Above: Example Investment Art: This painting by Herman Herzog (1832-1932) is representative of "Investment Art." Herman Herzog (American/German) is a painter of considerable accomplishment, and any oil painting by him, in good to excellent condition, is highly sought after, and will always increase in value. This painting, "Cows in a Pennsylvania Landscape," might fetch $10,000 at auction. A painting by Herman Herzog in a "Mountain Landscape," for which he is best known, could be worth $20,000, and one of his rare Florida landscape could even be worth $50,000. Herman Herzog meets our criteria for "Investment Art."

 

by: Ron Davis

As seen in Antiques & Art Around Florida, Winter/Spring 2006

Investing in art is not a get-rich quick scheme. But for many people, buying and selling art is more lucrative than other investments, and many have built a solid, growing, and rewarding business in art.

THE THREE BUYERS OF ART

First, decide what roll you want to play, whether you want to be an Art Collector, Investor, or Dealer, because each has a different motivation, buying and selling strategy, and outcome objective. The collector buys what he likes, the investor what he needs, and the dealer what he can sell for the highest price in the shortest amount of time. Each needs to follow the strict buying criteria outlined below.

The Collector has a love for art but not a compelling schedule to buy it. He buys only what pleases him, without regard for "whatís hot," possibly buying only one painting a year. The collector has no exit strategy or financial objective in mind when he buys art. He well might keep a painting all his life, willing it to his children or a museum. The art he buys, however, should create future wealth for his family. The collector also needs to acquire art knowledge and competent buying skills so he is not taken advantage of. Serious collectors usually have a focus and narrow interest in a particular School. Always studying art they like, collectors often become "subject experts" in their specialty.

The Investor definitely has an exit strategy and outcome objective in mind when he buys art. Developing a financial plan, the Investor buys art strategically, according to the strict criteria listed below, doing extensive research to eliminate risks associated with buying art. The Investorís time frame is five to seven years out. A weak economy will peak again in five to seven years. Even an unfresh painting (recently bought at public auction, or one "shopped around") will be fresh again in five to seven years. The investor buys what collectors desire, insuring him of a quick sale when itís time to cash in. The Investor expects 25% ROI, but even higher returns can be made with art.

The Dealerís business is buying and selling paintings, and brokering art transactions. Like any business owner, the dealer is on the telephone every day talking with customer and suppliers: collectors, investors, galleries, auction rooms, and other dealers. When an exceptional painting comes to market, the dealer pursues it relentlessly. The dealerís time frame is measured in days or weeks, rarely months, generally selling at the highest price in the shortest amount of time. Because he buys only "investment art," there is always a demand for his paintings. If youíre a "seller," on the other hand, selling art to a dealer can be an expensive proposition, because heíll only resell your painting right away, to a collector, investor, or gallery, for a handsome profit, exactly what you could have done, if you only knew what the dealer knows. So it behooves the collector to learn the parallel skills of an art dealer.


Example Decorative Art: This painting by J.K. Butler, dated 1939, is an excellent example of decorative art. J.K. Butler is an "unlisted artist" -- a virtual nobody, but his work is excellent, and very reminiscent of John F. Carlsonís work: "Snow Scenes in an Interior Forest." If this painting were indeed by John F. Carlson, it could easily be worth $10,000; however, since the painting is by J.K. Butler, it might be worth $500; $1,000 at the most. Decorative art is not a wise investment choice. If you like it, fine, keep it; but it will never grow in value like investment art.

THREE KINDS OF ART AVAILABLE TO BUY

Decorative Art is known as "furnishing pictures," and is often used for decorating purposes. This classification of art is generally thematic: "nautical," "country," "sporting" look, etc. Little intrinsic value exists in decorative art, and rarely is it painted by a "listed" artist. But distinctive decorative art can be expensive, especially if itís antique. Decorative art will not increase in value. Therefore, it is not a wise investment choice. If you buy, for example, 100 $200-paintings, you could have $20,000 invested in "garage sale" merchandise. Avoid that mistake. Limit your "training paintings" to ten or fewer. Better yet, buy Investment Art.

