Investing In Books: Safe Returns Between the Covers

There are fields of collecting in which you hear stories of someone who spent $5 at a flea market on an item that turned out to be worth $5 million.

Book collecting is not one of those fields.

A first-edition paperback of  on sale for $200 at the Chicago Rare Book Center.
A first-edition paperback of on sale for $200 at the Chicago Rare Book Center.

A multimillion dollar Shakespeare First Folio up for auction gets a lot of attention. But for most collectors, books represent a stable, long-term investment. It’s a rarefied pursuit, one that can be financially rewarding if you have the necessary expertise, diligence, and patience.

A Safe Bet

Ask a dealer if books are a wise investment strategy and the short answer is no. Mostly because there’s no liquidity and no fixed prices. Put a three copies of the same book in the same condition for sale at three different auction houses and you’ll likely get three different prices.

The longer answer is a bit more nuanced. John Windle, owner of John Windle Antiquarian Books in San Francisco, says collecting books is more akin to a savings account than a short-term investment.

“Books tend not to lose value over the long haul,” he says. “It’s not a bad place to put money with a reasonable expectation that it will grow. But if you’re looking for something that’s liquid, where one of your kids comes to you and says, ‘Dad, I need money for tuition next week,’ good luck.”

When factoring in a dealer’s markup, which is typically double the purchase price, Windle says collectors should expect to hold books for two seven-year cycles in order to see a significant return on their investment.

“If you buy a book from me at $2,000, for you to get your money back you’re going to have to wait until it’s worth $4,000 and a dealer will pay you $2,000 for it,” he explains. “That cycle is typically about seven years. The first seven years you wait to get your money back. In the next seven years the book may appreciate beyond what you paid for it to a point where a dealer might pay you $3,500 because now he can get $7,000 for it.”

What’s it Worth?

Determining the value of books, to say the least, is not an exact science. A book’s condition is vital—the closer to the original condition, the better. But a book’s edition is also paramount.

Typically, the first edition is the most coveted because fewer copies have been printed than subsequent editions. But first editions aren’t always the most prized. The third edition of Isaac Newton’s "Philosophiae Naturalis Principia Mathematica," for example, is the most collectible version, because that’s the edition that includes Newton’s initial comments on calculus.

“A lot of people think just because a book is old that it’s valuable or rare, and that’s just not the case,” says Rebecca Rego Barry, editor of Fine Books & Collections. “You really have to be mindful of that and you have to know what you’re doing. Is it a true first edition, or is it a facsimile edition? For the general person, that’s a confusing thing. If you think you have something special, have it appraised by a bookseller.”

Barry says the online resource Your Old Books is a good place for beginning collectors to start. But establishing relationships with rare book dealers is the best way to find out if what you have is valuable. It’s also the best way to seek out valuable items for your collection.

Beyond a book’s condition and edition, several other factors can help determine value.

“You want to know the provenance, the history of the book, who owned it before,” says Thomas Joyce, a partner at the Chicago Rare Book Center in Evanston, Ill., and a highly regarded appraiser. “There are people who tell you they don’t want anything that’s signed and personalized. If they want to buy a copy of Jack Kerouac’s "On the Road", they want it signed by him, but they don’t want it personalized unless he happened to personalize it to Allen Ginsburg or one of his intimates.”

Predicting Value

Complicating matters is the fact that valuable books need not be old, or especially rare.

The 2010 Pulitzer Prize for Fiction went to first-time author Paul Harding for his novel "Tinkers". After the prize was announced, Joyce says a woman approached him about selling her first-edition hardcover copy. He found that one dealer had priced the book as high as $2,000. In the end, Joyce found a buyer for the copy of Tinkers at $650.

But predicting which books will be valuable in the future is nearly impossible. J.D. Salinger’s"Catcher in the Rye" wasn’t a blockbuster when it was published in 1951. Today, a signed first- edition hardcover is on the market for $55,000 at AbeBooks.

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One area in which it’s hard to go wrong is collecting original manuscripts. However rare a printed book is, Windle notes, it’s still one of several copies available.

“But if you buy manuscripts, every one is unique,” he says. “It’s one thing to have a first edition of "The Great Gatsby", it’s another thing to have the manuscript of "The Great Gatsby" that Scott Fitzgerald gave to Zelda. Even if it’s in ratty condition, that’s the copy to have, because there isn’t another one.”

The digital age could serve to make books even more valuable. The PC has effectively eliminated the concept of original manuscripts, and e-books threaten to do the same to printed material. The publishers of the "Oxford English Dictionary", for example, are debating whether to make the third edition of the venerable reference tome a digital-only version.

Windle believes that as published works become more ubiquitous in different formats, collectors will be more driven to seek out original works. Earlier this year, the German publisher Taschen published a facsimile of an obscure 1847 illustrated book by mathematician Oliver Byrne called "The First Six Books of the Elements of Euclid". Taschen’s facsimile is based on an original copy that Windle owned.

Anyone can purchase the new version for $59.95, but Windle says that only stoked demand for the original, noting that a “major collector” from New York tracked him down for his copy. Windle’s price: $22,500.

“I actually had two of them,” Windle says. “I sold them both in a week.”

Labor of Love

There will always be a few usual suspects for wealthy collectors, such as Shakespeare and Dante. But in general, experts recommend focusing on a specific area interest, whether it’s a particular author, genre or time period.

“For newer people, collecting seems to be about collecting a subject matter,” Barry says. “Books about cocktails, that sort of thing. If you can go out there and sleuth around to find an amazing collection, you can build value just because you’ve built a collection of it, even though the individual pieces may not be very valuable.”

For Windle, the key is collecting whatever it is you’re passionate about, no matter how obscure.

“There are people who collect for financial reasons,” he says. “I don’t call them collectors, I call them accumulators. They’re buying books like they would buy stocks and bonds. Those people seldom do well. But a really passionate collector who loves his subject, who loves the field, who become de facto the living authority on it, they become their own market. Collect what you love, collect what you know, and become the expert in your own field.”