Sweat Equity

Definition - What does Sweat Equity mean?

Sweat equity is an increase in value due to hard work, time and effort put in. The term most commonly refers to businesses and real estate. It is called "sweat" equity because the word "sweat" reflects all of the hard work that the owner of the business or the property has put into making the business or property better.

Justipedia explains Sweat Equity

Sweat equity can dramatically change the price of a business. For example, if a person started a business with $50,000 and five years later it is worth 1,050,000, then this represents a sweat equity of $1,000,000. Examples of hard work that can constitute sweat equity include making sales, gaining clients, developing products, manufacturing products, expanding into new markets, etc. For real estate, this hard work could include painting the exterior, redoing the floors, updating the heating system, doing the landscaping, etc.

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