What You Might Not Have Considered Before Are These 8 Alternatives To Purchasing Art
Are you interested in learning more about art collecting?
For the last 25 years, the AMR Art 100 Index shows that art prices have risen by 8.0 percent every year, making it an excellent investment opportunity.
On the other hand, new collectors may not be aware that bidding at Christie’s or just stepping into a gallery and handing over a credit card aren’t the only options.
It was our pleasure to speak with Artvest’s Erica Waldbaum and Jeremy Rhodes on how to start investing in art and turn an existing art collection into a lucrative asset.
Put your money into an art fund that experts manage.
Art funds have existed for more than a century, but they’ve recently become a popular investment option. Generally working with an advisor, investors put money in, and a professional team obtains high-quality investment art. Oak Park Financial (for $100) can easily get via online.
The provenance and worth of artworks may be enhanced by placing them in museums. According to Rhodes, in 5 to 8 years, they attempt to resell them for a profit. Other funds, such as the well-known Fine Art Fund in London, specializing in various mediums.
Pros: The entrance barrier is low since the minimum investments are generally less than a single work of art, and investors don’t have to worry about the concerns of owning fine art, such as insurance and maintenance.
Rhodes cautioned that not all funds are well-managed and that thorough research is required before investing. In addition, there have been a few instances of art fund fraud.
You may join a private investment partnership or form your own company.
With the guidance of an advisor, private investment partnerships combine their funds to acquire investment-grade art. They’re less formal and intimate than art foundations, with fewer resources.
An advantage of this structure is that individual investors have a more excellent voice in what the group purchases, unlike an art fund.
It’s difficult to join without knowing the appropriate individuals or starting your group since they’re private. If the organization doesn’t have a knowledgeable advisor or a member who understands what he’s doing, there’s a risk of purchasing a piece that will lose value, Waldbaum said.
To purchase additional art, use your current collection as leverage.
According to Rhodes, “most individuals don’t become aware that an art collection may be used as collateral for a loan, just like a home.”
Numerous educational institutions
These loans will be given to small businesses. Waldbaum claimed that some boutiques might even provide non-recourse loans based only on the collateral of the item. An investment advisor can assist you in navigating the many lenders available in the market today.
Pros: A collector may purchase items he otherwise would not be able to buy, and if the items’ value rises quickly, he stands to gain substantially.
Cons: There is some risk involved, as there is with any loan. In addition, interest rates may be high—the usual rate is 10%, while private banks might charge as little as 4% and boutique businesses as much as 20%.
Make auction bids that cannot be withdrawn.
The auction house seeks a bidder willing to pay a certain sum for the art, generally less than the low estimate, in the event of an irreversible bid. The winning bidder (and buyer’s premium) gets the work if no one bids higher. A portion of the winning bid is returned to the individual who made the irreversible offer.
Since the “irrevocable bidder” is not a third-party guarantee, anybody may bid on the item at auction.
This is a cost-effective strategy that will still get you some money, regardless of whether you end up with the winning piece of art.
There is a strong likelihood that no one else will bid and that you will end up owning it, Waldbaum added.
Buying artwork by new artists is a good idea.
Don’t spend all of your money on the great masters when starting an art collection. Instead, look for pieces by up-and-coming artists.
According to Rhodes, a new level of esteem or collector base has been gained when an artist moves to a higher-end gallery.
They have the potential for growth and establishment—it is a less expensive approach to get your feet wet,” Waldbaum said.
Rhodes remarked that it’s a positive indicator if an artist gets accepted into Pace, Gagosian, or David Zwirner galleries in New York.
Advantages include lower costs and substantial future development.
Despite the lack of a crystal ball, it’s impossible to predict who will fail.
Then there are the emerging markets, such as Brazil and China.
Art from emerging markets might also be an excellent pick for a first-time collector.
According to Rhodes, “Many people are focusing on China, Brazil, Russia, the Middle East, and India, but Artvest has noted recent stalling in some of these regions.” Since the market for art from some areas of the globe is expected to rise significantly, investors are buying it now.
When it comes to investing in new talent, there are several advantages. With this purchase, you’ll also add a dash of flavor to your collection.
Drawbacks: There is always the chance that a market may go bust. Find an advisor or dealer you can trust to guide you properly and cultivate a robust working connection with them.
You don’t need the Mona Lisa to be blue-chip art.
A work of Impressionist or Modern art of auction grade, according to Waldbaum, has the potential to appreciate genuinely. It’s an investment that may increase and keep value if you have a piece of art that you love looking at and believe in.
However, the AMR Art 100 Index shows that art prices have climbed at a compound annual growth rate of 8.0 percent over the last 25 years, regardless of genre or artist.
Rhodes stated that Russian and pop art had had tremendous development over the last 25 years, but the American art market has lagged lately.
Even a little piece by a great artist is likely to bring in substantial profits over time, so there isn’t much danger.
Contrary to popular belief, it’s hard to predict how the market will look in 10 or 20 years.
Geographic arbitrage is a terrific technique to transform art into money for collectors who have the time and knowledge to acquire pieces at small or regional auction houses that may perform well with big-league auctioneers.
According to Artvest, in 2009, a Rodin sculpture acquired at a Parisian auction house for $4.3 million sold 11 months later at Sotheby’s for $11.8 million.
For the pros, if you find an obscure work before anybody else, you’ve unearthed a treasure chest.
Convenience: “It’s not as simple as finding something at an estate sale and taking it into one of the auction houses,” Waldbaum explains.