Rental system is quite unique in Korea. Have you heard about ‘key money’? It is a big chunk of cash that you entrust to the owner as a security deposit when you rent a property in Korea. The value of the key money depends on the type of rental agreement you have with the owner. The two most common types of rental system are jeonse (전세) and wolse (월세).
Jeonse literally means ‘money in full amount’. In this rental system, you deposit about 80% of the property’s market value. Sounds crazy right? But still, jeonse remains the most-preferred housing arrangement for most Koreans. The contract is usually for two years and you can occupy the property without paying any additional monthly rental fee. After two years, the owner returns your key money in full amount. So it’s like occupying the property for free.
How does the owner earn from this rental system? The owner invests the key money by depositing it into a high interest time deposit savings account or other kinds of investment. The interest serves as your payment for the rent.
“Wol” is the Korean term for “month”. So, wolse basically means monthly payment. You give none or a certain amount (but much lesser than jeonse) as deposit and pay monthly rental fees. For a small studio type unit in Seoul, the minimum key money is around 5 million won ($4,500) but this price is so hard to find especially in downtown area. In wolse system, the bigger the key money you deposit, the lower the monthly rental fee you’ll pay. With the declining interest rates nowadays, more and more property owners prefer this type of system. Thus, the number of houses in jeonse system has also declined.
A week ago, Hubby and I dropped by the real estate agency near our property (a building with commercial space on the ground floor, basement and housing units on the upper floors) as we got a rental inquiry for the basement. The potential tenant needs a space for business storage. It used to be a tailoring shop but currently we’re using half of the basement for personal storage. I hope I can convince my husband to let go of so many unused stuff and just rent out the space. Less stuff, less clutter, more income. ㅋㅋ