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Thursday, September 14, 2006

can you make a living in horseracing

? I'm doing a report on horse racing for a college business class. My question for you is can you make money? I see some horses for sale for $1500, are they competitive? How much money would I need upfront to start? Can I make a living doing this?


- The short answer is it's rare for a $1500 horse to be competitive at a high enough level to make any profit and it's pretty rare that someone can make a living at horse racing alone. The amount of money needed up front is dependent on where you race, costs vary by track and state. One thing is fairly certain, the cost of the horse itself is usually less than the cost of maintaining the horse.

In my area, Kentucky, to be competitive you would need a horse that could compete at about the $10,000 claiming level, and generally you would have to pay at least $10,000 for a horse that is ready immediately to compete at that level. Costs for training and maintenance of the horse could be as much as $2000-$3000 per month. A sound, fit horse could run about every 3-6 weeks and may be able to make back his expenses in purse money in Kentucky if he always finishes 1st-3rd, but a horse that consistent is rare, and he can't run all year long every month, breaks are inevitable.

Owners and trainers who make money race at the highest levels where the purses are highest, $50,000 and up, but it's expensive to acquire a horse that can race at that level. Some owners and trainers who make a profit take the opportunity to sell a horse that they acquired inexpensively and developed into a much more valuable racehorse. For instance if you claim a horse for $5000 and move him up the claiming ranks to the $20,000 level in just a couple starts, then he'll hopefully be claimed from you for $20,000 in a race that you win, so you get a profitable price for your horse plus the winner's share of the purse. This scenario is NOT a common occurance so the opportunity for profit is really pretty rare.

That being said, I believe that a lot of wealthy owners do benefit from some tax advantages when they buy racehorses and end up taking a loss, but there are a lot of rules about what qualifies as a tax deduction or other tax advantage and I am not at all qualified to speak about that.

As far as breeding horses to race or sell as a career, it's very difficult to make a profit. I believe the successful breeders are creative and diversified, and often have capital investment from outside sources to keep the business going.

This also applies to trainers - the profitable ones are creative about their business, for instance not afraid to own a few horses themselves or in partnership with owners, enabling them to earn more purse money when the horse wins and enabling them to sell the horse when it's value is at it's highest level. Many trainers also offer farm lay-up and shipping services in order to make more money themselves rather than using outside services.

How are jockeys assigned

? It seems to me that the majority of races at least at Fairmount use mulitple jockeys. That is to say that when you look at the program guide at any given horse and check past performance and races, you can see that different jockeys are used. Is this typical? Isn't it better to have only one or two available jockeys to ride your horse during any race?

How are jockeys assigned and can a request for a given jockey be made? Does trainer and owner have any say so in this area?


- Sometimes the first jockey you pick for a horse ends up not getting along with the horse, it's best to let your trainer evaluate the jockey's ride on the horse and decide whether to stick with that jockey or use another. Also you might not always be able to get the same jockey since he may have committed to ride another horse, in that case you have to pick another. Your trainer should always go over the race with you after it's over and explain everything that is happening in the race. Over time you will be able to see little things that happen in a race by yourself. When a trainer enters a horse he names a jockey to ride. Usually he informs the jockey's agent in advance to make sure the jockey will be available, and at that time the agent makes a verbal commitment to the trainer to let his jockey ride the horse.

What does maintenance and training cost

? The more I research my opportunities the more confused I become and determined as well This is information taken from a website and I wonder how exact it is.

from West Point Thoroughbreds (this is from 2006) -

>>
What does my initial investment cover?

Your initial investment covers the cost of the horse as well as all training expenses, fees, supplies, and mortality insurance through December 31st, of the horse's two-year-old year. From the time of your investment through the end of the two-year-old year you will not incur any further expenditures. West Point Thoroughbreds sells 10 percent units in each horse. The minimum buy in to a horse is 5 percent.

What does maintenance and training cost per quarter?

