There are people who are thinking of getting into model railroading for investment. But is going into model trains a good or bad investment? Well, I compiled some reasons that make it good and bad. But generally speaking, are model trains a good investment?
Generally speaking, investing in model trains is a bad idea because the hobby is declining. Demand plays a massive role in model trains, and there are fewer train collectors compared to the past decades. However, there are some model trains that are still viable as an investment.
This post will discuss the points that make model railroading a good and bad investment. We will talk on both sides so you will have a deeper understanding of the topic.
Are Model Trains a Good Investment?
As a general rule, model trains aren’t a good investment simply because the hobby has declined these past few decades. Furthermore, their price changes a lot due to fewer people wanting to collect these models. However, technological advancements are starting to make this hobby a viable investment again.
Overall, I found many reasons for both sides so you can also decide for yourself if you want to get into the hobby or not.
Of course, after explaining all of the reasons, I will also share my take at the end of this post.
What Makes Model Trains a Good Invesment?
Model trains can be a good investment because they generally last long due to their materials. Furthermore, they are easy to store and sell. Lastly, most of these models are standardized, which means they can fit on other people’s collections or layouts.
Here are some of the reasons why model trains can be a good investment.
1. Model Trains Lasts Long
Most model trains are made with durable materials such as diecast alloys, brass, and steel.
However, newer model trains can now include plastics, especially on their beginner and cheaper models.
The important thing is that these models are mostly made with durable metals, making them easier to maintain.
Furthermore, most of the current model trains are made with diecast alloys that come from aluminum that doesn’t rust.
Compared to others, you can store your model somewhere and wait until its price goes up.
As a general rule, if you want to get the most value out of your model train, you should get model trains made from brass or iron. These two are some of the most expensive materials for model trains today.
2. Model Trains are Easy to Store
One of the advantages of investing in model trains is that they are easy to store.
In fact, the best way to store your model trains is to keep them in the box.
Old model trains in mint condition usually sell for hundreds to thousands of dollars, depending on their rarity, age, and materials.
Combine this with their durable materials, and you won’t need to worry about maintaining them as long as you keep them in a safe place.
3. Most Model Trains are Standardized
Most model train buyers would want to buy other people’s model trains for two reasons which are for display or simulation purposes.
The good thing about model trains is they are usually standardized by the NMRA or the National Model Railroad Association.
This means your model train can work on other people’s layout, whatever brand or model you have, as long as they are of the same gauge.
This is important because as long as you collect model trains in popular scales such as HO and O, people can use your models.
This makes it easier to sell your rare models for a premium price.
4. Model Trains are Easy to Sell
While the hobby has been in decline for the past few decades, the advancement in technology made the hobby easier to sell.
For example, you can find many modelers in various forums and marketplaces such as eBay.
It would be hard to sell model train collections without the internet since there are fewer train modelers than before.
Even if the number of train modelers is in decline, the fact that these models can be sold online is a huge bonus as someone thousands of miles away can see what you’re selling and offer their buying price.
While these are great reasons to make model railroading a good investment, the hobby also has drawbacks which we will discuss in the next section.
What Makes Model Trains a Bad Invesment?
Model trains can be a bad investment because the hobby has been in decline these past decades, and fewer people are looking for model trains. Since demand has dramatically reduced, so is the asking price for these train models.
Here are some of the reasons why model trains can be a bad investment.
1. Model Railroading is in a Decline
The main reason many people are staying away from investing in model trains is that the hobby is declining.
This is why many people say that model railroading is a hobby and shouldn’t be thought of as an investment.
This is true since trains aren’t as popular as it was before.
A few decades ago, model trains were extremely popular since trains are what people use for transportation.
However, it is not as popular today for many reasons.
One is that people are starting to collect other models instead of model trains.
For example, ship, car, plane, and motorcycle models compete against model trains.
What’s more, the car model market is dominating model railroading in the number of sales and collectors.
That’s why some of the most popular train model companies are also declining.
Furthermore, people are starting to get away from modeling as video games are becoming popular with the younger generation.
Model railroading might become a very niche hobby in the future, and this means there will be lesser demand for model trains.
Since investments are greatly affected by the law of supply and demand, investing in model trains is bad.
2. Model Trains Have Low Liquidity
While the internet eased how we can sell model trains to other people, the decreasing number of collectors is still a problem.
The rise of sites like eBay significantly made model train investment viable. However, this is a band-aid solution.
As long as model railroading is declining, selling model trains will be more challenging in the next few years.
Thus, model trains have low liquidity. This means it will be harder to sell them to convert them into cash.
Furthermore, highly valued train models won’t be valuable if no one buys them.
