Shaky markets make art an alluring investment

By Ted Streuli
The Daily News

Published November 10, 2002

Investors watched stock portfolios plummet this year, leaving some looking for alternative ways to garner a little appreciation.

Some put money in real estate, others found safety in the relatively low returns of certificates of deposit. But while some are taking it to the bank, others are hanging it on their walls.

“Over some reasonable holding period, my experience is that you make about 5 percent to 8 percent per year,” said Sharla Kidder, president of Biddington’s, an online art gallery, auction house and art education site. Although she majored in art history, Kidder also spent 15 years trading on Wall Street.

Kidder said investing in art doesn’t require millions of dollars or any formal art training, but like any investment, a buyer should do some homework before pulling out a checkbook. “One thing you want to do is make sure you’re buying art and not a pretty picture,” said Kidder. “That’s the key.”

Most would-be art investors aren’t sitting at a Sotheby’s auction bidding on original Rembrandts. An investment of $2,000 to $15,000 is enough to acquire a piece of art that’s likely to appreciate, and Kidder said that with a modest amount of research it’s not difficult to make a good decision. “$10,000 would be a pretty big purchase,” Kidder said. “It’s a reasonable price range for real folks.”

Kidder recommends her clients buy work by contemporary artists — people who are still alive — and start by finding a style they like. “You’re always supposed to buy something you like,” said Kidder. “You have to live with it.”

Doing the Research

Kidder said that when a buyer finds an appealing genre, the next step is to find out who is painting in that area and who is doing it well. “Why not take it a step further and push your ability to learn something?” Kidder said.

The information is readily available, with sources on the Internet, in bookstores, at museums and art galleries. Kidder is a proponent of talking to art dealers and asking a lot of questions.

“Dealers are salesmen,” said Kidder. “But most of the people in the art business are there because they really love art and they like to talk about it.”

Clint Willour, director of the Galveston Art Center and a former gallery owner, said dealers want to educate collectors. “Most dealers are on a mission,” Willour said. “They want to educate and they want to inform.”

As the buyer learns whose painting the style they like, looking at a lot of paintings will help train the buyer’s eye. “If you look at a lot of things, a natural sifting upward will occur,” said Kidder. “Using your eyes is like using any other muscle — the more you use it, the stronger it gets. People don’t believe they can make their own judgement, but they can.”

Finding the Right Artist

Typically, she said, the process of looking will cause the buyer to identify a pool of artists whose work they would consider buying. Then it’s time to take a look at the artist’s background and some individual paintings.

“The first thing I ask myself is, ‘What’s this person trying to do?” said Kidder. “Usually we’re trying to buy a vision through somebody else’s eyes.”

Contemporary art that will appreciate, Kidder said, must be produced by an artist who’s doing something new. “If you’re buying from a dealer, you need to say, ‘What’s new about this?’” said Kidder. “Any dealer should be able to answer that.”

Dealers can be a good source of information about the artist’s background. Kidder said researching the artist’s career is much like researching a company’s business practices before buying its stock. She said investment-grade artists should have a track record of showings with a variety of dealers, at least a few museum placements, some auction records and a Master of Fine Arts degree from a major school.

“Generally, you don’t want somebody with no track record,” Kidder said. “With contemporary artists, bios are usually available. If they have an MFA from almost anywhere, they have jacks or better to open. If they’ve only shown at the local Peoria art fair for the last 30 years, they’re not a major artist. If they’re quite well known, they may have been at one of the major auction houses. Look for museum placements. It doesn’t have to be the Museum of Modern Art, but it’s nice if it is.”

The best time to buy an artist’s work, Kidder said, is in the middle of the artist’s career. “You’re probably buying a mid-career artist, someone in their 30s or 40s,” said Kidder. “You’re not buying a 20-year old.”

The advantage to purchasing work at that time is that it’s likely the artist has refined the talent and established a track record. “If people are good they get better,” Kidder said.

At that point in an artist’s career, prices might be higher than when the artist was freshly out of art school, but not as high as prices will be when the artist is older. Kidder said values tend to jump when an artist reaches his 30s, with another price surge coming between age 55 and 65. A final price surge typically appears when the artist dies.

Willour said catching an artist who’s a little younger but on the rise can be a good move, but it involves a little more risk. “The time to buy is just when they’re on the upward track,” said Willour. “At mid-career it depends what you bought. You could have bought art from a slow producer or someone who’s stopped producing altogether. There are artists that have taken off at mid-career and others that have just given up.”

Buy Low, Sell High

Buying low and selling high is as much a rule in art as it is in any investment. “You don’t want to buy at the top of a wave,” said Kidder.

Japanese interest in Impressionism drove the prices of contemporary Impressionist paintings to all-time highs from the late 1960s through the late 1980s. Medieval tapestries soared in the 1920s, but fell when depression-era architecture replaced 20-foot ceilings with eight-foot heights. Collectors simply no longer had room to display the large works.

