Is it Possible to Make Money Buying Art?

If you have a passion for an area of the arts, investing in it may be a wise choice. However, it's not without its dangers, so preparation is key.

Artwork does more than just liven up a home. Recent years have seen a surge in interest in the art market as a viable investment opportunity. Many times, art collectors purchase works with the intention of reselling them for a profit.

To what extent, though, will your money invested in works of art actually turn a profit? Do the actual benefits of this novel investment category justify the hype?

Is it smart to invest in art?

Where you stand on this issue is dependent on your individual investment objectives.

A work of art can appreciate just like a stock or bond. The monetary worth of a young artist's creations might increase dramatically if they go on to have a prosperous career. In 2021, the worldwide art industry reportedly generated over $65 billion in sales, according to data from Art Basel's annual report.

However, before diving headfirst into the art investment market, you should think about the following details:

Making money off of art is a long process. Investors with a 10-year or longer horizon are encouraged to consider purchasing works of art.

Many art collectors and investors leave paintings to future generations as an asset in their wills and trusts. In addition, the art market has its own set of guidelines that it must adhere to.

The value of art does not rise or fall in tandem with the stock market, which is a huge plus for this investment option. The wise investor who wishes to diversify a portfolio and limit risk will be pleased to learn that their investment in art may be doing rather well even if the stock market is underperforming.

Of course, it is always hoped that the value of an artwork will rise over time, but this is by no means guaranteed.

What are the dangers of art

The art industry, like any other, experiences booms and busts as consumers buy and sell individual pieces.

Given that it is impossible to know an artwork's genuine value without considering a wide range of factors, including the artist's fame and the state of the economy, you should be willing to take some chances. The question is, how much risk are you willing to take with your money?

Putting your money in Art

First, choose a budget that you're comfortable with. Set a price that you're comfortable losing if the artwork loses value. Think about the cost of keeping it in storage and any upkeep it might require.

Then, absorb as much information as possible about the art world. See what's on display at nearby museums and galleries and strike up conversations with the curators, who will likely be happy to answer any questions you might have.

Living in or near a city puts you in close proximity to gallery openings and art fairs, where many promising young artists display their work. You may get a feel for the market by perusing Artnet and online auction houses like Sotheby's.

Once you've decided on a piece or artist you're interested in, you can begin narrowing your search to find out how much similar artworks typically sell for. Find a qualified art appraiser to give you an opinion on the piece's worth.

Buying a piece of art outright is a costly endeavor, but there is another option: investing in a piece of art through a secondary market.

Markets for artwork on the Internet

In today's digital age, there is a robust market for expensive works of art. It's important to do your homework before making any online purchases to ensure you're dealing with a reputable gallery, dealer, or investment organisation.

If you're just starting out in the art investment world, Masterworks is a terrific online resource because they handle all the legwork for you. Masterworks will purchase artworks and provide regular updates on the value of your investment as a shareholder.

Masterworks is not a way to acquire or keep physical artwork. Instead, you and a group of other investors buy shares in valuable companies that have been thoroughly researched and deemed legitimate. The minimum amount you can invest in Masterworks is not set in stone and instead varies with the many investment opportunities available at any given time.

Don’t overinvest too much of your portfolio into Art

Most people's art collections are just a minor part of their overall financial portfolios. Even if you do well financially, it's quite improbable that your art will be the sole source of your success.

It's like putting money into a piece of property; it's useful, but it's not necessary. An investment in art is not a reliable source of revenue. Not to mention, the Internal Revenue Service classifies artwork as a collectible, so any profits from selling it will be subject to taxation.

Keep in mind that works of art cannot be easily sold for cash. This makes it problematic to quickly convert into cash.

It is simpler to convert liquid assets like stocks, bonds, and savings accounts into cold, hard cash. The sale of illiquid assets, such as real estate and artwork, can be a lengthy process, despite their high market value.

Though art sales are conceivable, most buyers won't even consider your work. Even while auction houses are your greatest choice for selling, they usually have quite high commission rates. Art prices are notoriously unpredictable, so there's no assurance that you'll make money off a sale.

When it comes to investing in art, most people get their feet wet as collectors. Consider it an asset if you enjoy visiting museums and galleries and are always on the lookout for a new work of art to grace your walls. Of course, if you don't appreciate art for its own sake, you'd be better off looking elsewhere for your investment pounds.

Buying art as an investment does not require you to be a collector. If you're just starting out, a single or double-piece investment is fine. If you want to choose winners, though, art world expertise or access to someone who does it is invaluable.

How Do I purchase Art

How should one go about purchasing works of art? Think about how it makes you feel aesthetically before you think about the financial gains.

If you happen to make money, great, but don't base your life savings expectations on that fact. Investing your retirement funds wisely is essential. According to research conducted at Stanford University, the addition of artwork is not likely to increase financial returns.

The bottom line is this: if you can't afford to lose the money, don't invest it in art.

That being said, savvy art investors can select works that will appreciate greatly over time. But do your research, just as you would before making a stock market investment.

Make sure you take excellent care of your art.

Having ownership of an investment is a significant perk for art buyers. If you want the artwork to remain in excellent condition, though, you'll need to pay attention to environmental elements like humidity and sunlight.

If you're going to show the artwork, you should take extra care to protect its condition. You'll also have to foot the bill for storage if you need to place it there. When you factor in the price of insurance and a certificate verifying the item's authenticity, the expense of upkeep becomes significant.

How can I Release My Capital from my art portfolio?

You will have substantial funds tied up in your portfolio. From time to time, you may need to release your capital. If you don’t want to sell quickly at a fire sale price another option exists in the form of a secured collateral loan against your artwork with a FCA-regulated lender such as ReleaseMyCapital.co.uk. They are experts in secured lending against luxury assets and fine art pawn.

It’s also important to keep in mind that pawning your luxury artwork is a regulated loan and it's non-recourse financing, which means your lender won't ever demand additional money if the value of the asset declines throughout the loan's duration. No matter if you are employed or self-employed, this is the ideal answer. Confidentiality is key, and since no credit reports are run and no search records are left on the credit file, the customer's anonymity is always guaranteed.

Contact ReleaseMyCapital.co.uk to find out more about how our loans will help you get through these trying times.