How to buy art
We all know that art, especially fine art, is one of the best investments there is. The modern art world is very loosely regulated, but it generates more than 60 billion dollars in sales yearly. A lot of individuals would love to start buying art. However, the market can be opaque and extremely confusing even to the most experienced art enthusiasts.
Whether you are a seasoned collector or an uninitiated newcomer, there is always something new to learn in the art world. As a result of big-ticket auction sales that are done by world-renowned museums and galleries all over the world, painting and sculptor collectors are making more money from their pieces than ever before.
Don’t believe it? In May 2019, a sculpture of a rabbit by Jeff Koons (1955) sold for a whopping $91.1 million at Christie’s in New York City. The ‘Rabbit’ thus became the most expensive work of art sold by a living artist. The large, silver, reflective sculpture of a rabbit was bought by well-known gallerist Robert Mnuchin on behalf of an anonymous client.
This sculpture may have set a record that is yet to be broken. However, extravagant investments such as these are fairly common in the art market. Case in point, Sotheby’s Hong Kong division sold two paintings by the late celebrated Chinese-French painter Zao Wou-Ki for $65.1 million and $11.5 million, respectively.
Salvator Mundi, which has been the source of controversy and conspiracy theories in the art world, sold at Christie’s for a remarkable $450 million, making it the most expensive piece of art that’s ever been purchased. The international art market, which is made up of many different parts, such as art fairs, auction sales, and galleries, sees billions in sales each year.
Is all art expensive?
The type of record-breaking sales discussed above has become common. However, the sales are driven by a small monopoly of super-wealthy collectors that are willing to pay astronomical prices for rare art pieces, which in turn causes the artwork to appreciate further.
The good news is that art can be expensive, but it doesn’t have to be. Only a few living artists manage to break records in sales. As such, most of the artwork available from living artists is actually quite accessible and affordable. Living artists generally price their artwork based on the size of the piece in question as well as the medium used.
A large painting can be priced anywhere between $1000 to $15,000, while canvas works tend to be priced slightly higher than works done on paper. On the other hand, works on paper tend to be higher priced than prints. Another thing that determines the price of a piece of art is the artist’s representation.
Artists that sell their works for millions of dollars, such as Yayoi Kusama, Damien Hirst, and Koons, are usually well represented by the best art galleries in the world. Finding a gallery willing to represent an artist seems like an easy endeavor, but it is not as straightforward as it may first appear. It takes years for a living artist to break into the market successfully.
But if the artist managed to attract the attention of a respected gallery such as David Zwirner, the dealer’s prestige helps to increase the price of the work, even though it may be done by a relatively unknown artist. When an artist chooses to partner with a gallery, the gallery or art dealer usually takes about a 50% cut of the artists’ total sales.
How does one buy art?
There are more collectors in the world now than there were 5 or 10 years ago. The art collection boom has transformed art from a luxury good to an investment. However, one has to make a smart investment so that the works one buys can become worth much more as time progresses. So what’s the right way to invest in art?
Carry out your research
Investing in art is no different from investing in anything else- extensive research is key. So before you jump right in and start making fine art purchases, consider setting aside a few months to observe the market passively. This will give you plenty of time to learn, watch art auction news, as well as see what the various trends may be.
If you’ve never bought art before, it may also be a good idea to talk to someone that has experience investing in high-value art pieces. This mentor will guide you on which artists you should consider and what to avoid in the process. A curator or art specialist will also give you an inside scoop so that you can make the most informed decision possible before spending an arm and afoot.
As a rule of thumb, works or prolific living artists are typically appraised at a value lower than a deceased master artist with a limited series of artworks available. As such, art produced by deceased artists such as Rembrandt or Van Gogh tends to sell for more and usually accrues value vaster than art created by living contemporary artists.
What type of art would you like to invest in?
Before you spend any money on art, it is important that you first think about the type of art that you would like to invest in. For example, are you more attracted to contemporary artists or are Old Master more your vibe? Are you looking to invest in an established artist or are you hoping to discover the next Picasso? Perhaps there is a specific style that you find more appealing.
Next, you should also think about the type of art that you would like to specialize in. some people opt to dabble exclusively in oil or acrylic painting. However, if you are open to exploring other mediums such as glass blowing, sculptures, or photography, there are plenty of great options that you can select.
The good news is that you do not need a degree or qualification to invest in art. However, at the minimum, you should try and educate yourself as much as you can about the basic mediums, style and eras you may want to specialize in. Visiting galleries and any available exhibitions in your local area is an excellent way to familiarize yourself with the wide range of art and artists available.
