1) buy a painting for X
2) have it evaluated, sometimes the price is higher than X
3) put it in storage or a tax loophole between countries
4) use said painting as collateral for low interest loans
Now you have money to invest, as long as you make more than the low interest loan, you're making profit.
Art is like Schrödinger's cat, its value is only determined when it changes owner.
If someone pays 1M€ for a piece of art, it is "valued at $1M" and you can use it for collateral for a loan at some percentage of its valuation.
Will it actually be 1M€ if it needs to be liquidated? Nobody knows. It can be worthless or it can be worth 10M€ - it all depends on what the next person is willing to pay for it. But until that point it's "worth" 1M€.
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This is why there are so many empty (commercial) properties, they were valued at a specific €/m2 price and were used to take loans based on that value.
Until they're rented/leased again, that is their worth and value. Could the owner get someone in the property by lowering the price? Definitely.
Would that also cause a rolling cascade of loans not having enough collateral to back them up? Yup.
but then you do not get the tax benefits discussed above.
The market for "investment art" I huge and everyone involved
has an upside by art appreciating in value.
> The artist may get more money (since the artist only gets paid in the
initial transaction the artist may only get a fraction of the value
as it increases. The artist may find that later work will become more
valuable as other investors want more of his art.
>The gallery gets more money, and it may attract more art investors
> and the auction house gets more money if it ends up there.
How much art is worth is difficult to estimate on its own.
I mean a white canvas painted uniformly white is worh a lot
of money if a famous artist does it.
It is worth entirely nothing if I do it.
I expect then that the market decides the value.
All investors want art to get more valuable and are in on it.
As an art lover, this is such a tragic scheme.
Unknown amount of art that will never been seen by the public.
Locked up inside a storage facility in a big box
Often the investor has no interest in the art at all, just an
investment made by some form of a broker.
there was a loophole that allowed wealthy people to donate to museums works of arts in exchange of a write off on the value of the artwork. to limit abuses they patched it so that you can writeoff only the purchase price not the market value. I heard a workaround is having living artist create a artwork directly for you and getting it appraised to a crazy amount for writeoffs.
