Your First Racehorse
Here are some possibilities:
Initial Investment | Possible Involvement |
---|---|
$1,000 – $5,000 | Two, three or more partners in an inexpensive horse |
$10,000+ | Sole owner of an inexpensive horse; general partner in a small partnership; limited partner in a large partnership or syndicate |
$100,000+ | Sole owner of one or more horses; sole owner and participate in partnerships; participate in partnerships only |
As you can see, the game of Thoroughbred ownership can be played at many different levels and the fun and excitement are there at any level of participation.
The unique sights, sounds and camaraderie of the backstretch in the morning, the beauty of and bond with the horse, the anticipation of race day, the anxiousness in the paddock before the race and the rush you get from seeing your horse, in your silks, come onto the track, is available to all owners.
The pages that follow are designed to educate you, the owner. Information is power. We believe the more information we provide and more informed you are, the more fun you will get out of this game.
The Thoroughbred industry welcomes new owners.
While participating in Thoroughbred racing and breeding offers an exciting opportunity, it is nonetheless a speculative opportunity. The game offers high risk, high emotion and high excitement. Money is won and lost, but no better time is had in the process.
Take a few moments to review these materials and to familiarize yourself with what Thoroughbred Owners and Breeders Association (TOBA) believes are basic pre-participation considerations. The place to start is with the recognition that horses are not machines; they cannot be programmed, nor do they perform on command. They are often temperamental and unpredictable. Like a child, a horse does not always live up to one’s expectations. As good parents are prepared to deal with the ups and downs and the emotional and financial considerations of parenthood so too are successful owners!
How does one become a successful owner? TOBA believes it begins with thorough preparation and continuing education, not to mention common sense. Every owner can become a knowledgeable and successful manager if he or she is willing to take the time to learn how to do something more about Thoroughbred ownership than write the monthly support check. If you are serious about participating in the Thoroughbred industry and becoming a new owner, consider these suggestions:
Get Familiar with the game
Defining Reasonable Goals & Objectives
Generally speaking, the level of investment is the primary consideration in determining the most appropriate means of becoming an owner. Determine the total amount of money that you are willing to allocate to this investment. Develop a budget, identifying the amount to be utilized for the initial purchase, and obtain realistic estimates of daily expenditures.
Unfortunately, to answer this question you will need to ask yourself: How involved do I intend to be? Will my schedule permit me to spend time monitoring my equine investment? For example, do you have the time to talk with the trainer, or to visit the stable area, racing office or track kitchen on a daily basis?
The level of investment and amount of time you have to spend on your equine activities should guide you in determining the appropriate form of ownership. TOBA recognizes, however, that personal preferences and past experiences may be equally important. Obviously, there are advantages and disadvantages to each form. What level of control do you wish to maintain? Are you the type of individual who must call all the shots, assume all the risks, and have all the glory? Or, are you the type who prefers to spread the risks and share the rewards?
How long are you willing to wait for a return (not necessarily financial) on your investment? Are you looking for the immediate action offered by racing or the long-term challenges of breeding and developing young horses? Thoroughbred racing and breeding offer both types of investment opportunities, challenges, and more!
If immediate action is what you desire, then your investment opportunities will be quite different from those interested in breeding and developing young stock. However, the opportunities are not mutually exclusive. You may consider diversifying your investment by purchasing a filly as a broodmare prospect, breeding her and selling the offspring, acquiring a stallion share, and/or owning horses of racing age.
It seems that every owner wants to be able to see their horse as often as possible, but that is practical for only a very few. However, if having convenient access to your horse is imperative, then you must think and act regionally. On the other hand, given that some states offer more lucrative racing and breeding programs, you may wish to consider how those programs could impact your investment. State owners’ and breeders’ organizations can provide a complete explanation of their respective state-bred incentive programs.
Everyone wants to own a classic winner. Unfortunately, not all horses have the ability to compete and win at the top level. There are many levels at which you can participate (i.e. the claiming, allowance, or stakes levels). You can compete on a regional and/or a national level. An owner’s financial resources ultimately dictate the level at which one competes. Again, if action is what you want, your strategy will be different from someone seeking the classic horse. You will likely spread your money out over a larger stable, with more horses racing on regional circuits. If your goal is to find the big horse, you might have fewer horses which race less often. Commercial breeding presents a similar scenario. Not everyone can participate at the top level. However, there are ample opportunities, certainly in the middle markets, where breeders can sell and buyers can purchase a useful horse. Remember, the thrills of owning a claiming horse or breeding a maiden winner often match those experienced by the owners of more accomplished horses.
