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Within this guide we cover all the pitfalls that can result in your property becoming unmortgageable. Sellers make innocent mistakes without the knowledge that their house will become unmortgageable.So, What makes a property unmortgageable?
Properties that have been neglected for years, as they may not be suitable for human habitation. People can find themselves in this situation when buying a property to refurbish. Running out of funds or change in circumstances can affect your project.
That don’t have kitchens and bathrooms or ones that are very dated are deemed unusable.
Believe it or not, a property with two kitchens. Why? Lenders assume that you could sub-let part of the property having bought it using a residential mortgage.
That are valued below £50,000, you will require a reliable cash buyer.
Apartments or Houses with leases less than 70 years. The freeholder has the right to take possession of the property after the lease expires.
Properties with structural issues, evident from cracks in ceilings and walls. These properties will require underpinning and remedial work carried out. Such properties remain unmortgageable and uninsured for five years or more following all work.
Subsidence occurs due to the soil surrounding the foundations shrinking or swelling. This causes the foundation, which supports the walls to move. Evidence of subsidence can be uneven floors, cracks within external walls and cracking above window openings. Even when fixed subsidence and structural issues are a stigma on a property. You will be required to disclose any of these issues to a buyer.
Properties that are close to mining works, areas of landfill or history of flooding are unmortgageable.
Properties with sitting tenants or regulated tenancies are unmortgageable. If tenants moved in before 15th January 1989, you have sitting tenants.
Properties with a defective lease are unmortgageable. An example of a defective lease is a block of flats and maintenance of a shared roof are unclear.
Properties with damp, dry or wet rot, wall ties or damaged floor joists are unmortgageable.
Properties with boundary disputes
Buildings in severe disrepair or dangerous
Illegal extensions without permission from the local councils planning and building control departments
Properties with non-standard construction, such as per-fabricated concrete
Properties that are next to commercial premises or apartments above food takeaways or shops
Properties within a close proximity to Japanese Knot-weed.
Properties with flying freehold
Fire damaged properties
Derelict agriculture buildings
This is not an exhaustive list. If any of the above points apply to you or you know your property is unmortgageable, there are many real estate companies that can buy your property at best costs.

If you have not asked yourself the question you have probably heard it raised – ‘so what’s a better investment, property or shares?’ The forum is typically a backyard BBQ between family and friends and sure enough it will spark interest with certain ardent supporters of one asset class over the other, keen to add to the mix their 2 cents worth of home spun wisdom.Having heard one too many ill-informed responses to this question, I have decided to write this short article outlining my view on the question. As a property investor, share investor and qualified financial planner I will hopefully provide you with a more intuitive response than those you may have heard in the past.Let’s first take a look at the reasons for investing in property and shares respectively.Reasons to Invest in PropertyEasier to understand – Property investment is generally more easily understood than share investment. Although property investment requires a certain level of sophistication it does not require the same degree of technical understanding that share investing does.Tangibility – Property investment provides tangible evidence of where your hard earned money is going. It is much more satisfying walking through your own investment property than through the aisles of a Woolworths store in which you are a shareholder.Control – Investing in property provides the investor with a greater level of control over their investment. When making decisions the property investor has complete influence over their investment unlike a share investor whose influence is only as great as their voting power.Potential to add value – Property provides the investor with the opportunity to improve its value either through renovation or development. This ability is not available with shares short of becoming a member of the board or creating your own publicly listed company.High gearing – Property enables investors with relatively small amounts of money to obtain exposure to relatively large assets. Property is a favoured form of security for banks and under certain circumstances may be fully financed with no recourse beyond the property. Shares on the other hand are generally financed at a maximum of 70% and the lender has recourse by way of margin calls against the investor when the LVR is breached.Low volatility – Property has historically provided low volatility relative to shares, although the infrequency of its valuation does bias the results.High long term returns – Property has historically provided high long term returns, particularly in comparison to fixed interest and cash.Tax efficiency – Property has a high degree of tax efficiency for a number of reasons. Firstly, its returns are comprised of a growth component that may be concessionally taxed (if held for over 12 months) using the capital gains tax discount. Secondly, property can be highly geared which results in a high deductible interest component. Thirdly, property allows the deduction of a depreciation component for building write off and plant and equipment which improves the after tax return.Reasons to Invest in SharesHigh liquidity – Shares generally provide higher liquidity than property. Whilst a line of credit facility secured against a property can help the matter, it is not