Costs for a horse in training at the track break down in the following manner (all figures are approximate):
Trainer - $75 a day, approximately $6-7k per quarter
Vet - $500 a month, approximately $1,500 a quarter
Blacksmith - $130 a month, approximately $300-400 a quarter
Stable Supplies - $100 a month, approximately $300 a quarter
Vanning - $200 a month, approximately $600 a quarter
Medication - $300 a month, approximately $900 a quarter. West Point Thoroughbreds places its horses on gastroguard to prevent and treat stomach ulcers as well as EPM medication.
Management costs - $500 a month, or $1500 a quarter. WHAT EXACTLY IS THIS EXPENSE IF I WOULD BE A SOLE OWNER OR PARTNER?
On average, the cost for a horse in training will be between $11,000-12,000 to cover all training, maintenance, and management costs. However, most horses do not spend the entire year in training.
A cost of approximately $40,000 per horse per year can be assumed.
Besides the initial expenditure and the training and maintenance fees, are there any other costs involved?

The only other fee is for mortality insurance (covered by initial expenditure during two-year-old year), which is charged annually and is 4.9% of the purchase price of the horse (not the syndication price). For example - if a filly is purchased at auction for $130,000 the annual fee for mortality insurance to the partnership would be $6,370. Therefore the annual cost for a person with a 10% stake in the partnership would be $637. If there is a major surgery the partnership is covered up to $1000, the partnership will be responsible for anything additional

Initial Expenditure - $34,000 Training and Maintenance – For each year thereafter approximately $4,400 to $4,800 (if at the track the entire year)

Purse Distribution

Purses earned at the racetrack are typically distributed as such:
First place receives 60% of the total purse
Second place receives 20% of the total purse
Third place receives 10% of the total purse
Fourth place receives 6% of the total purse
Fifth place receives 4% of the total purse
Per industry standards, trainers receive ten percent (10%) of any purse earnings. Jockeys receive ten percent (10%) of a winning purse, five percent (5%) of purses earned for finishing second or third, and a flat fee of $60 to $100 per mount for finishing off the board
<<


- In my opinion West Point TBs is a "boutique" partnership group that is aiming for high priced horses and owners with deep pockets. All their numbers are high because they use the most expensive trainers and they sell shares based on the idea that everything is high end. To me I can't see paying a trainer $75/day in 2006, very high. Vet bills could be $500 but the horse better have something wrong for it to be that much, for routine vet work that is ridiculous. Blacksmith could be $130 but depends on which blacksmith you use and if the horse needs special shoes, that is a tad high to me. Most trainers don't charge extra for everyday horse supplies like buckets, lead ropes, cooling out blankets, etc. But if he needs a special type of equipment that can't be reused on another horse, such as a special bit or saddle pad, then you might get charged for that. Routine medication/vitamins shouldn't cost $300/month but I don't blame them for estimating high that way if it's less then the owners are pleased. Most partnerships don't charge a management fee, especially if it's just 2 or 3 people going in together on a horse. Most trainers will divide the bills up themselves and bill each owner for their share without any "management fee".

I'd say the cost to have a horse in training should be more like $2500/month or $30,000/year and it could easily be less since your horse may get a break from the track for a couple months here and there, layup at a farm is typically about $25/day, and if your horse is claimed then it will take a while to find a new horse, so you'll have breaks in your bills during that time also.

income after expenses

? What tracks / state would you highly recommend? You mentioned Church Hill Downs among possible tracks and that threw me as I always felt those tracks and horses were out of my range of possibility at this time. In one of your emails you also mentioned Turfway Park. If there are trainers who have partnership possibilities in the 10K - 30K range that may work I have not seen this type of claiming race at Fairmount. Highest claiming race I have seen is about 4,200 - 5,000 You have convinced me that looking for a higher quality horse even though more expensive would yield better returns at tracks other than Fairmount.

What do you feel the potential would be as far as the horse and its ability to provide income after expenses? As an estimate, can you break down the cost for trainer, jockey, vets, etc?