Attend an art sale
Once you’ve educated yourself enough and feel ready to jump into the market, the next thing that you should do is attend an art sale. Sometimes attending an art sale can give you the push that you need to make the right investment. Sometimes the advice offered by gallery experts can impart the knowledge that you need to make your final decision.
However, do not let anyone intimidate you with their vast knowledge. For this reason, if you’ve never attended an art sale before, it may be better to start with an online art auction. This will give you a little taste of what to expect from a live sale and it will also prevent you from being pressured to make any decisions in an intimidating atmosphere.
Join a network
To increase your chances of making the right investment, consider joining a community of investors. This will allow you to build your professional network in the fine art space. Joining a forum of art lovers will also allow you to attend art fairs and auctions regularly so that you can learn the ropes. If you do not have the time to hunt for art pieces yourself, then it may be a better idea to seek other avenues of investing in the art, such as joining a fund, as discussed above.
Think carefully before buying
Buying art for your home should be an extremely personal process. It can be very easy to get swayed and carried away by other people’s opinions. However, it is crucial to invest only in what you love. You should feel an emotional connection to the piece that you are investing in.
If you cannot find a piece that resonates with you emotionally, the next best thing that you can do is to commission a piece. You can commission your art from anyone, but you should collaborate closely with the artist so that you can get exactly what you want.
Does investing in artwork pay off?
For savvy buyers, investing in art can turn out to be an extremely profitable venture. Buying art can help one diversify their portfolio and generate wealth in the long term. However, investing in art is entirely different from investing in, say, stocks or bonds. Before you invest in anything, there are a couple of things that you must consider.
In the high-end art market, single art pieces can easily sell for millions of dollars at auction. But if that’s not a realistic investment for you, there are plenty of low-cost alternatives that you can consider from your local gallery or studio. It may even help to invest in art from students or even art fairs. These avenues can introduce you to lesser-known but highly skilled artists at prices that may be more appropriate for a beginner investor.
Alternatively, you can also invest in an art mutual fund. Several art forms allow investors to purchase shares in art funds from as little as $1000. While the artworks will not belong to you when you invest in a mutual art fund, these funds usually offer investors a lot of diversification and return.
If there is artwork that you want but is too expensive, consider buying smaller works from the same artists as they may be lower priced. For instance, a work on paper instead of an oil painting from the artist that you want may be more affordable. Don’t ever buy art without first previewing it or experiencing it in person, especially if the piece is in question is of high value.
Are there any risks when buying art?
Like any investment, there are risks when it comes to buying art. According to experts, the biggest risks in the international art market are political instability and economic uncertainty. Economic and political instability can affect not only how art is traded but also how it is priced. The great news is that compared to other investment types like stocks, art generally fairs much better even if the market declines.
Art is also a very illiquid asset class. That means that if you are looking to buy undervalued artwork in the hopes of flipping it for a quick buck, then you need to re-evaluate your investment. Even when you have a high-value piece, sometimes it can take years before it sells at auction. That’s why it is advised that you consider investing in art as a long-term investment in your portfolio, much like buying real estate.
Beware of frauds
It happens all the time; a famous piece of artwork sells for millions only for it to be discovered later that it was a fake. After drugs and illegal weapons, art crime is the 3rd highest-grossing criminal enterprise based on reports from the Department of Justice. As the number of people willing to invest in art has continued to climb, so has the number of forgeries.
The art market faces unique challenges based on the nature of transactions and how they are managed. For example, in numerous instances, auction houses allow both buyers and sellers of art to remain anonymous, often using phrases such as ‘private collector’ rather than the actual owner’s name. This can make it extremely difficult to investigate potential fraudulent transactions. So before you invest in any art piece, it is vital to ensure that you are getting exactly what you are paying for.
Art investing isn’t for the weak at heart. It requires serious study, observation, and research before you can find a piece of artwork that will generate a significant return. Before you buy a piece, ensure that you consider the overall influence of the artist and not just the praise and public recognition they may have received from the media.
If you really want to make money investing in art, then you must master the basics. Treat the process as you would any other investment and do it through a reputable advisor that will facilitate the research, bidding, and consequent maintenance of your investment.
In short, even though investing in art can be an excellent investment, it is not a get-rich-quick scheme. It takes many years and sometimes even decades for a piece of art to appreciate. For this reason, buying art is usually left to people that truly appreciate it.