Art Rental: Generating an Income from Fine Art
Did you know that there is a way to get a guaranteed and immediate return from art? As art investment becomes more popular and a more widely accepted form of investment, different ways of generating returns from investing in art are becoming available. A recent addition to the options available to art investors is art rental which is one of the fastest growing vehicles for investing in art because it solves the problem of illiquidity which is usually associated with art investment by using the artworks to generate an income for the owner.
Art rental basically involves a gallery or broker selling you a portfolio or piece of art which is then rented out to the corporate sector on your behalf giving you a return which is usually underwritten and usually between 5% and 9% a year for up to 3 years. This means that you can invest in art and get a guaranteed return while you take advantage of the capital appreciation. Once the rental period is over you should get the option of either taking collection of the artworks, selling the artworks, or going back into the rental program and continuing to earn a return.
The gallery or broker that sells you the work will rent your artwork out to businesses and organisations for them to put in their offices and boardrooms, etc. and will take a small cut of the rental fees they charge them, passing on the rest to you. Before signing on the dotted line you should first get any agreements looked over by a lawyer and make sure that the artworks will be fully insured at all times (usually at the expense of the gallery/broker) so that there is no risk to you should anything untoward happen to your artworks while they are being rented out.
Many people ask me why the corporate sector would rent artworks for their offices rather than buy them, well, there are several reasons. The first reason is that often a company cannot justify purchasing artworks to their board or investors. Secondly, renting artworks allows the company to change the artworks they are displaying every so often without cost to the company and the final reason is that there may be tax breaks involved for the company by renting art.
This concept may seem rather complex but it is in fact a very, very good idea which many people have. A number of people have also used their superannuation money to invest in art rental as well but as with any investment you should seek the advice of a financial adviser become making any commitments.
**Nicholas Forrest is an art market analyst, art critic and journalist based in Sydney, Australia. He is the founder of artmarketblog.com, writes the art column for the magazine Antiques and Collectables for Pleasure and Profit and contributes to many other publications.