www.bbc.com/capital/story/20140502-a-day-at-the-races
And they're off! How to buy a racehorse
By Vikram Barhat
Rich Schweitzer had quite a stroke of beginner’s luck when he entered the world of racehorses.
In the fall of 2006, the Cherry Hill, New Jersey, native invested $20,000 to become part owner of three thoroughbred racehorses. On the day of the purchase, one of the lot, Jacaranda Jane, was running a race at the South Philadelphia Turf Club. She won.
While it was a low-rung, low-stakes race which got him “a few hundred on an investment of several thousand”, the thrill of winning the first race was indelible. “I thought this was an easy game,” he said.
But, it’s said the life of beginner’s luck is not long. It wasn’t for Schweitzer.
A string of disasters followed. One of his horses became seriously ill and had to be put down, while an injury forced another to retire. Still, Schweitzer, who works as an aircraft parts broker, was undeterred. “There's romance in racing, so I was sold,” he said.
In 2010, there came a turning point in Schweitzer’s fortunes. He received a small ownership interest in Animal Kingdom, a horse bred by Team Valor, a Lawrenceburg, Kentucky-based stable.
The next year, the chestnut colt won the Kentucky Derby, one of the most prestigious horseracing events in the US with a total purse of $2.1m. Then he won the $10m Dubai World Cup, the world’s richest race, in 2013. These wins “covered the costs of about a dozen horses,” said Schweitzer, who now part-owns four broodmares (retired female racehorses) that will be bred with Animal Kingdom.
Horse racing appears daunting for those outside of the glamorous and fiercely competitive world. Yet, it’s not financially impossible. There are several things prospective racehorse buyers can do to participate in the exciting sport without breaking the bank. While few owners will ever have the success of Schweitzer, one thing is guaranteed — even a losing racehorse can make a winning pet.
What to look for
A racing thoroughbred must possess a combination of talent, stride, temperament and pedigree, in that order, said Irwin. It’s critical for the uninitiated to seek professional input from seasoned horse owners, trainers and advisors, said Edmonton, Canada-based Cory Wagner, co-founder and chief executive officer of SportingCharts.com, a sports analytics site.
“If you knew nothing about the stock market, would you go throw a pile of money into a bunch of stocks?” said Wagner who also co-founded popular investor education site Investopedia in 1999. “It's no different in horse racing.”
A horse must be both powerful and light on its feet. “Look for rhythm,” said Irwin. “Horses that don’t move correctly waste motion, which wastes time.” The correctness of a horse’s bone structure, musculature and body proportions is another key consideration.
“Make sure to also get a veterinarian to examine any horse you buy,” said Wagner, himself an owner of 14 horses. ”A good vet or trainer will know if a horse just isn't put together to be a racing prospect.” A typical vet exam of a prospective horse might cost from $200 to $500.
Cory Wagner (pictured, with family) says it's critical to get advice to find the right mix of talent, pedigree and more. (Corey Wagner)
Where to shop
You can purchase racehorses privately with the help of a trainer or a bloodstock agent. A bloodstock agent is qualified to evaluate horses based upon pedigree and physical condition for the purpose of buying and selling. Horses can also be purchased at auctions such as the Keeneland September Yearling Sale in Lexington, Kentucky in the United States and Tattersalls Autumn Horses in Training Sale in Newmarket, Suffolk in the United Kingdom.
Horses sold at training sales have had some racetrack experience so buyers aren’t making a blind bet on their racing potential, said Jason Singh, marketing manager of Tattersalls Ltd, a Newmarket, UK-based racing stable.
“You know roughly what you’re getting and can have a horse running within a week or two,” he said. “Also, buying at auction means you are getting market value and are protected by the conditions of sale issued by the company.”
You could also “claim” a horse at a claiming race where participating horses have a price tag. Prospective buyers submit a claim before the race starts. Once the race is over, the horse is yours. If a claim is submitted by more than one person for the same horse, a simple draw after the race picks the person who gets the horse.
Claiming is not for everyone. For one, said Wagner, you can’t have a veterinarian examine the horse. If the horse breaks a bone or pulls a tendon of muscle in the race, it's your problem, he added. Expect to pay between $5,000 and $100,000 for claiming.
When to buy
Horses can be bought at all different stages of their lifecycle including a foal (a baby horse), a yearling (one-year old untrained horse) and a 2-year-old in training.
Irwin prefers lightly raced horses but warns “horses in many instances have been pushed too hard and are compromised” early in their lives, even if they’ve only raced in a couple of races, in the case of 2-year-olds, or about 5 times, if 3 years of age.
If you think you might want to “flip” a horse like you would an underpriced house, be warned: the practice, called “pinhooking,” is a risky undertaking. You usually must retain a horse six months to a year and “horses change dramatically when they’re young,” cautioned Irwin.
How much it costs
Buying your own racehorse can set you back anywhere from $10,000 to $100,000, said Irwin.
By contrast, syndicates such as Team Valor International (US), Horse Racing Share in Australia and Owners for Owners in the UK can offer a stake in a racehorse for as little as a few hundred dollars. Expenses are shared on a pro-rata basis. So is prize money.
“The evolution of syndicates has allowed everyday people to be directly involved,” said Colin Madden, managing director of Australian financial firm RMBL Investments. As the part-owner of legendary Australian racehorse, Black Caviar, Madden also enjoys all the perks and privileges of the winner’s circle.
Not only has Madden made a small fortune — Black Caviar retired last year with winnings of around $8m, undefeated in all 25 outings — he and his wife “got to travel the world and ended up meeting Britain’s Queen” and “were invited to attend a dinner at Windsor Castle” because of their ownership interest in the winning horse.
The cost of a sprinter, irrespective of the place of purchase or the type of ownership, (does this refer to a syndicate purchase, or are starting a new topic about auctions?) depends on a variety of factors including pedigree, past performance, supply and demand and economic conditions.
At an auction, prices could start at as low as $1,000, but could go up to $1m. This doesn’t include the 5% to 10% commission that agents charge for appraising and researching the horse.
Ongoing training and maintenance costs can add up. Trainers charge by the day, usually about $55, but twice as much if training on high-end racetracks. Buyers are also responsible for monthly veterinary bills — typically between $500 and $1,000 in North America and about A$200 and A$400 ($186 to $372) in Australia. There are grooming and transportation expenses, and the cost of a farrier (hoof care specialist).
Racehorses also eat like, well, a horse. Typically they will consume 2% to 2.5% of their body weight in hay daily, according to the Ontario Ministry of Agriculture, Food and Rural Affairs. The average thoroughbred racehorse weighs about 1,000 lb and consumes 22lb to 24lb of hay per day. Add to that a daily diet of about 10lb of whole grain, special feeds and supplements.
Overall, a monthly tab of $2,500 to $3,500 is fairly standard, said Wagner. All expenses are split according to the ownership ratios.
When buying a racehorse, keep your emotions on a tight leash. Experts say spend only what you can afford to kiss goodbye. Horse racing is a betting man’s game, after all. Committing your life’s savings in the hope of a finish-line windfall is “a fool’s journey,” said Irwin.
Consider the occasional profit a bonus. “Only by adopting this attitude will one have a ghost of a chance of coming out on the right side of the financial ledger,” said Irwin.
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