- I would guess that expenses are much the same for both Illinois and Kentucky. I mentioned in the last post the page to look at the breakdown of the trainer's "day rate", with farrier, vet, shipping and some other small expenses on top of that. These extra expenses can vary greatly depending on the horse you end up with, which is why it's important to have a good horseman pick a horse out that hopefully will not have too many "extra" expenses, or if he does have special needs such as custom farrier work or special vet care, he is a good enough horse to make up his expenses in purses. Since expenses can vary, that's another good reason to have some reliable partners to share expenses, that way nobody is overwhelmed if an unusual expense arises.

Whatever you do, insure any horse you claim or buy with mortality or loss of use insurance. A lot of people don't know but you can call an equine insurance company right before a race that you plan to claim a particular horse from, on your cell from the track when the horses are in the paddock if necessary, give the company the horse's details, and they will cover the horse in the race that you claim him out of. When you claim a horse you own him from the time the gates open on that race you claim him from, so if he should break down during the race, you would take the loss. If you have insurance before the race you will be covered for the full claiming price. The company that I have used in the past to cover a horse I plan to claim is Independent Equine Agents, I believe a search will turn up their web site.

Most tracks pay purse money through 5th place - 1st place gets 60%, 2nd gets 20%, 3rd 10%, 4th 5% and 5th 5% and occasionally they break it down even further and pay through more places so every horse gets something, depends on the track. There is no entry fee generally unless it's a stakes race.

I think what happens is say the 1st place horse wins his 60% of the purse. The track takes 10% of that 60% and puts it in the trainer's "horseman's account" at that track, and takes another 10% of the 60% and puts it in the jockey's "horseman's account", and the remainder goes into the owner's "horseman's account". So the money sits there in the horseman's account until you go to the "horseman's bookkeeper" at the track and ask for a check. So as an owner or partnership you can leave your money sitting there indefinately until it's needed to pay for expenses or to use for claiming the next horse - you can use your horseman's account funds to pay for a horse you claim at that track.

Similarly if someone claims your horse the track puts the money paid for your horse directly in your horseman's account. A lot of owners just keep turning that money around constantly in the quest to increase the funds by claiming, winning, and possibly losing the horse to another claim but making money in the process to claim the next one (this is Jere's specialty:)

cost analysis

? Splitting the cost of training and boarding .... Is there some sort of guideline as to those expenses?

- There is a cost analysis for racehorse owners at http://www.racehorsetrainers.com that was done a few years ago, but you can get a better idea of where the money goes. I will guess an competent midwest trainer at the track will have a "day rate" of $60-$65, or about $1800-$2000 per month. So with 3 partners figure at least $600-$700/month for expenses. Farrier, vet, shipping, and some other expenses could be extra on top of that. This is why it's a good idea to get a horse that can run hopefully about a month after you get him - to try to keep some money coming back in instead of watching it all go out for a long time before the horse has a chance to race.

update 2011: racehorsetrainers.com has a lot of other good general info for owners and has been updated in 2011, including the article with the expense breakdown for the day rate at http://racehorsetrainers.com/wordpress/article/do-you-know-where-your-day-rate-money-goes/ - amy

how and when to obtain a throughbred

? The biggest question now is how and when to obtain a throughbred. That answer seems like it may come from a trainer but I do wonder how one can get a trainer without having a horse up front, and if trainers are willing to search for a horse on my behalf. For example, should I find a trainer that I wish to work with out of Arlington, would they be willing to go to Keeneland to obtain a horse?

- I'd say most trainers would rather start a relationship with an owner by helping the owner claim or purchase an appropriate horse rather than getting a horse that someone else picked out that may not be suited for a profitable level of racing. And yes many trainers from your part of the country will be at Keeneland to buy horses this month, but the Keeneland Sept sale is Yearlings, so they are a year away from racing (or more). Probably best to try to claim a horse or buy a horse privately that is ready to run. Most trainers have owners that are always willing to go in as partners on a new horse or who are looking for a partner on a horse they already own (to help share expenses).

