Investing in Fine Art - How to get started
Not too long ago, I decided to make a post on the subreddit "Flipping" giving some free advice about fine art and the potential profits there is to be made. The post gained quite a bit of traction amongst the group in the subreddit, and because of that I decided to make a full guide on how to get started investing in fine art. I wanted to make a simplified, detailed guide for those looking to just get started asap. It's simple, either like art and you're thinking of adding art as an investment vehicle. Or you're someone who is a strict investor, looking to "flip" the art and make a quick buck (longer buck if you hold). - Investing Art
Art is a commodity, like other commodities such as Gold, Coffee, Bitcoin .. Art can make you a great return. You know those old rich people that pay millions to hang large pieces of art in their homes? We all like to think "they're crazy to spend 10 million on that". Well .. they aren't! They are smart, it's more than likely after just a few years, that same artwork would have doubled in price.
Please note, when you are buying ANYTHING in life to make money from it; you must understand you are speculating whether you like it or not.
Ok! Let's get down to business.
Which Artist Do I Buy?
This is the most common asked question I get from friends and online. You're looking to get into the art market, but you don't know much about art or the market yet. Well here's your break down. There's about three classes of artist in my opinion.
- Very established world renowned artist aka BLUE CHIP Artists - Expensive
- Established in their own way and with global exposure - Modest & Expensive
- Up-and-coming artists who are making noise but not their yet (unknown) - Cheap & Risky
As you can see above, I labelled 3 Tiers for where an artist can be. You're thinking, okay .. but what do I buy!
Depends on what you can afford!
- Blue Chip: $10,000 - Hundreds of Millions
- Mid Tier: $100 - $ 100,000
- Up-and-coming: $100+
I'm sure most of you reading this article are looking to get into the market for the first time and don't want to take any drastic risks. Being that as it may be, you'll be focusing on Mid Tier art. Also, make sure you purchase art you like, it helps!
You're looking for established mid-tier artist, this means that the artist is more than likely a full time artist. The artist maybe went to a known art school.
They've done solo shows in a few big cities around the world. The artist has work displayed in well known museums worldwide. Many important people have purchased their artwork (art dealers, collectors, celebrities). The artist is listed on major art directories online. - Investing Art
All this info provides you with a judgement on whether this artist is established or not. Giving you an idea if you should bother purchasing said artist.
What Type of Artwork Should I Buy?
Art can be literally ANYTHING, paintings, prints, posters, collectables, designer toys and more.
I only focus on Prints. The greatest type of returns comes from Paintings, Prints and Posters. Why do I focus on prints you may ask?
Prints are the most accessible type of art nowadays and usually mid-priced.
Theres three types of prints you can buy from an artist.
Open Edition - These are prints that the artist makes many of, they might sell this print for a few weeks or a few months (the quantity in the public is unknown)
Limited Edition - Theres only a select number of this artwork in the public by this artist, it can be 50, 100, 2000 .. but theres a limited supply
AP (artist proof) - This artwork is a special edition (1 of 1) directly from the artist. AP's are not usually sold to the public.
Prints come with these various attributes, these help with authentication and worth.
- Artist signature (not all prints are signed, signatures do add towards value)
- Quantity number or AP
- Artist engraved stamping
Petrol Bomb 2011 - Banksy
This originally was $5 pounds (10USD) - Today's resale value is approx $2500.00
How Much To Get Started?
Some of you skipped to this section right away, didn't you. Anyways here are the costs.
Artwork - $100.00 / $1000.00 (the bigger, the pricer)
I wouldn't recommend going crazy on your first buy, especially if you're new to the art world. Make sure you buy a reputable artist who's established, we went over this. You don't want to buy something that wont give you a return, we're investing here, don't forget that.
Shipping - NA
Some artists, dealers, auction houses provide free shipping, but look out for boarder importing tax fees! - Just be prepared or look into the costs of it.
Storage - $50.00 / $1000.00
Listen to me very closely (especially if you're one of those people who don't take care of things). Storage is VERY important. If your art is ruined the value can be drastically effected or become worthless.
