If you've been following developments in the country's residential real estate market, you've probably already heard the word 'turnkey' home several times. So much so that recent news reports highlighted the shortage of much-in-demand turnkey properties in Sydney.
Whether you're a new home buyer, looking for a better home, or an investor, in this article we lay out the relevant information to help you make a choice.
What Does Turnkey Mean?
Definitions for turnkey homes vary depending on different builders. In general, a turnkey home is one where once the building work is done, you can turn the key, enter the ready home and start living without the need for renovations, refurbishments, or other additional costs.
A turnkey property typically comes with the internal painting done, power supply, water and sewage connections taken care of, floor coverings and air conditioning in place, and even landscaping completed. It is mainly sold as a fixed price house.
The turnkey home may also be off-the-plan, ready-built, constructed on your land, or as part of a house and land package.
In Australia, we also know turnkey homes as a 'move-in ready home' or a 'complete new home.'
Who is Suitable for a Turnkey Home?
While there isn't any particular profile requirement for buying a turnkey house, the move in, ready home option is ideal for home buyers embracing the 'move-in now' approach. In sum, turnkey homes are ideal when:
- You are looking for a brand new home within budget restrictions.
- You do not have the time or patience to oversee home renovation activities.
- You're an investor actively seeking to purchase newly built properties in potential high-growth locations.
- You are either a couple, single, and/or renters seeking to downsize.
- You prefer a guaranteed, timely new build, sans the hassles of a long-drawn building process.
What You Can Expect in a Turnkey House
Turnkey home offerings differ from builder to builder. Before agreeing to the purchase, run a few checks on the builder's reputation, existing projects, and the list of inclusions in your turnkey home.
Typically essential utility connections including water, gas, electricity, and sewage are included in the turnkey package.
In addition, essentials such as aircon, light fittings, and kitchen appliances, internal painting, fencing, mailbox and basic landscaping of green spaces, security doors, screens, and window coverings, are included in the package.
Some builders offer different packages based on the needs and range of their floorplans. Nevertheless, you should almost certainly expect basic facilities like flooring, landscaping, flooring, fencing, and site costs to be included in the offer.
As mentioned previously, most turnkey homes come as a joint purchase with the block of land, so you can save time shopping for a house and block separately.
You may have already come across ads for stripped-down "turnkey" homes. In these cases, builders begin by advertising a property at a relatively lower price. Increments are charged over and above based on the specific features you select to be incorporated in your new turnkey house. On the flip-side, this could increase your costs significantly.
Turnkey House And Land Packages
As we have stated earlier, the land package offers vary depending on the builder. Some common variations include:
Split-Contract Turnkey House and Land Package
As the name suggests, you'll have one contract specific for the land when buying it from the developer; and another for building with the building company you've selected for constructing your home.
This option helps you get the ideal turnkey home on the right block since your builder will have already spotted the most suitable design for the block. Furthermore, you will not have to pay stamp duty on the land component.
Fixed Price Turnkey Packages
Usually, when buying your new home, you would buy a plot of land and then look around for a suitable builder. However, if you're a first home buyer, do read our blog for helpful hints when buying your first home.
A fixed price house and land package, on the other hand, make it a lot easier for you since the property developer and builder work together to take care of both steps for you.
Speaking on the subject, Graeme John, Head of Growth at Joust, adds, “Turnkey homes offer home buyers a streamlined and simplified way to buy a home. It can be less stressful than the regular process and comes with a host of benefits for those with time and budget restrictions. At the same time, we advise all home buyers to exercise caution. Though time may be priceless, your home is your safe space. Study turnkey providers' various offers and packages and make informed choices."
Benefits of Turnkey Homes
Cost-Effective and Less Stressful
Home buyers looking to avoid budget blowouts can do so with fixed price turnkey homes. However, implementing renovations, inclusions, and related costs can significantly increase your new home's construction cost. Furthermore, skilled labour shortages and supply chain disruptions can cause delays and increased costs.
If you're renting while waiting for the construction work to be completed, that would be an additional burden on stretched finances.
Instead, with your turnkey home, you can move into a completely ready-to-live home with better savings.
Ideal for Investors
Looking for a viable investment? Turnkey properties are a great way to generate an income stream with lesser hassles. Additionally, you can claim depreciation with new turnkey investment properties while attracting better rental returns than older properties in the same area. Your new turnkey property won't guzzle funds for plumbing, painting, and other niggles associated with older properties either.
Ease of Purchase
Buying a turnkey house and land package eliminates the hassle of picking a suitable lot for your new build. For packages, estate legal agreements are already factored in when selecting the ideal home design for the block.
Fixed Price Turnkey Packages
Fixed price packages mean you are fully aware of the expenses down to the last detail. Even better, considering that everything you need for your lifestyle is already paid for.
Good Value Proposition
Where turnkey homes come with more inclusions, chosen by skilled interior designers, you can derive significant value for your money. Volume builders allow you to negotiate good discounts with known suppliers.
Limitations of Turnkey Homes
Real estate is not a risk-free investment. Market dynamics, property tax implications, and natural disasters can throw a spanner in the works. Also, turnkey homes usually generate lower returns compared to independent properties.
Turnkey homes can be costly when the inclusions and renovation costs are factored into the final prices.
With the layout, style, design, and repairs being implemented before you move in, you may have limited options for giving your home your own personal touch.
Though they may appear great outwardly, cabinets, fixtures, and countertops may not be up to standards. You may need to hire an external building inspector to ensure functionality and standards are met.
What to Consider Before Buying Your Turnkey Home
Now that you're aware of the pros and cons, if you're convinced that a turnkey home is right for you, do consider the following factors when scouting around for house and land packages:
Developer and Land
Connecting well with your developer is essential as it supports a more transparent interaction, where you can clear your doubts and trust that the answers provided are genuine and of relevant value.
Before going ahead with any deal, do your own research about the land. Ensure that it's not linked to environmental problems, which may later affect your health and ownership.
Choice of Location
Location matters. Choose a place that is well planned, has adequate green spaces, parkland, and good infrastructure. If you use public transport, ensure it has good connectivity to get you around. A small reminder to check the distance to the town centre, shopping facilities, schools, healthcare, and childcare centres.
Total Clarity about the Contract
Since the concept of turnkey homes is used differently by builders, check exactly what your purchase includes - landscaping, site costs, mailboxes, aircon, and other inclusions listed earlier in this article, as well as those specific to your needs.
Look through the contract for a validity period (whether the contract only includes a time-barred tender price) and other such details. You could land up paying more if there are price increases later.
Read the fine print for hidden costs, potential variations, price increases, and unflattering terms and conditions. Click here to learn more about hidden costs of buying a house.
Tenant improvement allowances are usually capped at a specific amount by the builder of turnkey homes. For certain building fit outs in the construction or renovation stage, if the amount of money budgeted in the allowance is exceeded, or was insufficient in the first place, expect to pay more.
Joust For All Your Home Loan Needs
Joust is one of the most reliable and user-friendly Aussie online marketplaces for home loans. We help you save time and money by putting you in control of your home loan search with user-friendly tools such as Instant Match. In addition, by gaining access to up to 80% of lenders in Australia, you are better placed to get competitive home loan deals from our trusted lenders.
You could also try out our Mortgage Calculators to discover your borrowing capacity and compare home loans, stamp duty, and other necessary calculations. The estimates provided by mortgage calculators will help you assess your options and make your next move.