Homeowners Build Sweat Equity. Renters Just Sweat.

You can’t put a price tag on a happy home, but you can put one on whatever updates or costly renovations you make to it. 

Sweat equity is more than just putting new cabinets in your kitchen or repainting your rooms—it’s investing in what is likely your greatest asset and making it even more valuable. And if you’re a renter, it’s unlikely that you’ll see a dime of that equity for yourself. 

Most renters understand that the upgrades they make for their home won’t go with them, but just how much do renters lose compared to what homeowners gain for similar work—and what else do they lose in the process?

What is sweat equity?

Sweat equity is the concept of putting in work on your home rather than paying someone else to do it, or moving into a home where the work has been completed. 

You start building equity the moment you buy a home and start making payments on it, and economic forces like home price appreciation in your area may also increase the equity you have in your home. But one of the surest ways to add value is to make your own upgrades—and if you can save money by doing the work yourself, all the better. 

Renters, unfortunately, don’t have the same upside on whatever improvements they make. 

“Renters and homeowners make improvements, but what is the biggest difference?” says Ben Mizes, president of Clever Real Estate. “Renters expend energy and money to make their homes comfortable, functional, and aesthetically pleasing. However, renters often either take their improvements when they relocate or leave their enhancements and receive no payment.”

Why don’t renters get this?

The reason renters can’t benefit from sweat equity in the same way is obvious: They are making upgrades to something they don’t own. That doesn’t stop many of them. 

“A renter can easily spend several hundred to several thousand dollars on improvements such as smart home devices, lighting, shelving, paint, various home storage solutions, rental home landscaping, or window coverings,” says Mizes. 

If you’ve rented the same place for years, you may be willing to make these improvements because they’ll impact your quality of life, price be damned. 

But not everyone understands this calculation, or they make the upgrades with the mistaken idea that they will come to own the place one day. 

“I have seen renters make all sorts of improvements to properties they didn't own. I always advise against this, unless the property owner is providing you a credit or discount towards your rent,” says Christina Rordam, a real estate agent at Florida Realty Investments in Central Florida. “The most egregious improvement I saw a renter make was to renovate an entire kitchen. New cabinets and countertops—tens of thousands of dollars. They were in a rent-to-own situation that never actually resulted in them owning the home.”

Even if you have a great relationship with your landlord and expect to recoup some of your investment—whether through a rent-to-own agreement or a future rent credit—the truth is you don’t have any leverage if for any reason you don’t come to own the home yourself. If your landlord sells to someone else, passes away, or turns over operations to a family member or business partner, your handshake agreement goes out the window and you’re back at square one. 

How to measure the sweat equity you lost 

When measuring sweat equity as a homeowner, keep track of the work you’ve done on the home, including a price for your labor. One common tactic is a simple spreadsheet with details and costs of any renovation. 

“The way to calculate this is by obtaining professional quotes for the work you're interested in—new floors, paint, landscaping and so on—and then price out just the materials and how much time it will take you and compare,” says Rordam. “Certainly if you are able to complete the work in a proper way there is equity to be created here.”

There are established baseline ROI calculations on home improvements you can refer to for work you may have done in your space. For example, a minor kitchen remodel will likely net you a 70% ROI; replacing existing linoleum with tile or hardwood can provide up to an 80% ROI. 

You can perform the same calculations as a renter—with the knowledge that whatever number you come up with, you won’t be able to realize. This is money that in effect you give to your landlord, no matter when you end up moving out. That’s especially true for upgrades like window treatments to uniquely sized windows, foundation work, or landscaping. 

Is this a reason to buy rather than rent?

Can this dilemma be considered a hidden cost of renting? Not quite. No one makes you make upgrades to your space—even if it feels important or necessary to you. 

One way in which it might: making upgrades to your rental makes it more livable, more comfortable, and more “yours.” That can make it harder to leave, even if it’s for a true home of your own. 

“I think the biggest hidden cost of renting is becoming complacent and allowing the current affordability of the market to pass you by,” says Rordam. “You may actually be able to build your own equity and wealth by investing in home ownership.”

Indeed, studies show that the sooner you get into the market and start building your own home equity, the sooner you will build real generational wealth. That’s simply something that renters can’t do. 

If you’re a long-time renter and homeownership is on the horizon, don’t let small projects in your rental get in the way of making the investment that can really change your life in the long run.