always desirable to increase ones borrowings when cash is required.High Divisibility – A share portfolio is much more easily divisible than a property portfolio so when small amounts of cash is required a share investor can sell down a similar value of shares where a property investor is forced to sell an entire property.Low minimum investment – Shares provide the opportunity to invest smaller amounts of money than property. If you only have $5,000 to invest you will have no problems finding shares to purchase but good luck finding an investment property for this amount of money.Low transaction costs – Shares involve substantially lower transaction costs than property. The only costs involved in transacting shares are brokerage on both acquisition and disposal. Property on the other hand involves stamp duty, inspections, and legals on acquisition and advertising, agent’s commission and legals on disposal.Low ongoing costs – Shares involve substantially lower ongoing costs than property. In fact, direct share ownership does not involve any ongoing costs whereas property can involve body corporate fees, insurance, land tax, letting fees, maintenance costs, management fees, rates, and repair costs.Diversification – Due to the lower price of a share relative to a property it is possible to obtain greater diversification for your dollar by investing in shares. For example, if you have $100,000 to invest you may decide to spread it in $5,000 bundles across 20 different companies from 20 different sectors of the market. For an equivalent amount of money you would be lucky to purchase just one property without gearing.Timely performance appraisal – Shares in publicly listed companies enable the investor to make a timely assessment of the value and performance of their portfolio. The share investor can simply call their broker or view their portfolio value online whereas the property investor must obtain market appraisals and or valuations on each of their properties before being in a position to appraise the performance and value of their portfolio.High long term returns – Just like property shares have historically provided high long term returns, particularly in comparison to fixed interest and cash.Tax efficiency – Shares have a very high degree of tax efficiency for a number of reasons. Firstly, its returns are comprised of a growth component that may be concessionally taxed (if held for over 12 months) using the capital gains tax discount. Secondly, shares can be relatively highly geared which results in a relatively high deductible interest component. Thirdly, many Australian shares provide franking credits with their dividends that may be used to offset the investors other tax liabilities. Put another way, the dividend income from a fully franked share provides tax free income to a share investor on the 30% marginal tax rate.The ReturnsAt the end of the day you can have all of the before mentioned benefits but the bottom line for most investors is returns. Whilst we all know that past performance is no guarantee of future performance we are all nonetheless interested in how asset classes have performed in the past. As such, let’s now turn our attention to property and share historical returns.Over the years I have seen ardent supporters from both sides of the camp waving research papers in the air substantiating their claim that their favoured asset class has historically provided the highest return. Some have property marginally outperforming shares and some have shares marginally outperforming property on either a pre tax or post tax basis.How is this possible you might ask? Well, it all comes back to the measurement period of the research. As with all other asset classes, property and share values move in cycles. It therefore stands to reason that a measurement period incorporating more peaks and fewer troughs will provide a greater return for the period. Given that property and shares generally do not move in harmony with one another they each have peaks and troughs at different times in the cycle. Different measurements periods capture this and can therefore provide substantial variations in results.Below are the results from an ASX commissioned report prepared by Towns Perrin. The measurement period is only 1 year apart and spans for a considerable amount of time to provide more relevant information. 10 Years To December 2003Property 12.7%Shares 8.0%20 Years To December 2003Property 15.1%Shares 11.7%10 Years To December 2004Property 11.6%Shares 11.7%To December 2004Property 12.9%Shares 13.2%Source: ASX Investment Sector Performance Report by Towns PerrinSo what can we make of these results. Well, simply that both property and shares have each provided relatively high long term returns in excess of any other traditional asset classes.ConclusionProperty or shares? Given the comparability in historical returns and the many benefits they each present it should be obvious that the question shouldn’t be property or shares, but instead how much property and how much shares.So next time you are at a backyard BBQ and your ill-informed friend pipes up about property or shares being far superior to the other, politely reveal to them their ignorance and encourage them to seek professional financial advice!Oh, and when it comes to purchasing property for your portfolio, don’t pay retail price like everyone else, acquire your property the smart way by developing it at absolute developers cost. It’s easier than you think…By Luke AndersenPartner of Positive Property Strategies and co-author of ‘Residential Real Estate Development: A Practical Guide For Beginners To Experts’