Why run a horse in a cheap claiming race

? Why would someone want to run their horse in a claiming race knowing that there may be an individual ( Like me ) or a trainer who may claim him?

Can a throughbred be purchased any time of the year from Keeneland?


- You would run a horse in a cheap claiming race even though it might get claimed because you have a chance to win the race and get the winner's share of the purse, plus the claiming price, thus likely making a very nice profit. Keeneland and Fasig Tipton have sales throughout the year, there is one every few months. But again you need your trainer to advise you on whether to claim, purchase privately, or at auction. Their recommendations may depend on where and when you will be racing the horse, and how much money you are willing to spend on a horse.

Remember it costs as much to take care of a cheap horse as a more expensive one, the real expense is the daily care and training. With several partners a new owner can put in $5000 initially and get a pretty nice quality horse, plus split the costs of training and board.

price levels for thoroughbreds

? To race at Arlington, Hawthorne, Hoosier Park, Fairmount Park and other grades of tracks, would I be competitive with a $5,000 - $15,000 horse? Is it also possible that such a horse may be competitive at bigger tracks and stake races? What type of horse could I expect to obtain at the 5K, 10K, 20K level?

You mentioned a 2 yr old in training. (Never raced before?) Are they readily available? I thought I have seen 2 yr olds already racing at Fairmount.


- In TB racing claimers are divided up by quality/ability into price levels, so a $5000 claimer would have less ability than a $10k or $15k in theory but a good horseman can find a $5k claimer that may be able to move up to $10k or more, however it would be the 1 in a thousands horse that runs for $5k claiming and then moves up to the stakes level. It's pretty rare for a $5k claimer to move up to $10k or $15k UNLESS the horse moves from a tougher track like Churchill or Keeneland where he ran for $5k to a track that has less quality horses running every day, like Fairmount or Hoosier Park.

Sometimes you can get a $5k horse at Churchill and run him at a higher level at an "easier" track like Fairmount, but you must have a really astute horseman to pick the right horse if they are to move up in claiming level. The other part of the equation is the purse money - generally a bigger purse for $5k claimers at Churchill than for $10k claimers at Fairmount so even if you win the higher level at Fairmount you probably won't make as much money as you would running for $5k at Churchill.

The problem with claiming a $5k horse at Churchill is there aren't many races to run him in (if they even have $5k races, sometimes the "bottom" is $7500), most races are for higher level horses, and trainers stabled at Churchill are discouraged from claiming a horse and promptly running back at another track because that takes away from full fields at Churchill. For that reason most trainers wait until the end of a meet to claim a horse, good idea to spot horses and watch them run once, wait for them to be entered back near the end of the meet and then take him. You could find something to claim at Turfway or Keeneland for $5-$15k and then run back at the Churchill fall meet. Better to get with about 3 partners and you each put up $5k to claim a $15-20k horse.

2yos in training are readily available but more often than not you pay more than the horse ends up being worth if it hasn't raced yet because you have no idea of it's true ability. 2yos are racing but it's highly unlikely you'd find good ones racing for a claiming price under about $30k. Trainers and owners tend to enter 2yos at a higher level than they should be to find out their ability before dropping them down to where they belong.

naming a horse

? If a horse is purchased at a claiming race, is it possible that I would have the ability to rename the horse? Since the beginning of my hopes and dream of having my own throughbred, I have had a name that I would very much like to give my horse.

Also, it appears to me that there are other breeds running in the races such as Quarter Horses, is this correct or am I seeing other types of throughbreds?


- You can only name or rename a horse if it has not yet raced, so that means a weanling, yearling or two year old that you buy privately or at auction.

It's fun to speculate on a young horse that hasn't raced yet, but also very risky because you don't know it's ability yet and young horses tend to have physical problems along the way that hold up training and cost the owners in time and vet bills. There is no guarantee that a young horse will ever make the races at all.

