Some people collect antique, rare, and first edition books because they love reading and knowledge. Others do it purely as an investment. Many do it for a mix of both.

What Makes a Book Valuable?

Four main factors determine a book’s value: the edition, its condition, its rarity, and its desirability.

First editions of popular books are a great example. If a book becomes popular and desirable, a first edition’s value can skyrocket because first editions are usually printed in smaller quantities, making them rarer. Once a book gains popularity, larger volumes are produced, making them less rare and less likely to be considered collectible.

Other factors influencing a book’s price include its condition and binding. As expected, books in perfect condition are way more valuable than those showing wear and tear. Fancy leather bindings, engravings, hand-drawn illustrations, and the book’s provenance (its history) also add to its value.

For instance, at a rare book sale in Sydney in 2010, a 5th-century book of world maps, the Macrobian, was listed for $185,000. This book was super desirable due to its use of the word ‘antipodes,’ its rarity, excellent condition, and its provenance from the personal library of the Duke of Marlborough.

How Do You Determine the Edition and Value of a Book?

Fortunately, there’s a universal system for determining a book’s edition. Inside the front cover, you’ll find a 10 or 13-digit number, the International Standard Book Number (ISBN). You can check this unique identifier on websites like Biblio, Alibris, and AbeBooks to determine the edition.

These sites also have calculators to estimate the book’s potential value or the price it could fetch if sold to other collectors. Plus, they’re great platforms for buying and selling collectible books, usually charging around 15% commission on the sale price.

Just How Valuable is Valuable?

Like stamps and comics, books have the potential to become highly valuable, especially compared to their original purchase price. The starting price for rare books is typically around $5,000, but some can go for hundreds of thousands, even millions. Others may be listed as POA (price on application), which basically means if you have to ask, you probably can’t afford it.

J.K. Rowling may have made billions from her Harry Potter series, but first editions of these books also fetch high prices. The highest amount ever paid on AbeBooks for a first edition of the first book in the series was $37,000 in 2005 by an American collector. Only 500 copies 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, fetching $65,000.

Major auction houses like Christie’s and Sotheby’s regularly offer extremely rare books for millions of dollars. For example, Bill Gates bought the original copy of “The Codex Leicester” by Leonardo da Vinci for $30.8 million in 1994, the most expensive book purchase to date.

Other books commanding 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 Gutenberg Bible, for $4.9 million
• “Birds of America” by naturalist John James Audubon, sold for $11.7 million

Rare Book Investing

Investing in rare and antique books is pretty cool. The market is small but dedicated, with a limited number of items available, increasing their value. An investment portfolio that includes rare books is often well-positioned to withstand fluctuations in other financial markets. Rare books tend to provide long-term growth, as they have consistently shown an increase in value.

Are Rare Books a Good Investment for an SMSF?

As always, the answer depends. Before purchasing any investments for a self-managed super fund (SMSF), you should seek advice from a professional financial advisor or accountant.

Approximately $680 million is invested by SMSFs in artwork, rare books, and collectibles, accounting for less than one-sixth of a percent of all SMSF investments. According to ATO statistics, only one in 50 SMSFs own investment artwork or collectibles, with an average investment value of around $20,000.

In July 2011, a new rule regarding SMSF investment assets, including rare books and artworks, was introduced. It prohibits storing these assets on any property considered a private residence of the fund owner or their relatives. These investments can be stored at a business premise but cannot be displayed. Additionally, the SMSF must insure the investment within seven days of acquisition.

Previously, such investments could be stored but not displayed on private property and could be leased to a business for display. SMSFs with investment assets prior to the rule change had until July 2016 to reorganize storage and insurance arrangements.

The new rule has increased the cost of insuring such items, leading to a decline in SMSFs investing in artwork and rare books. Typically, these investments were covered under a personal home and contents insurance policy. Now, insuring a rare book collection worth around $11,000 costs about 10% of the valuation price per year.

Funds wishing to invest in these types of assets need to make long-term projections of the future valuation versus the ongoing cost of insurance.