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Sweat
Equity
(versus
leisure equity)
Sweat equity is equity
in a business or home that is the direct result of hard work by
the owner or owners. Sweat equity is solely based on the time and
effort of the contributors in contrast to financial equity, which
is based on the monetary contribution to a home or project. The
term sweat equity is sometimes used in partnership agreements when
one or more partners contribute time, energy, creativity and effort
instead of capitol.
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The term sweat equity
can also be applied to the value added by owners of real estate
who make improvements based on their own efforts. The greater
labor applied to a home, the greater the increase in value is
the general rule. Also, the greater the labor, the more sweat
equity has been used up. Typical sweat equity projects are home
improvement efforts which add the most value to a home. Paint,
wallpaper and carpeting projects undertaken by the owner can mean
greater value to a property than other projects and thus involves
a greater sweat equity in that property.
Improving kitchens and
bathrooms offer opportunities to increase a home's value the greatest
and thus efforts in these areas by the owners equate to greater
sweat equity. In addition, and owner-built home or an addition to
a home built by the owner offer the greatest sweat equity opportunities.
Purchasing a modular
home also offers opportunity for sweat equity savings off
the retail price of a home. Many times, home can be purchased
for wholesale prices when the owners decide to take on some
of the sweat equity projects themselves. Such sweat equity
projects may include: electrical, plumbing, drywall, painting,
carpentry, siding or brickwork or other project needed to
finish a home. The owner has the ability to save money and
build equity using hard work at the same time. With this
kind of sweat equity, the owner can also reduce their initial
loan amount, saving considerable principal and interest
payments in the future.
Some charitable organizations
use sweat equity to build low income housing for those who
cannot afford it. By organizing many skilled and unskilled
people to work on a home at the same time, these charities
can often do most of the labor for free while many times
materials are donated. The sweat equity in homes such as
these are in the 90 to 100-percent area and are based solely
on the hard work and labor of many willing participants.
Fiction: Sweat equity sucks. Leisure equity is much
more holistic. What you do is convince others to use their
sweat equity to put into your home. For instance, host a
painting party BBQ. Everybody grab a brush! You can also
host a plumbing surprise party, a grouting Super Bowl party
and home insulation cocktail party. Motivate others to do
the work so that you don't have to. If all else fails, there
is always gunpoint.
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