Renting an apartment in Seoul: Jeonse (전세)

I don't have any first hand knowledge about renting an apartment. My job has always provided housing for me. I was reading an article that I found to be really interesting. I can't believe apartments in Korea are so expensive. For $290,000 you can buy a nice house in the USA. Koreans pay that much to rent an apartment.
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Read the article here: http://news.msn.com/world/it-takes-dollar290000-in-cash-to-rent-an-apartment-in-seoul#tscptmf

According to the article, Seoulites spend $290,000 in cash to rent an apartment. 

Most Koreans don't pay monthly rent. Korea uses a system called jeonse. Jeonse is also known as "key money". In the Jeonse system, tenants will lend large sums of money to the landlord for a period of time (usually 2 years) instead of paying a monthly rent. Tenants pay a percentage of what the property would be worth. The percentage used to be around 40%-50%, but these days it can be all the way up to 90%. At the end of the term, the money is returned to the tenant.

"The transaction is essentially a loan, with the tenant as the lender, the landlord as the borrower, and the house as the collateral."

Jeonse does come with some risks. Sometimes the loans don't get paid back to the tenant. The tenants are protected. If the landlord defaults and the house is sold, the tenant will get the money back. 10% of landlords could have trouble paying back the deposit to the tenant.