Invest in antiques

Buying antique furniture offers the twin benefits of enjoying both fine craftsmanship and value appreciation.

What makes these pieces investment worthy is scarcity—they don’t make them anymore, says Neil Herbert, owner of Neil Herbert Fine Woodworking in Oakville, Ont.

But if you’re thinking of investing in antiques, you’ll need to have more than just a passing interest. Anyone who wants to invest in this area must do extensive research. Herbert says attending auctions are a great way to learn about pieces and periods, and get a sense for market prices.

It’s also important to hit the right stage of the market cycle. “If you’re getting into antiques to invest, now is the best time: [when] the economy is slower.”

The Annual Furniture Index (AFI), compiled by England’s Antique Collectors’ Club, stood at 2,505 in 2010 (up from 100 in 1968, its year of inception). The AFI is based on a blend of retail and auction prices for 1,400 typical pieces of furniture from seven different periods.

Further, buying antiques at auction is “like gambling; it’s a rush,” he says. “When you’re [there] you really want it—[then you realize] all of a sudden you’ve spent too much.”

So set a spending limit and determine desired pieces beforehand.

In terms of asset allocation, one Ontario-based financial advisor suggests antiques make up no more than 5% of your net worth. For the very wealthy, 2% is a more reasonable number.

Most of Herbert’s clients buy and hold because they’re partial to the pieces, not just the investment. That’s smart, because according to the New England Antiques Journal, selling costs can run at least 30% of the value of the antique.

Buying antique furniture is not only about capital preservation. It’s also about the legacy you want to leave behind. Himself a beneficiary of inherited pieces, Herbert is now buying heirlooms for his family.

Buying & selling tips

• Get an independent, expert opinion. Formal appraisals cost as much as $400.
• Auctions can ensure sale, but not necessarily the price you want; selling on consignment can ensure price but not sale
• If you need to sell quickly, an auction is your best bet.
• Research your auctioneer’s reputation and standards before entering a piece.
• The AFI recorded an 8% drop during 2010, the largest-ever 12-month drop in four decades, and 2013 continued that downward trend according to a February 2014 AFI report. So if you’re selling now, be prepared to lose in this down market.

Hassle factor

• The investment is illiquid, and usually long-term.
• Many pieces need restoration or repair. Restoration work costs at least $70 an hour.
• Pieces are susceptible to rot, mold and insect infestations.
• Home contents insurance may not cover the entire value of antique furniture, so separate policies must be taken out.
• Can be difficult to tell a genuine period piece from a high-quality reproduction without an appraisal.

Ultimately, investing in antiques is no more a sure-bet than any other investment strategy, but if you have an appreciation for old things and are looking to pick up a new hobby while adding to your portfolio, there are worse options.