The Book That Turned 300 Homes into a Pitch for Gap Investing

In South Korea, years of rising property prices helped make homeownership seem like a dependable route to wealth.

That expectation was especially powerful during the 2010s. It made sense of the strategies that appeared in investment books of the period, even when those strategies depended on prices rising further.

How Jeonse Fits into the Property Market

Under Korea’s jeonse system, a tenant pays a large refundable deposit up front in place of regular rent. The landlord must return it when the lease ends. The money can also help finance the landlord’s purchase of the home.

Housing prices respond to many things. Jeonse matters here because the size of the deposit can change how much a buyer needs to bring to the purchase.

Buying the Gap

If the deposit covers most of the purchase price, the buyer may put up only the difference, or gap, and hope the home rises in value. Park Jeong-su presents his experience with that strategy in this book.

The leverage can magnify gains when prices rise. It also leaves the buyer with a large repayment due to the tenant, regardless of what the home is worth by then.

When Deposits Become Difficult to Return

In a falling market, a landlord may be unable to return the full deposit from the proceeds of a sale. If a new tenant will put up less money than the departing tenant is owed, the shortfall has to come from somewhere else.

An unpaid deposit can result from an inability to pay. Fraud involves additional facts, such as deception. Either way, the practical question for the tenant is whether the money will come back when they need it.

Who Gets the Gain and Who Waits for the Money?

The appeal of the strategy is clear when the owner puts up relatively little and keeps the gain on a sale.

The landlord still owes the deposit when prices fall. If the landlord cannot pay and sale proceeds fall short, however, the tenant may face delays or recover less than they put in.

The investor can lose equity or face debts they cannot cover. The tenant can have money tied up that they were relying on for their next home. The downside reaches both sides in different ways.

Park Jeong-su’s 2016 Case for Gap Investing

I Became the Landlord of 300 Homes through Gap Investing presents a method for acquiring multiple properties with jeonse deposits as part of the financing.

The book was written against the expectation that both sale prices and deposits would keep rising. Park built his case around inflation assumptions and a shortage of homes available on jeonse terms.

Read during a downturn, it raises a different set of questions. How many deposits fall due at once? What is there to repay them with if new deposits or sale prices come in lower?

The book records a strategy shaped by one phase of the market. Its strongest lesson now may be how different the same financing looks when the conditions turn.

A purchase plan is only as durable as the repayment plan behind it.

Book Information

I Became the Landlord of 300 Homes through Gap Investing (Korean title, translated)

Author

Park Jeong-su

Publication date

18 July 2016

ISBN13

9791155425039

View the book on YES24

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