Glossary
Sweat equity
Sweat equity is a partner's ownership or profit share earned through work, like finding the deal or running the rehab, instead of putting in cash.
In many flip and BRRRR partnerships, one partner brings the money and the other brings the work. Sweat equity puts a value on that work so the split feels fair to both sides.
Without an agreed value, the operator's work is easy to undervalue at the start and easy to argue about at the end.
How it works
Run The Deal's "cash plus work value" split lets you assign a dollar value to finding the deal, managing the project and signing the loan guarantee. Each partner's share of profit is their cash plus their work value, divided by the total. Capital is still returned first.
- Cash partner: cash in
- $80,000
- Operator: finding the deal
- $5,000
- Operator: managing the rehab
- $15,000
- Total contributions
- $100,000
- Profit to split
- $40,000
- Cash partner share (80%)
- $32,000
Work values are negotiated. These numbers are an illustration.
What to watch
- Agree on values up front. Arguing about what the work was worth after the sale rarely goes well.
- Tie it to delivery. If the operator stops managing, decide what happens to their share.
- Taxes. Equity received for services can have tax effects. Check with your tax pro.
- Paperwork. Put the split in a written agreement drafted by your attorney.
Other structures use a preferred return for the cash partner. See what each partner earns on the flip calculator or the BRRRR calculator.
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