Regardless of which form of ownership you choose, you should seriously consider structuring and treating your equine activities as a business because of certain tax and liability issues. Always consult with your tax advisor for the proper way to structure your equine business. A more detailed discussion of this subject can be found in the Business Issues chapter of this web site.
How does a wonderful network of new friends, endless social activities, a sense of significant achievement and hours of unsurpassed entertainment sound?
Planning Ahead
You want to buy a racehorse. It is really a simple process, but like many “simple” things a lot of thought and planning are done beforehand to make it look simple. We think a good place to start is with a business plan. The plan does not have to be complex or contain a complete sentence, but it should lay out your goals, objectives and projected costs. A plan will be constantly updated as conditions change, so it will never be complete, but it will help you manage your equine investment.
Keep in mind that equine investments are, if treated properly, legitimate business activities and will be treated as such by the IRS. Consequently, manage your equine investments as you would manage any other investment or business activity, including exercising good, sound business judgment.
Selecting Your Team
Every new owner is confronted by the urge to develop a stable on his or her own, specifically the selection of the horses however, Thoroughbred racing and breeding is a team sport. Success in the game is dependent on more than the natural talent of its athletes. As with any other good team, in addition to outstanding athletes, the team must have a good coach, astute scouts, a quality physician, adequate support personnel and a savvy owner.
Recognize early that the success of one’s racing or breeding operation will depend, to a significant extent, on the makeup of the team. Exercise as much, if not more, care in selecting a team of consultants as you would expect to exercise in the selection of your first horse.
Given the size of your particular investment, and with the general objectives of your business plan in mind, you should consider which consultants should be retained. Your particular team of consultants may be as few as one or may include any combination of the following: A bloodstock agent, a pedigree advisor, a trainer, a veterinarian and/or a mentor – someone already in the business such as a farm manager or more experienced owner.
Consider how this team will assist you. Will they merely participate in the selection and evaluation of potential purchases or in refining your business plan as well? Again, in making this decision, remember to exercise sound business judgment.
When selecting your team of professional consultants, keep in mind the following thoughts:
- Thoroughbred racing and breeding are businesses; treat them as such.
- Be rational, not emotional. Keep an open mind during the preliminary selection process.
- Disclose your objectives from the start. Ascertain whether they are consistent with the areas of expertise of the consultants considered.
- Stay within your budget created. Realistically evaluate your ability to invest in the industry at the level you have selected. If not certain, scale down your level of participation. Remember, it is just as much fun to own part of a horse as it is to own the entire thing.
- Once your consultants have been selected, allow them to do their jobs. Stay involved, but allow the professionals to do what you have hired them to do – provide learned advice in areas where you have little knowledge or expertise.
Purchase Options
Now that you have your professionals assembled, the next step in building your team is the acquisition of the athlete — the racehorse.
A racehorse may be purchased in any of three ways: through public auction, claim and private sale. You may also lease a horse in much the same way any other piece of property is leased.
There are advantages and disadvantages associated with each approach. Regardless of the approach taken, the team, whether it is you and your trainer or you and a group of advisors must work together, utilizing each member’s skills in devising a strategy for acquiring the equine assets.
Business Issues
Tax Issues
Pay particular attention to tax-related issues in operating your stable. Although some consider the applicable tax code provisions onerous, they are, in reality, manageable. However, it is most advantageous to be familiar with the provisions most commonly applicable to this business. They are the difference between long-term capital gains rates and ordinary income tax rates and the hobby loss and passive loss issues.
The following pages are written to merely acquaint you with equine tax issues. The American Horse Council publishes two very good reference books dealing with taxes. They are Tax Tips for Horse Owners and The Horse Owners Tax Manual. These publications are the tax references for the equine industry. If you are seriously considering becoming an owner or are already an owner, we encourage you to acquire these publications for your library. For more information, please visit the American Horse Council’s web site at www.horsecouncil.org.
Costs of Ownership
How much does it cost to keep a racehorse in training? The easy answer is, “It depends.” It depends on where you race, who your trainer is, the vet and farrier you use and the soundness of your horse. Costs are set by what the market will bear and everything (except taxes, jockey fees and worker’s compensation premiums) is negotiable.
