It’s the hype that can be troublesome while dealing with pieces of art. Treat each art piece as an asset and nothing more. It’s an investment, and a subjective opinion shouldn’t be coming into play just like it wouldn’t with any other form of investment.
Art appreciation is something that can lead one down the wrong path and make it hard to produce the returns hoped for financially. Investors can start to assume they’re dealing with a great piece but it will not lead to quality gains. This is why it is essential to focus on what works rather than what may work. A lot of this occurs when an investor begins to bet on a future artist that may become popular or well-received down the road. This is never the right way to go and is inherently risky.
If you invest in art you need to remember it is similar to investing in venture capitalism. The idea is to look at the core details and how the art is produced. You don’t want to think about going with too many start-ups as the market may leave them in tatters.
Subjectivity is going to matter when it comes to collections because there is a personalized interpretation involved with artwork. This can make it seem like art cannot be deemed as an asset nor can it be viewed as something to add to one’s portfolio of investments.
However, there is a way to determine the market value of an art piece. The best way to get started is by speaking to a proven art advisor with years of expertise in dictating sales figures based on previous entries. It could be something sold at an auction or at an art gallery. These related sales can offer insight.
Another avenue is to start dissecting what the artist may have sold in the past. This information is ideal for setting a price point and knowing what one is working with. For example, an artist renowned for his/her work will receive awards or fellowships, and this can be a sign of good things to come. It can even be the academic position they may have held in the field of art because that indicates the potential value of the asset itself.
Resale value is the wrong way to look at an art piece. This only applies to the biggest of names in the world of art. You have to focus on this as a long-term asset and one that is going to act as a collectible (according to the IRS), and you will be taxed nearly 28% on all gains. This is a part of the expense you are going to pay on a sale, which means you are not going to net as much as you think you will.
This is why you have to think about the returns coming in and how they will play out in the long-term. You want to think about the non-financial advantages before anything else. The financial gain is nice, but that is a real bonus. If you keep it as an investment, you need to go to a proper art advisor to get a gist of what you’re working with.
If you are getting a collection, you need to think of it as a set of pieces rather than a complete sum of artwork. It is all about looking at the quality of the collection based on each piece and then assessing its value in general.
The artwork is often seen being listed in estates after valuation begins post-death. This is why a proper estate plan is an excellent strategic move. This is something you have to factor in as you are dealing with it as an asset. Will it be sold? Will it be transferred to your children/grandchildren?
This is a significant investment, but you have to think about it with a good understanding of your cash flows, additional assets, and other collections in hand. This is how you will be able to get more out of this asset.
You should always look to benefit from the art market but do it the right way, so you get more out of it.