Is 'Monthly Rent' Really Better Than Stocks? — I Analyzed Rental Investment
With home prices rising constantly these days, I keep seeing comments like, "Rather than stocks, collecting monthly rent is the real answer." So I decided to run my own comparison using the data and calculations I have. Of course, every region and property is different, so take this as a general overview.
Scenario: Putting 100 million won into a stock ETF vs. buying a 300 million won small apartment with no loan and renting it out (jeonse/monthly rent).
1. Assuming a 7% annual return on the ETF investment, 100 million won yields 7 million won per year. After taxes, it's effectively around 5.5 million won.
2. For the rental property, a 300 million won villa rents for about 700,000 won per month; factoring in a 5% vacancy rate, maintenance fees, and property tax, the effective monthly income is around 600,000 won, or 7.2 million won per year.
3. Real estate offers the expectation of capital gains, but on the flip side, there's also downside risk. Same goes for ETFs.
Conclusion: In terms of initial capital, cash flow, and risk management, each has clear pros and cons. Real estate's strengths are steady cash flow and asset value preservation, while ETFs have overwhelmingly better liquidity. There's no single right answer—it all depends on where your own tendencies fit. I'm curious to hear from people who've invested in monthly-rent properties: how do you run the numbers?
6 answers
Okay okay, the monthly rent cash flow is good.
I also bought an old villa in Seoul three years ago and have been collecting monthly rent, and it's similar to the calculation. But factoring in the drop in housing prices, ETFs seem better in most cases. Every time a tenant moves out, I have to fix things up and clean — the stress is no joke.
Well, isn't that a bit too optimistic? You're not factoring in longer vacancy periods or tenants not moving out even if rents rise. And the assumption that housing prices will keep going up is pretty risky these days too.
The conclusion is spot on. It really depends on your preference. I went all-in on ETFs because liquidity matters to me. But for retirement prep, rental income is definitely more stable.
Same here. I think just splitting it half and half is the best lol
With 300 million won in initial capital, you might be better off collecting dividends via ETFs in terms of taxes and fees. Real estate means property taxes, maintenance fees, and if it ends up vacant, it's just a loss. I wouldn't recommend investing in rental properties.