I have a rule, if I can't properly store the art. I refuse to buy it, it's too risky to have just laying around without protection from sunlight, water ... you know .. everything.
I recommend storing your art in a ITOYA Art Portfolio. The standard 18 x 24 inch size is my favourite, 18/24 inch is also the standard print size (and you call store your smaller prints in there as well). There's other brands around but ITOYA is staple in the industry and I have used their portfolio for years, so I trust them.
Pricing varies depending on the size of the portfolio you're buying. Anywhere from $20-$100.
Where Do I Buy the Artwork?
There's three places I would recommend buying your Artwork from, anywhere else I classify as risky and potentially allowing yourself to get scammed. Not to sound harsh, but no one likes to have a fake, especially if you're considering to part ways with the artwork in the future and looking for a profit.
Three Places to Buy from:
Directly from the artists website
(this is my favourite method, because this is the cheapest and most guaranteed method)
This is sometimes the hardest method because many may be on the website looking to grab the same artwork you're after (especially if it's a limited edition).
(this is my least favourite method, because I hate getting into price wars and buyers premiums cut into potential future profits)
There's several online auction houses that resell fine art. With an auction house, you get a guarantee on the authenticity of the artwork. Auction houses usually have art specialist who focus on authentication. BAD part, when you buy from an auction house you end up paying a hefty buyers premium. A buyers premium is basically a tax/fee you pay to the auction house on top of the purchase price of the artwork. The fee depends on what the artwork ends up being auctioned off for.
(this is my second favourite method, but take great precaution when identifying the authenticity of the artwork .. especially if you're new to the art world)
There's private dealers who have websites, a great place to look for these dealers is Artsy and Artnet. Both these websites provide a database of art on for sale through private dealers and auction houses.
Many ask this, should I purchase my art from instagram and ebay. NO, I repeat ... Do Not Do This. This is a hotspot for fake resellers. Also the authentication processes here are non existent. Side note: There's real art on ebay but purchasing it can be such a gamble, especially if you aren't experienced at this.
World On Fire 2020 - Cleon Peterson
This was released a few months ago, within 24 hours resellers were selling it for double the price. Sale price $200.00 USD - Current value - $350/600 USD
What Are Possible Art Investment Returns?
I'd like to repeat myself again and say: when you purchase fine art, you're speculating on the price. Even though you are usually guaranteed to make a profit when purchasing art made by an established artist. You must understand, nothing is completely guaranteed, the price of this artists work may not be sought out for as much as other artists. Also, keep in mind, you haven't made a profit until you've successfully resold the artwork you purchased (obvious, I know, but some need to hear it). Remember investing in art is almost always profitable as long as you do your due diligence. - Investing Art
Alright lets get to the numbers. Art in general increases approx 8%-12% a year, I know .. wow. This doesn't mean your art increases this amount, this is an average number comparing of the art market.
How Do I Value the Art I bought?
- Who's the artist, how established of an artist are they?
- When was the artwork released? How longs it been?
- Whats the average resale price of this artists artwork?
Is there a recent sale that has happened of the same artwork you possess?
If not, can you find a similar sized artwork by this artist online, and how much is it?
Take note to all these questions and with the right amount of research, you will be able to attach an appropriate asking price for the artwork you are looking to possibly resell.
Where Do I Sell the Artwork?
Similar to purchasing art, the same websites usually Buy art as well (except for the artist, obviously).
Like I stated earlier, there's positives and negatives when listing with an auction house. On the selling side, the positive is you will be getting top dollar for the artwork you're looking to sell. Negative side is, auction houses do take a hefty fee from the sale and sometimes inquire the artwork from you at a fixed cost.
Art Directory websites
This is the easiest method, list through an art directory and they will assist with the transaction. The fees are much lower.
Another great method, but usually some private dealers only buy in person and that can be a difficult for obvious reasons. But at times they will go through online transactions, the nice part is you skip any sort of 3rd party fees using this method.
NOT FINANCIAL ADVICE
The Art market is speculative, and things are only worth what others are willing to pay for them.