Could investing in a racehorse make you rich?

Investing in a racehorse can be a risky gamble.
Investing in a racehorse can be a risky gamble.
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There's something thrilling about owning a racehorse. It's cheaper than buying a professional sports team, and who doesn't like wearing big hats and sipping mint juleps at the Kentucky Derby? Still, if you think owning a racehorse is a good bet, think again. It's a gamble that probably won't pay off.

 

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Horses can be money pits, sucking your wallet dry with fees, taxes and vet bills. Moreover, horse racing itself is going through tough economic times. The soft economy, coupled with increased competition for gambling dollars, is hurting the sport [source: Pedulla]. Still, if you want to saddle up, here are a few key questions to consider:

  • How do I become a racehorse owner? Most racehorse owners belong to a partnership. Partnerships, or syndicates, sell shares in a horse, much like a Fortune 500 company. The partners then divide the prize money [source: Investment Advisor].
  • What are the benefits of a partnership? Partnerships make economic sense because you don't have to be a king to enjoy the sport of kings. According to one study, 60 percent of racehorse owners had an annual household income of $75,000 or less [source: Brunker].
  • How much should I spend to own a horse? You can invest a few thousand dollars, or significantly more depending on your goals. You might decide to own just a piece of a horse, or be the sole owner.
  • Where should I race my horse? Not every horse has the talent to compete for racing's Triple Crown. As such, most horses race regionally, where competition is less daunting. Monetary considerations, the horse's ability and the type of race (such as harness or quarter) dictate the level of competition.
  • How do I buy a racehorse? You can buy racehorses at public auctions, private sales or at a claiming race at a track.

Whatever you do remember that horseracing might be a sport, but it is also a business, and a risky business at that. The key is to understand the advantages and pitfalls. Do your research and check with experts. Check out the next page to learn more about the horseracing biz.

 

Cost of Owning a Racehorse

You and your checkbook will get to know one another very well when you buy a racehorse. In addition to the initial purchase, there is a laundry list of other costs you as the owner will be responsible for. By year's end, an average owner can expect to pay $60,000 per horse for training, boarding and other expenses [source: Wharton].  Here are a few of those costs:

  • Day Rate: This is the rate owners pay to train, house and feed their horses at the track. The average fee can range from $45 to $120 a day per horse [source: Wharton]. Owners who race at major tracks can expect to fork over $34,000 a year in training fees [source: theracinggame.com].
  • Shoeing: Although horses don't wear high-heeled Jimmy Choos, the cost of keeping a horse in shoes is just as expensive. Shoeing can run between $100 and $400 a month per horse, depending on the type of shoe the animal needs [source: theracinggame.com].   
  • Vet Bills: Horses get sick. Horses injure themselves. They need vitamins and other medications. Veterinarians aren't cheap. Vet fees vary. Medications are expensive. For example, an anabolic steroid that can repair damaged tissue or increase the appetite of a horse can run as high as $60 per injection [source: Thoroughbred Owners and Breeders Association].
  • Jockey Fees: This is the fee owners pay the jockey to ride a horse in a race. Jockeys can take home a minimum of $35 to $100 a race. Jockeys also earn a percentage of the purse if the horse is lucky enough to win, place or show [source: Animal Planet]. 
  • Transportation: Transporting a horse from track to track is expensive. Those who race close to home will not have to dole out as much money as owners who race their horses nationally.
  • Other Fees: Racehorse owners must also pay for insurance, licenses and of course, taxes, all of which can vary by state.

Go to the next page and see how much money you can make.

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Racehorse Success Stories

The economics are simple: The more a horse wins, the more the horse is worth.
The economics are simple: The more a horse wins, the more the horse is worth.

In 1975, Karen and Mickey Taylor bought a young colt for $17,500 and named it Seattle Slew. The horse won Thoroughbred racing's Triple Crown, beating the best of the best at the Kentucky Derby, the Preakness Stakes and the Belmont Stakes. Seattle Slew earned $1,208,726 in his career, which included 14 first-place wins. Slew also earned $12 million when the Taylors put him out to stud and millions more with the sale of his offspring [source: SeattleSlew.com].

Such success stories are rare, but they do happen. Owners make money when horses win. Generally, the winner receives 60 percent of the purse; second place, 20 percent; and third place, 12 percent [source: theracinggame.com]. The economics are simple: the more the horse wins, the more the horse is worth. Owners are likely to invest, purchase or claim a winning horse.

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However, the real scratch -- millions if the horse is a champion -- comes from breeding. In 2000, a racing syndicate bought Kentucky Derby winner Fusaichi for a whopping $60 million, a record-setting price. Today, the Thoroughbred commands a stud fee of around $200,000. Since Fusaichi was young when he retired, he could sire hundreds of offspring [source: PBS.com]. You do the math!

For more information about horseracing and related topics, check out the links on the next page.

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More Great Links

Sources

  • Animal Planet. "Jockey Income Facts, Animal Planet."  2010. (Oct., 2010)http://animal.discovery.com/tv/jockeys/horse-racing/jockeys-101/income.html
  • Investment Advisor. "Beware the Hidden Costs of Racehorses." March 5, 2007. (Oct., 2010)
  • Brunker, Mike. "Not for Widows and Orphans." MSNBC.com. (2008). (Oct., 2010). http://nbcsports.msnbc.com/id/4838915
  • Pedulla, Tom. "Once the sport of kings, now galloping toward uncertainty." USA Today. June 3, 2010. (Oct., 2010) http://www.usatoday.com/sports/horses/2010-06-03-racing-uncertain-future_N.htm
  • Perritano, John. Time For Kids: Big Book of Why. New York, NY: Time, Inc., 2010.
  • Seattle Slew. "About Seattle Slew." 2010. (Oct., 2010)http://www.seattleslew.com/about_slew.aspx
  • Sparkman, John P. "Gone, but Not Forgotten." The Thoroughbred Times. May 18, 2002. (Oct., 2010) http://www.seattleslew.com/articles.aspx?aid=9
  • The Racing Game. "Frequently Asked Questions." 2007. (Oct., 2010) http://www.theracinggame.com/lists/faq/allitemsalt.aspx
  • The Racing Game. "The Thrill of Ownership." 2007. (Oct., 2010) http://www.theracinggame.com/default.aspx
  • Thoroughbred Owners and Breeders Association. 2010. (Oct., 2010)http://www.toba.org/
  • Wharton, Dave. "Slim Pickings for Racehorse Owners," Los Angeles Times. November 2, 2009. (Oct., 2010) http://articles.latimes.com/2009/nov/02/sports/sp-owners2