The trainer’s day rate is the major expense. Day rates can be as little as $40 at a small track to as much as $120+ at a major track. It all depends on the locale and the trainer’s “win percentage.”
Not included in the trainer’s day rate are veterinary and farrier fees. Veterinary fees vary as much as day rates and are dependent upon your trainer’s habits and the health of your horse. For routine veterinary care, the cost can be as low as less than $100 per month to as much as 50% or more of your monthly training bill. It all depends.
Given the variability of veterinary costs, it is important for you to have a discussion with your trainer where you learn their philosophy concerning the extent to which a vet is going to be used. Also, do your homework so you will be able to understand, as much as possible, the purpose of each treatment and ask intelligent questions of your trainer and veterinarian.
While at the track, you should expect your horse to be re-shod every month. “Regular” shoeing includes hoof trimming and costs about $80 to $120 per horse. Again, this cost depends on the locale and the farrier’s expertise. “Special” shoes such as bar shoes and mud calks will cost more, as will patches to repair quarter cracks (cracks in the hoof).
Entering Races
Entering a race does not cost any money, unless it is a stakes race. The following sections describe what resource is used to find that next race, how the entering process works, and, if you are lucky enough to own a stakes horse, what fees are paid to enter a stakes race.
The Condition Book
The condition book is published every two weeks and is usually applicable for two weeks. The book is available to everyone, and can be obtained in the office of the Racing Secretary at the track with a current meet. The Condition Book is the basic Bible for the next two weeks of racing, and your trainer, if one of your horses is race-ready, will fall upon it eagerly to find out if there is a race perfectly suited to your horse. This is also the day when jockeys’ agents filter through the backside, making preliminary deals for their “boys” to ride mounts in the listed races.
The Racing Secretary “writes” the roster of races based on the preponderance or types of horses residing at the track. That is, to the extent that there are “maidens” and “claiming horses” stabled at the track hosting the meet, the Racing Secretary will write an abundance of “Maiden” and “Claiming” races to accommodate them. The Racing Secretary, on the other hand, is sometimes required by state mandate to write an average of one per day for state-bred horses only. The Secretary must also accommodate owners by writing an appropriate number of high-purse and “Stakes” races, so that owners of the relatively few top-class horses available within the bounds of a “circuit” have a chance to make good on their investments.
The Secretary’s main role is to painstakingly design races with “a level field” – races, both for the sake of bettors and owners, in which all the horses will be closely competitive.
Theirs is not only an extremely detailed and difficult job, but the Secretaries will be the first to admit that the listed qualifications often seem to present a tangled web. No one – least of all you, or your trainer – should hesitate to contact the Secretary for an explanation of any condition that is even slightly unclear. The Secretary’s second main goal is to fill 8-10 races every day: if an owner or trainer hangs back from entering a race because of a confusing condition, and that race fails to fill, the Secretary’s job just got several hours harder.
Before looking through the Condition Book, you might want to be certain you are familiar with the correct definitions of terms and titles you’ll be seeing.
Veterinary Expenses
Obviously if your horse is sound, it will require fewer treatments than an unsound horse. If your trainer is one who does not rely heavily on medications or veterinary consultation, the monthly cost to you will be considerably less than one who does. Nevertheless, it seems that at one time or another nearly every horse will go through a period of serious illness or injury that will cost a lot of money to treat.
As an owner, you can protect yourself against unnecessary costs by education and communication. You should try and understand, as much as possible, the purpose and cost of each treatment, procedure or medication performed on or given to your horse. Also, communicate by having a discussion with your trainer in which you learn the trainer’s philosophy concerning the extent to which a vet is going to be used, setting a dollar limit beyond which your trainer must consult with you before ordering treatment and keeping in contact with your trainer so you are prepared for any unusual medical outlays.
Conformation
Conformation is the physical appearance of an animal due to the arrangement of muscle, bone and other body tissue. It is the sum of these body parts and how they blend together which determines the acceptability or unacceptability of the horse’s conformation. Good conformation is the overall blending of body parts to form a beautiful athlete.
No horse is conformed perfectly. Remember that in examining horses the purpose is to exclude those with physical faults your team considers unacceptable.
Overall, when examining a horse you should consider balance, bone, intelligence and athleticism.
