‘Key’ money

[reader]

A fairly recent discussion about key money ensued after it became known that Circus bar on Silom Soi 4 was on the market. The following excerpt describes how it’s understood in Korea.

From CNBC 

Two factors that contribute to the high amount of debt among households in South Korea is a heavy usage of credit cards, and the unique system of housing in South Korea. 

Prospective homeowners can of course, buy their own homes outright, but for those who cannot, they need to rent.

But unlike most rental systems around the world, South Korean renters pay a deposit known as “jeonse” or “key money,” instead of a monthly rent, according to Samuel Rhee, co-founder, chairman and group chief investment officer for wealth platform Endowus.

The jeonse is a deposit about 50%-80% of the market value of the property. At the end of their lease, the deposit is returned to the renter. For the landlord, the jeonse is an interest-free loan, which they are free to invest.

However, renters will usually take out a loan to fund the jeonse deposit, which Rhee said causes “a lot of burden and excess debt in the system for housing.”

https://www.cnbc.com/2025/02/03/south-korea-has-a-big-household-debt-problem-the-countrys-unique-rental-system-may-be-to-blame.html

 

[KeepItReal]

4 hours ago, reader said:

A fairly recent discussion about key money ensued after it became known that Circus bar on Silom Soi 4 was on the market. The following excerpt describes how it’s understood in Korea.

From CNBC 

Two factors that contribute to the high amount of debt among households in South Korea is a heavy usage of credit cards, and the unique system of housing in South Korea. 

Prospective homeowners can of course, buy their own homes outright, but for those who cannot, they need to rent.

But unlike most rental systems around the world, South Korean renters pay a deposit known as “jeonse” or “key money,” instead of a monthly rent, according to Samuel Rhee, co-founder, chairman and group chief investment officer for wealth platform Endowus.

The jeonse is a deposit about 50%-80% of the market value of the property. At the end of their lease, the deposit is returned to the renter. For the landlord, the jeonse is an interest-free loan, which they are free to invest.

However, renters will usually take out a loan to fund the jeonse deposit, which Rhee said causes “a lot of burden and excess debt in the system for housing.”

https://www.cnbc.com/2025/02/03/south-korea-has-a-big-household-debt-problem-the-countrys-unique-rental-system-may-be-to-blame.html

 

Thanks - I did not know this. Will be hard to get a loan for "key money" as an expat since I don't have a credit history in  South Korea...

[omega]

That's actually insane.

What happens to the "key money" if the landlord goes bankrupt after investing it in some scam?

[vinapu]

On 2/6/2025 at 4:13 PM, omega said:

What happens to the "key money" if the landlord goes bankrupt after investing it in some scam?

my guess would be it evaporates

[Keithambrose]

5 hours ago, vinapu said:

my guess would be it evaporates

Undoubtedly!