Some collectors of antique, rare and first edition books do so for the love of reading and knowledge. Some do it purely for the investment. But many do it for a combination of both.
What defines a valuable book?
There are four things that determine the value of a book: the edition, its condition, its scarcity and its desirability.
First editions of popular books are the best example. If the book goes on to become popular, and thus desirable, then a first edition escalates in value. This is because first editions are published in smaller quantities, making them scarcer.
Once a book becomes popular, larger volumes are produced and are less likely to be scarce enough to be considered collectable.
Other elements regarding the condition and binding of a book can influence its price. As you’d expect, books in perfect condition are far more valuable in those that show signs of wear and tear. Whether a book has been exquisitely bound in leather, is engraved or has hand drawn illustrations also influences its value, as does its provenance, or history.
For example, at a sale of rare books in Sydney in 2010, a 5th century book of world maps, the Macrobian, that is exceptionally desirable for its use of the word ‘antipodes’ was listed for sale for $185,000. Not only was the book a rare edition and in exceptional condition, it was also originally from the personal library of the Duke of Marlborough.
How do you determine the edition and value of a book?
Fortunately, there is a universal system for determining the edition of a book. Inside the front cover there is a 10 or 13 digital number, the International Standard Book Number (ISBN). This unique identifier can be checked on websites such as Biblio, Alibris and, AbeBooks to determine the edition.
These sites also provide calculators that estimate the potential value or the price the book would fetch if made available to other collectors.
Sites like these are also sources for buying and selling collectable books. Selling via these sites usually attracts a commission on the sale price of around 15 per cent.
Just how valuable is valuable?
Like stamps and comics, books have the potential to become highly valuable, especially when compared to their original purchase price.
The approximate starting price for rare books is around $5,000. Some books can fetch hundreds of thousands, even millions. Others can be listed as POA, or price on application. This is probably a polite way of saying, if you have to ask, then you can’t afford it.
J. K. Rowling may have made billions from her Harry Potter series, but first editions of the boy wizard stories also fetch reasonable prices. The highest amount ever paid on AbeBooks for a first edition of book one in the series was $37,000 in 2005 by an American collector. Only 500 copies of the book were printed in its first edition, long before it became a literary phenomenon.
A first edition of J.R.R. Tolkien’s The Hobbit is believed to be the most expensive book ever sold on AbeBooks. It sold for $65,000.
Major auction houses such as Christie’s and Sotheby’s regularly offer extremely rare books for sale for millions of dollars. Bill Gates, Founder of Microsoft, purchased the original copy of The Codex Leicester by Leonardo da Vinci for $30.8 million in 1994. This remains the most expensive book purchase.
Other books that have commanded million dollar prices include:
A first edition of Chaucer’s 15th century works, The Canterbury Tales for $7.5 million
One of seven original, hand created copies of J. K. Rowling’s The Tales of Beedle the Bard for $3.98 million
The First Folio by William Shakespeare sold for $6.1 million
A copy of the original Guttenberg Bible for $4.9 million
Birds of America by naturalist John James Audubon sold for $11.7 million
Rare book investing
Rare and antique books are an interesting investment. The market is small, but dedicated. And the volume of items available for sale within the market is extremely limited, thus increasing their value.
An investment portfolio that includes rare books is often in a good position to withstand other financial investment peaks and troughs. Rare books tend to provide long-term growth as they have repeatedly been shown to increase in value.
Are rare books a good investment for a SMSF?
As always, the answer is, it depends. Before purchasing any investments for a self managed super fund (SMSF), you should seek advice from a professional financial advisor or accountant.
There is an estimated $680 million invested by SMSF in artwork, rare books and collectables. It’s a minor investment option for most funds; this accounts for less than one sixth of a percent for all investments in SMSFs. According to statistics from the ATO, only one in 50 SMSFs own investment artwork or collectables. And these investments have an average value of around $20,000.
In July 2011 there was a new rule introduced regarding investment assets such as rare books and artworks for SMSFs. It strictly prohibits the storage of artworks, rare books or other collectables on any property that is considered a private residence of the owner of the fund, or any of their relatives.
These investments can be stored at a business premises but cannot be displayed. Also, the SMSF must take out insurance on the investment within seven days of acquisition.
Previously, such investments could be stored but not displayed on private property and could be leased for display to a business.
SMSFs that had artwork, rare books and other collectables as investment assets prior to the rule change have until July 2016 to reorganise storage and insurance arrangements.
The new rule will see the cost of insurance rise for those SMSFs that have these types of investments. Typically, under the old rules, such investments could be covered in a personal home and contents insurance policy. If a rare book collection is worth around $11,000, the insurance now costs around 10 per cent of the valuation price, per year.
The additional cost of insurance of such items has led to a fall in SMSFs investing in artwork and rare books.
Funds wishing to invest in these types of assets need to do longer term projections of the future valuation of the assets versus the ongoing cost of insuring the items.
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