Collectable Art suggests that someone else also collects the same artworks. Therefore, a market already exists for your painting, albeit small. Collectable art can either be signed or unsigned, "listed" or "unlisted" (recorded in auction price guides). But generally it is of modest quality, not superior work, and not a good investment choice. For example, Florida Highwaymen Art, painted by itinerant Afro-American artists in the 1960s, is "hot" merchandise in Florida, and many local dealers buy and sell this art for a profit. Its appeal, however, is limited to Florida. Therefore itís Regional Art, and would not sell well in the art capitals of the world. The quality of this art generally is "student work," not academic or professional. If a Highwaymen painting is accidentally left on a park bench, for example, in Paris, London, or Cincinnati, it probably will still be there three weeks later. Discerning art collectors and investors would not show interest in this art. Donít hold onto collectable art thinking it will one day grow into "investment art." It wonít! Sell it. Move on. If you like the picture, however, and itís affordable, fine, keep it for whatever is charming about it. But it will not be a wise long-term investment.

Investment Art will always increase in value. High caliber, well-listed artists generally create investment quality paintings. Sought by collectors, investors, and dealers, investment art appeals to buyers beyond the state or local region, meeting national and international demand. Connoisseurs, experts, and art historians determine the quality standards for investment art. Therefore, if you own investment art, it can easily be sold for a profit. If investment art is ever lost, the finder essentially holds a bearer instrumentóthe equivalent of cash. A metropolitan radio station once reported a Picasso artwork was lostóaccidentally left on a New York City subway. Can you imagine? The radio station asked the finder of the artwork to call the police. Hello. Leaving a painting by Picasso on a New York City train is like leaving a bag with a million dollars cash in it on a park bench. Forget it!

WHY IS ART VALUABLE?

Investment art is valuable for three reasons: (1) superior quality, (2) rarity, and (3) scarcity. Some people who deem scarcity as prize-worthy, are willing to pay an exorbitant price for the last anything on earth that someone else wants, needs, or admires. You might have heard, they stopped making 19th century art more than one hundred years ago. Itís like waterfront property, it isnít made any more, which is why it cost 10 times more than rural farmland. If youíre lucky enough to own a rare painting, say one of a kind, well, that artwork can be near priceless.

There is more money in the world than great paintings, so a competition will always exist for superior artworks. Quality in art has absolute standards. Exceptional art has a masterís touch. Itís a gift. Few artists possess or develop such extraordinary skill and talent. Hence, the expression, "a stroke of genius," could well refer to the brushwork and technique of a great artist.

Recognizing quality in art takes time. Itís best learned with the help of an expert or mentor. Unless you understand "value" in art (or anything else), itís impossible to understand opportunity. And to understand value, you have looked at hundreds, even thousands of paintings. Learning about art is lifelong. When you arrive at the threshold of connoisseurship, and can see art at a gut-level, youíre ready to begin buying and selling art for a profit.

WHICH SUBJECTS ARE BEST?

Notwithstanding the exception to every rule: horizontal pictures are better than vertical ones. Paintings of girls are more desirable than pictures of boys. Landscapes are more valuable than seascapes. Life-pictures are more valuable than death scenes. Domestic animals are more appealing than wild animals. Organic still lifes are more valuable than inanimate pictures. More is better than less, with fruit, flowers, and fish etc. Thick paint (impasto) is better than thin paint (dry brush). Bright colors are better than soft tones. Remember, religious pictures are hard to sell, unless an Old Master, or executed by well-known artists. Full size paintings (24" X 36") are better than small or medium size pictures. Experimental themes are not as valuable as paintings from an artistís main body of work (oeuvre). For example, Thomas Moranís paintings of Yellowstone and the Grand Teton Mountains are more valuable than his paintings of India and Venice. A masculine face on a woman dressed in satin and lace will have little chance of fetching a good price at auction. Cheerful subjects, such as kittens pawing a ball of string, goldfish swimming in a bowl, or children chasing fireflies on a summer evening are highly desired subjects, and form a generally safe buying guide.


