Why are most investment packages fixed price, full turnkey?

Most investment house and land packages are offered as fixed price full turnkey because this format appeals strongly to property investors looking for a hands-off, predictable, and risk-managed investment. Here's why it's the dominant model:

Fixed Price = Certainty

Investors want to know exactly what the property will cost—no surprise costs during construction.

• No budget blowouts
• Easier to get finance approved
• Aligns with investment planning and cash flow forecasting
• No cost increases if the package is bought much before the land Registration Date, i.e. much before the build can start.

Full Turnkey = Ready to Rent

"Turnkey" means the home is 100% move-in ready—you can literally turn the key, and a tenant can move in. This includes:

• Landscaping, fencing, driveway, clothesline
• Letterbox, blinds, flyscreens, even air-con
• Sometimes also includes NBN connection and TV antenna

Investors don’t want to coordinate finishing touches after handover—this removes hassle and speeds up rental income.

Time Efficiency

Investors are often buying interstate or from overseas and prefer not to manage construction. A fixed-price turnkey package:

• Reduces the need for constant oversight
• Gets the property tenanted faster
• Allows investors to focus on portfolio building

Tax & Depreciation Benefits

Turnkey packages make it easy for investors to:

• Claim full depreciation on the building and inclusions
• Maximise returns using quantity surveyor reports

Aligns with Off-the-Plan Strategies

In growth corridors, many investors buy off-the-plan:

• Lock in today’s price
• Ride capital growth through build
• Turnkey means no delays in earning rental income once built

Example:

An investor buys a 4-bed, 2-bath turnkey house in South Ripley for $620,000. When construction is complete:

• The home is landscaped, fenced, has blinds and appliances
• A tenant moves in within a week of handover
• Investor avoids spending an extra $15–20k on finishing items

In Summary:

What are the implications from a builder's perspective when they do such a fixed-price product up to a year before the land registration date?

Offering a fixed-price full turnkey package up to a year before land registration presents both strategic opportunities and financial risks for builders. Here’s a breakdown of the key implications:

1. Exposure to Rising Construction Costs

Builders are locking in today's price without knowing:

• How much material and labour will cost in 6–12 months
• If there will be further inflation, trade shortages, or supply delays

🔴 Risk: Margin erosion or losses if input costs increase significantly during the wait period.

2. Cash Flow Lag

• Contracts are signed, but build work won’t commence for months
• No progress payments = delayed revenue
• Meanwhile, overheads continue (staff, rent, marketing)

🔴 Risk: Reduced liquidity, especially for small to mid-sized builders.

3. Administrative Burden & Pipeline Management

• Managing a long pipeline of pending builds
• Keeping the contract valid for months while monitoring developer delays
• Needing to reassess pricing and inclusions if land delays go beyond expectation

🟡 Challenge: Operational complexity and staff time spent on dormant files.

4. Sales & Marketing Advantages

• Attractive for investors and first home buyers looking for price certainty
• Helps builders secure future pipeline and revenue forecasting
• Locking clients in early may limit buyer attrition to competitors

🟢 Opportunity: Strong forward order book = predictable sales pipeline.

5. Risk Management Tools Often Used

To protect against risk, builders may:

• Use price expiry clauses (e.g. price valid until X date)
• Offer provisional fixed price with escalation clauses (though less investor-friendly)
• Include delayed start surcharges if build doesn’t commence within X months of contract

In Summary – Pros and Cons for Builders

Example Scenario:

A builder locks in a $330K turnkey build in May 2024. Land registers in May 2025.

Between those dates, material costs rise 8%.

Without price protection, profit margin drops or vanishes.