We’ve all thought about it at least once. There is some spare cash hidden away somewhere, or an investment has just paid dividends, or you’ve just come into an inheritance. You’ve paid off the mortgage and recently bought a new car and the children are all grown up, so what do you do with the money? Then you read an article in the paper about how a Van Gogh that couldn’t be sold for love nor money in the artist’s lifetime has just gone for £20 million, and then another article caught your eye about how some long forgotten artist has been rediscovered and his work has quintupled in value in the last year. So you consider maybe buying art as a long term investment and your local gallery has some pictures you quite like and the prices seem reasonable and the artist has built up a small reputation for himself. What should you do?
Well, if you are at all serious about buying fine art as an investment, you start by educating yourself about the art market as much as you do about the art itself. A good way to combine these two disciplines is to go round as many art galleries as you are able and ask lots of questions about why the gallery chose to curate this artist’s work and how they set the prices for the art and whether they specialise in a particular segment of the market and how they chose their specialisation. Really ask lots of questions about everything and anything and don’t be shy about asking questions that might sound naïve or stupid. After all, you are here to learn from the experts and the best way to learn is to start from a position of complete ignorance without any assumptions or preconceptions about how the art business works or why a particular artist or style of art is more valuable than another.
Once you feel you have a handle on current trends and potential future trends in the art market, there is one essential thing to decide: whether you will be buying art purely for investment purposes, primarily as an investment but also as something you’d like to hang on your living room wall, or as something you’ve absolutely fallen in love with that might just also appreciate in value when passed on as a family heirloom. Naturally going purely for the investment value of the piece is more likely to make you money, but in that case you might as well invest in stocks and shares. If, as is more likely the case, you want to invest your money in something that you also like the look of, make sure that your heart doesn’t rule your head and you buy something that looks pretty but is unlikely to ever accrue very much more value than you paid for it. Regardless of the circumstances that have resulted in your buying the piece of art, there are two essential things to determine from the seller that guarantee its resale value: a statement of authenticity and a detailed history of ownership going back to the time the work was created, because without these two pieces of documentation the work is effectively worthless.
Aside from this, it is a good idea to find out more about the kind of seller you are dealing with. Request references and check to ensure their authenticity and impartiality. Get a feel for how the dealer is viewed in the industry by asking about him in museums and other art galleries. The dealer might have his finger on the zeitgeist and be in a position to source work from artists who are hot at the moment, but for how long will they remain hot and is their work selling for over-inflated amounts as a result? Or perhaps the seller specialises in the type of art you are thinking of buying, so has a good idea of the value of the piece, or the style was in vogue five years ago but has fallen off since and the seller hasn’t altered his prices accordingly. One failsafe way of looking into the dealers reputation is to look at what has happened to the art he has handled in the past. Have the prices for this work generally gone up, stayed the same or even gone down in valuation. Any respectable dealer or seller should have a record of their past sales and be willing to share this information. If they are not, this suggests they may well have something to hide.
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