Example Collectable Art: This painting by C. Gordon Harris (b 1891- ) is an example of Collectable Art. C. Gordon Harris is mostly known as a New England artist, and his work has regional interest, but not much "national" interest, and no "international" demand. C. Gordon Harris is a "listed artist," but of minor stature. Generally, his oil paintings, in good condition, sell from $1,000 to $3,000. This one, titled on the reverse: "Summer Morning, Lincoln, Rhode Island," might fetch $5,000, because it can be traced to a specific location in Rhode Island, and a collector there might pay top dollar: $5,000. While local and regional art is considered "Collectable Art," it is not a wise investment choice, and Collectable Art will never grow in value like Investment Art.

WHO SUPPLIES ART?

Serious buyers of art develop "relationships" with Knockers, Pickers, Dealers, Galleries, and Auction Rooms. 80 % of all art moves from dealer to dealer, each tagging on a profit. Eventually most art winds up on a collectorís wall, usually at the highest price. You can feed off the bottom or fish at the top, but you want to buy at the beginning of the art chain, or as close to it as possible. Knockers "knock" on house doors. Taking off their hat, they ask, "Do you have any art or antiques to sell?" Itís a dying trade, but when practiced can produce sterling results. Pickers buy an old chair for $10 in an antique shop, then drive five miles down the turnpike and sell it for $15. Picking up another item, down the highway they go. In a weekís time, an experienced Picker will comb an entire region, often finding valuable works of art for select customers. Make sure he knows what youíre looking for. Pickers know which dealers to sell to. Low-end dealers generally sell to high-end dealers, usually at a low price. More experienced dealers "sell up," to collectors, investors, galleries, even museums, usually for top dollar. Galleries have traditionally sold the best of art, at the highest prices, to wealthy patrons. Such art generally comes with a documented provenance, bells and whistles, and free viewing rooms, but itís very expensive. Today, smart dealers working off their kitchen table can compete with renowned galleries for the same customers and the same valuable artworks. Remember, auction rooms offer great opportunities to buy and sell art. You must learn which Rooms to buy from and which to sell to, and how to find "winners" in trade papers, such as The Maine Antique Digest, or The Newtown Bee, available in most chain bookstores. From these papers and select art magazines you can harvest names and telephone numbers of serious art collectors and dealers who will become your future customers and suppliers. To buy and sell art successfully, you must develop contacts and build relationships.

25/25/50 Rule

Remember this rule, because it applies whether youíre an engineer, teacher, or art dealer: 25% of your success will come from your knowledge. 25% of your success will come from your skills. And 50% of your success will come from your relationships. Develop these attributes.

BUYING ART STRATEGICALLY

The below buying criteria will help establish standards for buying investment quality art, thereby assuring you of a profitable outcome.

Buy

only original paintings; signed and dated by the artist.

only listed artists with multiple auction records.

paintings by artists who produced a prodigious body of work in their lifetime, e.g., more than 200 paintings.

works by artists who had major exhibitions and shows in their lifetime, e.g., The British Royal Academy, The Paris Salon, The National Academy of Design.

artworks by artists whose School of art remains highly collected and in demand, e.g., Hudson River School, Brandywine School, California Impressionist School.

representative examples of an artistís central theme paintings (oeuvre); for example, Thomas Moranís Grand Canyon scenes, not his Venice or India pictures.

subjects that other people collect and invest in, e.g., children at play, women under parasols, genre pictures, mountain and vista landscapes.

examples that are fresh and new to the market (have not recently been at auction, or "shopped around").

representative paintings of an artistís highest quality.

large size paintings, 24" X 36", but generally not larger than 60 inches on any side.

examples that are in good to excellent condition.

paintings with an authenticated well-documented provenance.

art works that come with a free title, bill of sale, and a guarantee.

unsigned paintings that are outstanding (if reasonably priced), especially if accompanied by firm attribution from a renowned specialty scholar.

Make a Deal, Donít Be Shy

If youíve found a painting you like, in good to excellent condition, in a School of art that is appreciating, fairly priced, youíve done your research and due diligence, and itís affordable, buy it! Enjoy your painting for its beauty and financially for its profit appreciation for years to come.


About the author:
For more information on Buying and Selling Art, including workshops on this subject, see Ron Davisí new book, Art Dealerís Field Guide: How to Profit in Art, Buying and Selling Valuable Paintings. Available for $19.95 in most bookstores, or by calling: 1-888-401-2844. ISBN: 0-9755031-0-3. Check out Ronís Web site at www.CircaArt.com


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