Balance:
Is the horse well-proportioned? Does the frame suit its muscle?
Bone:
Does it appear to be substantial – not too light?
Intelligence:
Does the horse seem in control, aware of its surroundings, alert?
Athleticism:
Does the horse look physically fit and capable?
Remember, every horse has some physical fault with regard to pedigree and conformation. The art or science of evaluating a horse is deciding which of those faults are less likely to adversely impact the intended use of the animal. It is helpful to know something about the pedigree of the horse as it may relate to a particular horse’s conformation. Some sires pass similar conformational faults to offspring, with some of the faults having little or no consequence with respect to their racing success.
Everyone has different thresholds with regard to what constitutes acceptable faults. Establish your own thresholds, but be realistic considering your budget.
Pedigrees
“What I am attempting is to prepare the reader for the conclusion that there is no conclusion to the study of pedigrees.” J. A. Estes, former editor of The Blood-Horse
Pedigree refers to a horse’s family tree, with its paternal ancestors — sire/father — on the top, and its maternal ancestors — dam/mother — on the bottom. A horse’s pedigree provides insight into its potential ability and value.
A few basic points to consider from among the numerous facts and attributes regarding a sire are number and size of foal crops; percentage of progeny that are starters, winners and stakes winners; type of horse the sire produces: turf or dirt, sprint or route; precociousness of his foals — does he produce better 2-year-old runners or do they develop more slowly?; and age of the sire — some people believe the horse’s ability to pass on desirable traits diminishes as he gets older.
As with a sire, there are many factors to consider with regard to a dam. Such factors to consider are racing and produce record of the female side, going back at least two generations; performance of her foals on the track — how many made it to the track and started? What was their race record, i.e., number of starts, wins and purse money earned? How long did they withstand training?; and number of full and/or half-siblings that have been stakes performers.
There are as many theories about pedigree as there are theories about how to make money in the stock market. For example, some pedigree consultants pay particular attention to in-breeding and out-crossing, while others elect to focus on the physical or performance characteristics of the horse. Because beliefs differ so greatly, you should be as familiar with as many as you can, and select those theories you find most appealing.
Thoroughbred Retirement
The wonder of the Thoroughbred racehorse, and the quality that draws us to them, is their genetic need to run as far and as fast as they can. Added to the traditional training they receive, the effort they put out in any race surpasses the heights achieved by human athletes during Championship encounters in basketball, football or even marathon racing. Like all great athletes, they are prone to injury – in fact, especially prone: when they are competing, over 1,000 pounds of muscle and bone land jarringly on spindly front legs 120 times every quarter of a mile. They tell us about their injuries by the manner in which they eat, walk, canter and respond to human handling.
So the vigilant owner must be a consistent monitor of the horse’s condition. Once the physical signs of deterioration begin to show up, decisive action must be taken. It is far better to retire a horse while he is sound and capable of thriving in a second career than to risk furthering an injury on the track. The question the owner must face when, sadly, the horse’s race career has concluded is, what do we do?
For those who own farms as well as Thoroughbreds, the question of maintaining a retired horse is the decision to provide food and pasture. A large majority of owners do not have that luxury available. Given a life expectancy of 15 to 20 more years (after its racing career), a retired horse becomes a major non-returnable investment.
It’s hard to pull your heart away from a horse you own. They do become something more than an investment, no matter how tough-minded you are. But there is an investment you can make that insures a workable future for horses who can no longer race and cannot or should not be consigned for breeding. TOBA’s charitable arm, Thoroughbred Charities of America (TCA), supports many aftercare organizations each year. Please refer to this page for a list of TCA supported aftercare organizations. Please contact an adoption organization to ensure your racehorse has a good home and will have the opportunity to enter into a second career as an eventer, jumper, dressage horse, pleasure horse or much more.
Thoroughbred OwnerView is a free information website developed jointly by The Jockey Club and Thoroughbred Owners and Breeders Association for new, prospective and current Thoroughbred owners. OwnerView includes a wealth of information about Trainers, Racing Syndicates, Getting Started, Licensing, Racetracks, Veterinary, Aftercare, Publications and State Incentive programs.
Read below for a brief description of what you will find on OwnerView.
Trainer Information Racing Syndicates Getting Started Owning Thoroughbreds Owner Profiles Racetracks
Veterinary State Incentives State Licensing Aftercare Publications & Books