Have you heard the term sweat equity used with regard to real estate? No this isnt sweating to the oldies (as fun as that may be). Rather sweat equity means that youre going to put time and effort into your home to improve its value rather than cash.
Dont Sweat it?
There are a variety of reasons that sweat equity might work for you. For example, say you find a home but it needs a little TLC. You will probably be able to purchase such a home at a lower cost due to the repairs needed. That savings can then be put aside for the materials required to fix things up. If youre doing your own repairs and improvements instead of paying someone else that is sweat equity that pays off twice: once at the purchase and again when you have extra money at the end of the day that would otherwise be in a contractors pocket. This particular approach to sweat equity is frequently used by house flippers. It improves their profit when they go to sell the house.
The buyers approach to sweat equity is a model used very successfully by Habitat for Humanity (a cause that's very worthy). In order to get families into homes the hopeful owners must commit to putting in a certain number of hours of sweat equity, in partnership with Habitat for Humanity. This results in home-owners who might otherwise still be lost in the concrete jungle.
Sweat Equity for Improved Appraisal:
Another way to look at sweat equity is from an owners perspective. You have a house and youd like to boost the curb appeal and overall value of the home. So you look at various home improvement projects that you have the skills and tools to complete. Painting and fresh wallpaper certainly dont hurt but upgrades to kitchens and bathrooms can change your valuation greatly!
When to Hire Help
Ok, not all homeowners are tool-proficient. In some cases the attempt to put in sweat equity can become very, very costly. You may not have the precision tools necessary, so you rent them. You may not have the correct skills and end up breaking something that was FINE. Or, you may end up getting into a project that takes three times as long as it would have if you hired a professional. Your time is worth something too!
Additionally sweat equity requires time away from family and pleasurable pursuits. Its also darn hard work, and could begin to impact your day job. To know if sweat equity is something you can consider and have it work out positively ask yourself this:
- do you have the right tools
- do you know how to use those tools
- do you know the process necessary to do the job correctly the first time
- will you have enough free time to complete the work in a timely manner
- do you have the ability to complete all aspects of the project (for example, can you read blueprints if necessary? Do you know how to take out plumbing?)
If you can honestly answer yes to all those questions, then sweat equity might be an ideal approach. Otherwise, find a professional who will do the work at the right price.