CORRECTED: Hobbies that pay: How the wealthy make money on fun

June 30, 2011

If you’ve seen “The Antiques Roadshow,” you know dusty paintings or funny-looking nightstands can fetch mega dollars. Or not. It’s a crapshoot, and no one knows that better than the hopefuls getting their attic bric-a-brac appraised.

The wealthy amass their tchotchkes, too, but with a big difference: Financially successful folks bring their money smarts to hobbies and collectibles. So while they indulge that ages-old impulse to stash stuff, they also find ways to write it off and make it pay.

Reuters Wealth surveyed estate planners and experts to sample non-traditional areas where the rich sink their dough. These categories may reek of conspicuous consumption, but beneath the surface you’ll find a calculus worthy of a stock portfolio.

Vintage guitars
How it works: American-made electrics from Gibson, Fender and Rickenbacker from the 1950s and ‘60s are prized. Guitars played by rock stars fetch big bucks, as do limited-edition models.

The bottom line: 1960s guitars that retailed for under $1000 (2011 dollars) often command five-digit sums today. Guitars purchases may be tax deductible if you claim a Schedule C as a musician and/or own a for-profit recording studio.

Quotable: Beware of buying guitars on eBay, says Wayne Sefton of Chicago’s Midwest Buy and Sell. “There’s a lot of shill bidding going on,” says Sefton, whose clientele includes Wilco, Franz Ferdinand and Death Cab for Cutie.

Kickstart it: George Gruhn in Nashville is the world’s foremost appraiser of guitars, charging a modest $50 per instrument. Visit his website at gruhn.com.

Fun Fact: Eric Clapton’s famous Fender Stratocaster “Blackie” (on the cover of his album “Slowhand”) sold for just shy of $1 million in 2004.

Wine
How it works: Wine collecting taken to new levels involves selling acquisitions for a profit, and visiting wine regions in France or Italy to survey the wares.

The bottom line: Inventory from collections of 200-plus bottles can be sold to boutique wine stores, realizing a 25 percent return, says Steve Mindel of the Southern California law firm Feinberg, Mindel, Brandt & Klein.

Quotable: Wine collectors “can do their hobby [of overseas travel] and write it off,” Mindel says. “And they’re not flying in coach; they’re traveling first class, staying in some great hotels and having some very decent dinners.”

Kickstart it: Wine Spectator has an auction database that tracks sale and pricing information on the most collectible wines sold at auctions.

Fun fact: Mindel’s conservative estimate of one client’s yearly expenses for fact-finding wine trips overseas is between $30,000 and $40,000.

Cars
How it works: Collectors focus on high-status cars, antiques, muscle cars and models that are pop culture icons. T-Birds and Chevy Corvettes? In. K Cars and Chevy Chevettes? Definitely out.

The bottom line: A common strategy is to transfer vehicle titles to a family foundation. This allows collectors all the benefits of ownership with the added bonus of big tax breaks — in excess of $350,000 for a car that might sell privately for $1 million, experts say.

Quotable: “I’ve got a billionaire client who invests in vintage race cars,” says Simon Singer, founder of Advisor Consulting Group, which provides financial and estate planning to clients of high-end CPA and law firms. With a foundation, “he gets the satisfaction of being able to keep on collecting. Plus, whenever he [passes away] there will be a perpetuation of his values, with the elimination of income taxes, gift taxes, estate taxes and capital gains tax.”

Kickstart it: Desirable models — Corvettes, for example — have loyal and dedicated followers who gather at car shows dedicated to their vehicle of choice. A good starting point: Enthusiast organizations of long standing, such as the National Council of Corvette Clubs.

Fun fact: A 1936 Bugatti 57SC Atlantic sold for a reported $40 million in 2010. The original owner was a New Hampshire neurologist who collected Bugattis; the buyer chooses to this day to remain anonymous, but the Bugatti is housed in the Mullin Automotive Museum of Oxnard, California  the buyer was the Mullin Automotive Museum of Oxnard, California — opened by noted car collector Peter Mullin, chairman emeritus of MullinTBG and founder/chairman of M Financial.

Meteorites
How it works: The only hobby that’s literally out of this world, meteorite collecting involves buying and selling of space-borne debris. And yes, you can buy these things on websites such as The Meteorite Market, in business since 1995.

The bottom line: Stony meteorites, known as chondrites or achondrites, might fetch as much as $1300 per gram — or about $590,000 a pound. The most expensive stony meteorites are those scientists think originated from Mars.

Quotable: “You can do very well if you buy correctly,” says Grant Rawdin, president of Wescott Financial, a Philadelphia-based wealth management firm. “Meteorites come from outside Earth; everything else is either from the Earth, either organic or inorganic. You’d be very surprised how valuable these things are.”

Kickstart it: The book “The Art of Collecting Meteorites” by Kevin Kichinka offers an insider’s glimpse into this pastime.

Fun fact: The 1906 Antiquities Act states that meteorites falling on public lands officially belong to the Smithsonian Institution. But if they land on your property, they’re all yours.

(Corrects to update anonymous owner of 1936 Bugatti 57SC)

2 comments

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[…] What Do The Uber Rich Collect? GA_googleFillSlot("worthpoint_atf_rectan gle"); Very expensive things for sure, including guitars, wines, and meteorites, among other things. Click here to see how the "other half" spend their collecting dollars… and sometimes eve… […]

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For all those who bravely defended the rich and the “trickle down” benefits of the wealthy in yesterday’s article, I give you this article. Investments in luxury items helps main street America just as much as investments in overseas ventures or hedge manipulation: zero benefit. Seven deadly sins are alive and thriving in “upper crust” America, especially mammon and gluttony.

Posted by armoderate | Report as abusive

Zero benefit for a car collection? Jay Leno employs at least 3 people full time to maintain his collection. He paid a builder mightily for the construction of his garage, who in turn employeed dozens if not hundreds of workers to do the construction. Auctioneers and other car collectors have profitted by selling him their cars. He buys oil, parts, transmission fluid, gas, car wax, etc from vendors across the country to keep his cars running. He hosts charity events to view the garage, and must employ party planners and assistants to make it happen. He participates in car shows, paying the car show promoter, the venue owner, the transportation team. He pays mightily for auto insurance, & car registration. The city and state where he lives benefits from the taxes on all these purchases including luxury taxes. He employs someone to create his website about the collection http://www.jaylenosgarage.com/the-garage  / which runs ads for medium and small businesses, who in turn profit from the exposure… I could go on and on. This is just one small example. The deadliest sin of all is envy, which blinds us from seeing the value that other’s successes bring to the world.

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[…] hobbies | investing | Personal finance | wealthy In June, Reuters Wealth reported on how the wealthy make money from their hobbies, in areas from rock-star guitars to rocks from Mars. This month, we examine four more instances […]

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[…] bug. And it’s not just limited to the Archie comics or baseball cards of your childhood. Adults collect, too — and with adult salaries, such passions can add up to serious […]

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