Real Estate Ripple Effect

April 23, 2022 3:28 pm Published by

Killing two birds with one stone is a desirable objective, but rarely an achievable one. On Sunday, my attempt to escape from the demanding real estate industry and enjoy the water’s calm, I stumbled upon old knowledge while watching the ripples from boats passing by; the real estate ripple effect.  

The ripples start as large waves, slowly flow through the body of water, and gradually reduce in size as they move to shore. A ripple effect is the spreading results of one action, in this blog: Real Estate.

The purchase of property impacts multiple industries and this casual sequence of events continues to spread through the lifespan of this one property.

The cycle begins with the lender (or the bank of Canada?). The home must be built; the builder needs capital to make and uses a bank/lender. The lender needs investors and hires individuals to underwrite the transaction, collect documents, send out an appraiser, and finally (if all checks out) lend the builder money.

The transaction requires two lawyers, each lawyer representing their respective parties. The lawyer must also hire staff to handle the transaction. Lenders and lawyers must pay for their utilities for their office and paperwork.

Utility companies must hire staff.

The city is involved, which must also include staff.

Commonly, there are at least 25 people involved in this one transaction, and we haven’t hit the ground yet. These numbers multiply during the property’s lifespan when considering furniture, renovations, utilities, appliances, and all the extra bells and whistles. 

In a recent article by the National Association of Realtors, they estimate that one job is generated for every two homes sold. With that ratio, 1,000 home sales create 500 jobs. Real Estate transactions build 100’s of roles across multiple industries, from lumber to high-tech, nearly everyone is involved. 

For lack of better expressions, with Real Estate economics, you’re killing 100’s of birds, with one stone.

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