Kidder said a well-informed buyer can spot a good deal almost anywhere, but reputable dealers are often safest. “The more you know, the more places you can buy,” said Kidder. “There are some very reputable people selling online. Obviously, you’d rather buy it at something less than full retail.”

And full retail is usually what a buyer will pay at a gallery. Dealers who buy art directly from the artists typically markup the price 100 percent. Return on investment for the buyer can come more quickly if the buyer finds a bargain, but a reputable dealer can do a lot to help a collector find the right work.

“Any artist worth his salt has a dealer,” said Willour. “It’s usually better to know an artist has more than one dealer, maybe one in Houston, one in Los Angeles, one in New York, one in London. Then more of their work is being sold and there’s more demand.”

Willour said the best way to identify a reputable dealer is to ask those who are familiar with the local scene. “You ask around within the local art community,” said Willour. “You find out who the art people are in town and ask them what they think of so-and-so.”

Another way to test a seller’s credibility is to ask if they accept returns or if they’re willing to buy the painting back at a specific percentage of the price paid in the future.

Bargain Hunting

As with any investment, there are pitfalls and there are bargains. Kidder said the art investment world’s equivalent of penny stocks lies in art schools.

“It’s the off-the-charts clever art school kid,” said Kidder. “It’s rare, because most student work looks like student work. But if you find the one with real talent you can buy a painting for $500 that’s likely to be worth a lot more when his career takes off.”

Kidder also thinks Latin America has bargains to offer right now. She said the growing influence of Hispanic culture in the United States could promote the value of Latin art in the United States and depressed economic conditions in South America are making prices very attractive.

Kidder recommended buying pieces that fall in the artist’s normal range of work; buying a seascape by an artist who normally paints still lives can be risky. She said the same holds true for size: If most of an artist’s work is 36”x36”, it’s safer to buy something about that size rather than his one very large or very small piece.

Art tends to bring the highest price in its area of origin. French artists sell for higher prices in France than they do in the United States, a point Kidder said is worth considering both when buying and selling.

Although fine art typically continues to appreciate regardless of economic conditions, Kidder said there can be a problem with quick sales.

“Art has a liquidity issue much like real estate,” Kidder said. “But typically a seller will be able to find a buyer who will pay at least 75 percent to 80 percent of full retail.”

Kidder advises investors to stick with original works and avoid prints (unless printmaking is the artist’s primary medium). She offers clients a formula: The size of the series multiplied by the price of the print should equal no more than the value of the original work.

“If it’s a series of 500 and it’s a $1,000 print, the original has to be worth $500,000,” Kidder said. “And that’s a hard nut to make.”

You Can’t Frame A Savings Bond

Unlike stocks, bonds or commodity futures, art investments offer a non-monetary value to their owner. “What we’re talking about is a combination of financial and aesthetic value,” said Kidder. “Good is good and quality is quality. There is an intrinsic value in these things that has nothing to do with money.”

Willour agreed, pointing to the value of simply enjoying the work. “Even at the end of 10 years, if it hadn’t appreciated, would you care?” he said.

Nine simple rules to art investing

Sharla Kidder, president of Biddington’s Inc., offers these nine rules for long-term art investing:
1. Buy the Best You Can Afford: The best work by artists appreciates in value more than mediocre work by the same artist. Even in a down market, prices hold-up better for the top examples of any type of object.
2. Buy Items with a Paper Trail: A good provenance hikes the value and adds to the resaleability of an object. Two reasons: It testifies that the piece is authentic and it tells a story.
3. Buy Signed Objects: The signature doesn’t show when you exhibit the item? For resale value, it’s got to be there.
4. Buy Items in Perfect Condition: Everybody knows about the huge price spread between mint-in-box toys versus ones that kids actually used. Sure, you can have a piece restored, but it will never be as desirable as something that was never damaged.
5. Keep Items in Perfect Condition: Simple attrition is one of the basic reasons antiques have value. Over time, fewer items survive and those that have survived usually deteriorate.
6. Buy Small Scale Objects: Small items trade higher than big ones. This has to do with display logistics: People prefer Amish crib quilts versus full size ones, because you get the idea, and it takes half the space to show it.
7. Buy Typical Items: Sure, you could buy a Jackson Pollock drawing showing a representational depiction of a reclining nude. When your friends walk in the door, they say: “Nice nude.” For resale, buy a Pollock dripped painting. Friends’ response: “awesome Pollock!”
8. Do Not Buy at the Top: Tempting as it may be, buying whatever is on everyone’s tongue this week is probably not a viable long-term investment. If an object, period or artist you own is all over the media, it’s time to think about unloading.
9. Sensitize Yourself to Major Trends: Global political and economic shifts are a great clue in trendspotting: In the 1990s, the fracturing of the USSR generated good interest in Stalinist memorabilia and other tchotchkas since they marked the Cold War — an era now relegated to the history books