What Is Sweat Equity and How Does It Impact Home Values

November 7, 2023 - 4 min read

Sweat equity is a cost-effective way to increase the value of your home while personalizing the space to suit your preferences.

By tackling DIY projects and putting in your own time and effort, you can make home improvements that add aesthetic value and contribute to a higher home value.

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What is sweat equity?

Sweat equity refers to the value added to your property through your own labor and hard work.

Instead of investing money in hiring contractors, you put your own time and energy into improving the space. This can involve various projects and renovations such as painting the home, landscaping the front or back yard, and even finishing a basement or building a room addition.

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Sweat equity can improve the functionality and aesthetics of your home, and ultimately increase its overall value and market appeal. When potential buyers and appraisers see these improvements, it’ll be easier to command a higher sale price.

Sweat equity is beneficial in a lot of situations, such as when you want to sell the property, or when you want to reduce the costs of extensive improvements. Instead of hiring a professional contractor, you can save money by investing in your own labor.

In addition, if you don’t move, sweat equity is an affordable way to personalize the living space to your tastes and needs. Whether it’s installing new flooring, creating a backyard oasis, or adding energy-efficient features, rolling up your sleeves and completing the work yourself is often a more cost-effective solution.

It’s important to note, though, that the value of sweat equity varies. So, while some projects can offer a significant return on investment, others might have a more modest impact.

Therefore, you must consider the potential return on your investment before starting any renovation or project.

Calculating sweat equity

Calculating the dollar equivalent for sweat equity can be tricky, as you’ll need to factor in the cost of materials, the estimated value of your labor, and how the project will impact your home value overall.

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Here’s a breakdown of sweat equity for a house painting project and a bathroom remodel:

Interior paint project:

Let’s say you estimate the project taking 60 hours to complete. If you value your time at $20 per hour, the labor cost would be $1,200. In addition, you might spend about $500 on materials which includes paint, brushes, rollers, and other supplies.

In this scenario, the total investment of sweat equity is the sum of labor and the cost of materials, which is $1,700 ($1,200 + $500).

Next, you must take into account how the project will impact your home’s value. To get this rough estimate, let’s also say the paint job increases your home’s value by around 2% to 5%.

Assuming a home value of $400,000, the sweat equity you put into painting the home’s interior could potentially increase its value by $8,000 to $20,000.

Bathroom remodeling:

Then again, maybe you estimate a bathroom remodel taking 80 hours to complete. If you value your time at $25 per hour for this job, the labor cost would be $2,000. For this example, the cost of fixtures, tiles, flooring, and other supplies is $3,500.

In this instance, the total investment of sweat equity is $5,500, which is the sum of labor and the cost of materials ($2,000 + $3,500).

Generally speaking, a bathroom remodeling project can potentially increase a home’s value by 71% of the project cost. So if you complete the project for $5,500, your sweat equity can potentially add $3,850 to your home’s value.

Pros and cons of sweat equity

While creating sweat equity can be a rewarding endeavor that gives you a sense of accomplishment, it also comes with its own set of advantages and disadvantages. Here’s what you need to know before starting projects.

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Pros of Sweat Equity:

  • Saves money: Sweat equity offers a significant advantage when it comes to saving money. By doing the work yourself, you can avoid expenses that come with hiring professionals or contractors. This means you can cut down on the overall project costs and use your resources more effectively.
  • More control over the project: Sweat equity gives you complete control over your home improvement project. You have the freedom to make design choices, select materials, and customize every aspect according to your preferences. This level of personalization ensures that the end result is a living space that truly reflects your style and meets your specific needs.
  • Sense of accomplishment: Completing DIY projects and putting in your own hard work can bring great satisfaction, providing a sense of accomplishment.

Cons of sweat equity:

  • Requires your time and energy: Sweat equity often requires a significant amount of time and physical effort. Some projects are more demanding than others, which can create problems if you have a busy schedule or lack the necessary skills and expertise.
  • Can involve increased costs: Professionals have specific expertise and skills that reduce the chances of mistakes. If you lack experience or knowledge in certain areas, this can result in poor quality and require expensive repairs down the line.

The bottom line

Sweat equity is a valuable approach for homeowners looking to save money while updating their space. However, it’s important to carefully consider the time commitment and skill requirements before starting DIY projects. By weighing the pros and cons, you can determine whether you have the knowledge and expertise to complete an improvement successfully.

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Valencia Higuera
Authored By: Valencia Higuera
The Mortgage Reports contributor
Valencia Higuera is a freelance writer from Chesapeake, Virginia. As a personal finance and health junkie, she enjoys all things related to budgeting, saving money, fitness, and healthy living.
Aleksandra Kadzielawski
Reviewed By: Aleksandra Kadzielawski
The Mortgage Reports Editor
Aleksandra is the Senior Editor at The Mortgage Reports, where she brings 10 years of experience in mortgage and real estate to help consumers discover the right path to homeownership. Aleksandra received a bachelor’s degree from DePaul University. She is also a licensed real estate agent and a member of the National Association of Realtors (NAR).