Ireland’s economy depends largely on property which is why we desperately need property experts to help get us out of the recession. So why isn’t the Government using them?The wealth of the Irish nation was/is based on property values and the entire banking system was/is a leveraged play on property values: when property fell by a half the banks collapsed because they were more than 10 times leveraged.The current recession, then, has impacted Ireland dramatically because of the significant drop in property values. The recent €25 billion banking bailout and the €45 billion bailout in 2009/2010 were primarily necessitated by falls in property value.The risk now is that values will fall further, requiring more billions. Is anything being done to stop values falling? Can anything be done?Sometimes, when you are very close to the problem, you cannot craft a solution because you are overwhelmed by the problem and so are not thinking about the way to solve it.Do our policy makers really know anything about property values and their drivers? Is this the economic equivalent of the plague, with no one looking at fleas on the rats, or the potato famine, with no one looking for the bluestone spray?Has this Government access to an appropriate skill base that can halt and reverse the downward trend?The answer is a resounding “No.” It is relying on general economists and not urban economists or property experts, who frequent the property industry, and academia.Apart from a limited number of taxation-focused valuation specialists in the Valuations Office and OPW (and some fully occupied investment managers in Nama), the Government has no high-level property skills professionals at its disposal – none in the Department of Finance; none in the Central Bank; and none in the Department of Environment.Imagine running an airline without skilled pilots, engine technicians or navigators. Running an economy, now firmly proven to be grounded on property values, without these skills is surely unwise.Policy decision after policy decision is being made with little understanding of its effect on the intricate drivers of the Irish property industry and resultant effect on property values.The few economists that there are in Government are not qualified specialists in urban economists who are familiar with the detail of the property industry. While they may comment on high-level issues within the economy, they know little about the detailed workings of the property industry or the players or drivers of the property investment industry.The past Government incorrectly thought this “knowledge” came from their friends in the Galway tent – few of whom were Masters or PhD level urban economists.A bricklayer or carpenter turned developer might be a shrewd businessman – and he might be lucky – but he probably has no qualified understanding of property economics.In an economy that is “flying” normally, perhaps this can be tolerated, but when the going gets as tough – as it now has in Ireland – you need the equivalent of pilots, engine technicians and navigators to help prevent a crash landing.We have already had two such property-based “crash landings” in Ireland and still no one is looking at the fundamentals of why property values have collapsed and what can be done to halt or reverse the slide.Instead of seeking ways in which to understand the property industry and its macro and micro drivers, we get policy decision after policy decision that makes the situation even worse.Here are four examples:
• The 80 percent land value windfall tax destroyed the value of much development land and, by reducing the buy-in value to Nama, raised the cost of the banking bailout:• The Core Strategy policy of the 2010 Planning Act, by reducing the amount of zoned land, will add to the downward valuation of 50,000 hectares of former development land and will further undermine the banks and Nama’s asset base.• The upward/downward rent review policy proposals of the current government will knock about 20 per cent off the value of most property portfolios, further exasperating the banking problems. This has not been factored into the recent banking stress-test exercise.• The proposal to introduce rates on residential properties will further impact on house values.These may all be good policies in a normal economic environment but in what is the equivalent of a raging battlefield, they are like the troops smelling the roses or making daisy chains with the shells flying overhead.Is it any wonder that the international investment community won’t touch our Irish bonds or lend us money when thy can clearly see this madness.They understand urban economics even if we do not. When in a hole one should stop digging,Other industries have ministerial advisory groups so why not in the area of property? In overseas economies such as the UK and the US there are well-honed property advisory procedures in place.In the UK, the Property Industry Alliance submits regular updates to Government on issues affecting commercial property. Its most recent publication, of January 28th, gives a most detailed update on property debt risk relating to future trends in property values.In the US, the Urban Land Institute is probably the best property related think-tank in the world and gives direct advice to both the White House and the leaders of America’s property and financial services industries.The Government urgently needs to set up a high-level property advisory group, from national and international sources, from academia and the property industry.It needs to ask it to come up with strategies to halt and reverse the downward trend in property values and be given the mandate to look at the big picture as well as the fine tuning.It should be required to issue a preliminary report within three months of establishment.Every householder, investor, banker, and borrower would like to see some serious skills being applied to halting the downslide in values.The way to begin this is to assemble the brainpower that understands the industry and ask them to develop appropriate policies.Unfortunately, the old belief still prevails in Merrion Street and Dame Street – that simply because you own a house and built a kitchen extension, you understand the complexities of urban economics and property economics.What we are doing at present is equivalent to the 17th century practice of drawing blood from a sick patient.The skills are there – just mobilise the experts now and listen to their advice, please – for all our sakes.