It's also risky to claim a horse but I would recommend starting with a cheap claimer (or inexpensive 2 year old in training) and wait on the horse that you will name yourself until after you have learned the ropes a bit. A horse that is already racing or at least has shown some kind of form on the track in training will give you some confidence of it's ability.

If you want your own horse, your trusted trainer can certainly find you a young one that is within your budget that you can name and follow through their road to the races. It's important that you tell your trainer what your budget is upfront because they can present you with horses priced from $5000 up to $100,000 or more.

Quarter horse racing looks fun to me also but I don't know much about it. I do believe that all the things I've told you apply to other breeds as well as thoroughbreds. I recommend thoroughbreds because the return on investment is best with them in my opinion.

buying a horse

? Amy, what do you know about Keeneland?

- All the trainers I know run horses at Keeneland although they aren't based there - it's a pain when Keeneland has to take over so many of the barns to accomodate horses entered in their huge sales, making training stables move their horses around, so not too many trainers are actually based there.

It's highly advisable to have a very experienced horseman help you choose a horse - to claim, buy privately, or at auction. You can get a bargain at Keeneland or Fasig Tipton but it's never a sure thing, you must have someone who knows the people involved with the horse, knows what to look for in a horse, knows how to spot problems, and knows what a horse should be worth.

contacting trainers

? I am having a difficult time contacting trainers. Can you recommend trainers at Arlington or other parks that I can hopefully contact?

- Trainers tend to move every few months, although some stay in one place all the time. I think trainers would prefer to meet an owner in person at the track during the course of racing, maybe you can try to contact trainers that way, even ask other owners for recommendations. Send me your number and I will have Jere pass it on to some recommended trainers - he knows the trainers in your area, I only know Kentucky trainers well enough to recommend. Don't give up, finding a good trainer is a harder job than finding a good horse.

thoroughbred owners' questions

When I first posted this blog, in 2006, it had not attracted any outside comments but I did receive several emails from people who said they want to own racehorses and they have so many questions. So after answering a bunch of these emails I decided I should post these questions and answers in the blog. So that's what you will see here. Please feel free to jump in and correct my answers or add your own views on the subjects discussed.

? I am writing to you in hopes of finding someone who can work with me on my road to becoming an owner of a quality throughbred race horse. It appears to me that trying to get information about who can supply a solid race horse along with trainer and other information is kept out of general public's grasp I am interested in finding out more and hope that it leads to ownership with a team of needed people ( trainers, jockey, etc ) in my corner.

- If you'd like me to recommend some other advisors or trainers, I'd be happy to suggest some that I know are honest, ethical, knowledgable horsemen. A half and half partnership with a good trainer as part owner or with a couple of that trainer's other owners who will educate you along the way would be a good option.

It is not a good idea to try to buy or claim a horse on your own, a trainer's help and recommendation is essential, and it has to be a trainer who has a good reputation for honesty, integrity, and horsemanship. Your first step is really to find a trainer who you can get along with and trust. The thing to do is to ask the racing office to give your name and number to the trainers you want to talk to so they can choose whether to call you back.

Most owners don't get to see their horses in person very often, maybe just the occasional Saturday morning during training, and of course on race day. To keep up with their horses, owners get regular email or phone updates from the trainer, you would let the trainer know how often you would expect an update - the regularity of updates from the trainer is one thing to make sure you and the trainer agree on before you pick a trainer.

Jere will be keen to offer training services when we get back to the states, but for now we're in Saudi Arabia at least through March 2009. We would also be available to help you pick a horse to buy privately or to claim when we get back in town, but for now it would be best to pick a trainer first, make sure you see eye to eye and that trainer is willing to educate you, and work with your trainer to pick out a horse.

Whether you do a partnership or not really depends on your budget. Plan on $15,000-$30,000/year for expenses related to owning a horse by yourself, in addition to the initial purchase price (upkeep often costs more than the horse itself). Splitting the costs between partners lessens the risk of the investment.