For example, some model trains that are considered to be rare and in a limited edition can only be sold for hundreds of dollars online.
If you account for inflation, their price didn’t seem to increase.
This can get worse in the future if fewer people get into the hobby.
3. Model Trains Require Maintenance
While model trains are made with durable materials and can easily be stored, they have motors that require maintenance.
Furthermore, using these trains in layouts can cause wear and tear, so you need to do proper maintenance to maintain their value.
Many people aren’t into keeping their models in mint condition since they see making train layouts as a hobby.
Thus, if you decide to use your models, it requires maintenance to make your you’re going to maintain as much value as possible.
This means you also have to maintain their delicate motor, which can be a pain for people who don’t know how to maintain their models.
However, you can still enjoy the hobby and get the most out of your train models. You can practice on cheaper models first to know how to take care of your more expensive models.
However, most of the time, it is better to keep rare models in their boxes.
4. Model Train’s Price Changes a Lot
Model trains can be risky, which is why it isn’t a good investment.
Many expensive model trains that might go for thousands of dollars in the 1970s could now only sell for hundreds of dollars.
Since the hobby is declining, their price changes a lot due to fewer people buying rare model trains.
This means the price fluctuates a lot.
This is why many people suggest getting into the hobby for fun instead of investment.
5. Model Train’s Trend is Changing
Earlier, I talked about standards and why it is a good way to keep the number of buyers on model trains.
However, currently, there is a going trend towards other scales.
In the early days, the most popular scale was the O scale, which is modeled in the 1:48 scale.
However, it declined and is now the third most popular scale.
The most popular scale is now the HO scale which is in the 1:87 scale. This means these are smaller than the O scale.
In fact, HO means Half-O.
The HO scale now accounts for 60-70% of the model trains in the market.
The trend is now going to smaller trains. In fact, the second most popular scale is not the N scale which is in the 1:160 scale.
The thing is that O scale trains can’t run on HO, and N scale won’t run on O. As you can see, this trend is getting harder for people who collected rare O scale trains since fewer people are running O scale layouts.
In fact, there are now even smaller trains than the N scale that is getting the spotlight, such as the Z and T scale.
Recommended read: If you are interested in the smaller scale trains, feel free to read two of the smallest train scales, which are the Z and T scales. You can find the post here: T vs. Z scale.
Not only is model railroading in decline, but the shift to smaller trains is becoming apparent year by year. There might come a time that the N scale would surpass the HO, but it won’t be happening soon.
This means people collecting in HO can have a harder time selling their collection since fewer people would be using the HO layout.
In the remaining sections, I will give some tips on model train investments to get the best chance of success and my take on the current issue.
Do Model trains hold their value?
Not all model trains hold their value. In fact, many cheap plastic model trains tend to lose their value over time. Model trains that hold or even increase in value are the ones that are in limited edition and are made of durable materials such as brass and iron.
You are free to decide if you want to still get into model railroading.
Study the trends, and maybe, smaller scales like the Z scale is the future.
However, no one knows the future, but we can study the trend.
The trend is that model railroading is declining, and the demand for smaller-scale trains is increasing.
So, if you decide to give this a try and want to get the most out of your models, I have some tips.
One is to make sure that you aren’t getting cheap model trains.
Generally speaking, beginner train sets won’t increase in value except if they are in limited edition and aged.
However, most of the time, it isn’t the case.
So, it is better to go for higher-quality models if you want to preserve their value.
Furthermore, keep and store your models in a safe place away from moisture and sunlight. This will prevent oxidation which might harm their metal.
Lastly, material matters.
Please don’t go for plastics as they don’t usually increase in value. The current market values brass and iron models more than those made with diecast metals.
For example, the 1937 Lionel 277 O gauge train made from iron was sold in an auction for $2,970 in 2022.
Compare that to the ones made from diecast, which usually goes for hundreds, and the rare ones can reach a thousand.
I recommend you read the post linked below for some more examples of train models sold for thousands of dollars so you can know the current market trend.
Recommended Read: I explained what makes model railroading a good and bad investment. While the hobby is in decline, many model trains are sold for thousands of dollars, even in 2022. I compiled some examples of valuable model trains recently sold in an auction in this post: Are old model trains worth the money?
Current advancements and technology made investing in model trains easier.
While the number of people collecting model trains has been declining these past few decades, technology allowed train modelers around the globe to communicate and help each other.
In fact, model railroading is one of the friendliest online communities you can see in various forums as they help each other.
This made buying and selling rare model trains easier, and since the demographics of people in model railroading are people who have some money to spend, there are lots of examples of old model trains that have been sold for thousands of dollars.