The Truth about Turnkey Properties
Purchasing a turnkey property can seem like the answer to all your prayers for first home buyers and investors. Brand new, ultra-modern and at a fixed price, what’s not to like? The Reserve Bank seems to agree, and current LVR (Loan to Value Ratio) restrictions do not apply to new homes.
Turnkey homes are undoubtedly an excellent option for many. And while there are plenty of upsides, there are also some downsides. Here we provide an overview of what you need to know.
This information is for general purposes only. Before making any decisions, it’s vital to talk to your Loan Market adviser for personalised advice.
What is a turnkey home?
Also called a house and land package, a turnkey home is what it says on the box. It’s a brand new, fully completed home. All you need to do is rock up and turn the key.
All the hassle and responsibility for the design and construction of the home rests with the developer. You pay a deposit, usually 10 per cent of the purchase price, and the rest is due on the settlement date. This is usually ten days after the title and code of compliance have been issued.
Benefits of turnkey properties
You’re buying a brand-new home, usually with a 10-year guarantee.
It comes at a fixed price, so you know exactly what you are paying.
It's easy on your cashflow. You can continue saving, and no repayments are required until completion.
Less stress is involved. No more trudging around open homes or competing with other buyers at auction.
You may be eligible for a government first home grant of up to $10,000 for a new build compared to a maximum of $5,000 for existing homes.
Downsides of turnkey homes
Construction can take longer than anticipated. Covid, weather or materials shortages could push out the completion date. And with most finance approvals lasting up to one year, construction delays could cause problems.
The developer may go bust before handover.
Poor workmanship. The completed property may not meet your expectations.
Is buying a turnkey property right for me?
If you are considering buying a turnkey property, it’s vital to do your homework beforehand. Here are some tips on how to prepare.
Have a lawyer review the paperwork. Contracts vary from developer to developer. Be sure to check whether there is a sunset clause. Recently, there have been many media reports where developers have used sunset clauses to bail out of contracts and resell at higher prices.
Make sure your deposit is held in a trust account to protect you should the developer go bust.
Know what you are buying. Check out the developer’s track record, have a look at any show homes and double-check what's included in the contract. For example, some builders include external landscaping while others don’t.
Thinking about buying a turnkey property? Everyone’s situation is different, so it’s essential to discuss the options with your Loan Market adviser.