance your rental property if it’s found in an area with very low property values – for instance, in a rural area or an economically depressed neighborhood. Applicable, 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, refurbishing it will help. There are a whole lot of 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 – like, if the roads are broken or there is a lack of public transportation – it may be hard to finance. This is because lenders see weak infrastructure as a sign that the area is undesirable, and they may be averse to offering a mortgage for such a property.
  10. Significant Damage. If your rental property has significant damage – take one example, if the foundation is damaged or needs a new roof or other major repairs – it may be a pain to finance. If the damage is serious, it may make the property completely unmortgageable. The ideal way to work this out is to make sure the property is in good condition before you try to sell it.

What it all comes down to, consistent property maintenance and regularly scheduled improvements can benefit you by allowing you to sidestep these issues on this list. It is thus pivotal to study your investment properties carefully before spending money on any of these with red flags, both now and in the future. Even if no one can predict everything that might happen, by working on intensive market evaluations and caring for the properties you own, you can better safeguard 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 Greater Milwaukee today.

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