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What is sweat equity in real estate? – Bankrate.com

One of the biggest benefits of owning real estate is the opportunity to accumulate home equity. As you pay off the mortgage on a property, your equity increases. However, equity isn’t just the result of making payments. You can a…….

One of the biggest benefits of owning real estate is the opportunity to accumulate home equity. As you pay off the mortgage on a property, your equity increases. However, equity isn’t just the result of making payments. You can also increase the value, and your portion of ownership, through sweat equity with do-it-yourself improvements.

Sweat equity in real estate: How it works

When you’re working hard, you’re likely to break a sweat — it’s the signal that you’re exerting energy. In real estate, if you’re willing to put in the time and hard work to make home upgrades on your own, instead of paying someone else to do it, you are building up what’s referred to as sweat equity. It’s value that you earned without having to pay for it, with only the sweat of your brow and the work of your own hands.

Plenty of homeowners are sweating it out in an effort to make their homes more valuable. In fact, survey data from Angi shows that 81 percent of homeowners completed do-it-yourself projects during the pandemic, and 77 percent reported that their projects were rooted in increasing the future sale value of their properties.

How does sweat equity affect a home’s value?

Sweat equity can play an important role in increasing your home’s valuation. For instance, let’s say that your current home doesn’t have an outdoor deck. But you have the necessary skills to install one, and you put in the work and build it. When you’re ready to sell, a buyer might be willing to pay more based on your addition to the backyard — you’ve increased your home’s value.

It’s important to note that sweat equity may still require spending some money on supplies, though. For example, if you decide to install new countertops in your kitchen, you will still need to pay for the materials themselves. But your sweat equity saves you the money you would have paid a contractor to remove your old countertops and put the new ones in.

Value-increasing projects to try

You don’t have to be a skilled contractor or a master plumber to increase your home’s value through sweat equity. Some small DIY projects can go a long way toward boosting a property’s value.

“Rip up old carpeting,” suggests Michele Messina, a Realtor with RE/MAX Villa in Edgewater, New Jersey. “Another really simple fix is to change your light switches. It gives the house a fresh look. Make sure your gutters are cleaned out — you can do it yourself.”

Messina adds that a simple paint job can go …….

Source: https://www.bankrate.com/real-estate/sweat-equity/

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