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Anyone Own Racehorses?

JScott

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Just curious if there are any racehorse owners here?

I own four thoroughbreds right now (just raced one at at Churchill Downs on Kentucky Derby day last weekend!), and am always interested in chatting about investing strategies or other ideas.
 

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levijean

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I always figured it was more of a hobby than an investment, unless you get a superstar horse. What do the numbers really look like?
 

snappyhappy

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I own a few Harness horses in Australia. We often train them up and sell them to America once they've had a few wins. Once they get to America they mostly race out of Yonkers.

At least from my experience, it seems pretty hit & miss in terms of investing in a winning horse and getting a good return. We got lucky and had a very successful horse who has pretty much paid for the rest that we own, but the majority are usually losses or break-evens.

Investing in Thoroughbreds here is a lot more expensive than Harness, and something like 7 out of 10 horses never win a race, so a lot of luck involved.
 
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JScott

JScott

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I always figured it was more of a hobby than an investment, unless you get a superstar horse. What do the numbers really look like?
I liken owning horses to playing poker -- it tends to be much easier to make money the higher stakes you play. It's not that the game is different at higher stakes, but that it's easier to overcome the fixed expenses that are part of the game.

In poker, you pay a "rake" to the house (their fee for dealing each hand) -- if you're playing low stakes poker, the rake can be a significant percentage of the betting stakes, and it can be difficult to make a profit after accounting for the rake. But, if you move up in betting stakes, the rake doesn't increase as quickly, so at higher stakes, it's easier to make a profit despite the fee you pay to the house.

With horse racing, there are monthly fees associated with just owning horses -- a good rule of thumb is $100 per day per horse for the stall, food, training, medical treatment, etc. If a horse is running once a month trying to win a $3000 purse, it can be pretty difficult to overcome the base cost of just owning the horse to make a profit. But, if you own horses that are running in races that pay $100,000 purse, the daily cost of ownership is a small percentage of the potential winnings.

Now, in terms of the investing model, owning horses is a lot like investing in real estate (yeah, I like analogies)...

You can "flip" horses -- this means buying a horse at a specific price that you believe is under the real value of the horse, using some strategy, game theory and good training to improve the statistics of the horse, and then reselling within a 1-6 months for a profit (and hopefully winning some purse money in races along the way).

You can "buy and hold" horses -- this is basically the idea of buying a horse that you believe can consistently win races, and just hold it long-term for the cash-flow it generates from those races.

You can "develop" horses -- basically, buy a female horse, breed it, raise the baby horse for a couple years, and then either race or sell the baby when it gets old enough to run. Obviously, this is a longer-term play -- you'l spend $30-40K just raising the foal for a few years until it's ready to run, not to mention the "stud fees" (the cost of breeding that inputchip alludes to in his post above).

I have a partner who is very serious about the business. He's owned dozens of horses over the past few years, and really knows the industry inside and out. Personally, I just love horses and enjoy the investing and gambling aspects of the industry (I try to take the gambling out of it, but it's a very high-variance investment, in general).

I'm a little too attached to my horses -- every time I buy one, I just want to retire it to the farm, let it live out its life in luxury and visit it every once in a while. But, my partner keeps me a bit more pragmatic. Because of my soft spot for the animals, this will likely never be a very serious investing model for me, but I do enjoy it and find the business fascinating.

Finally, in terms of making money, it's really just like any other type of investing. If you don't invest a LOT of time and effort into learning the business, learning how to evaluate investments, learning the strategies and tactics that go into making smart investment decisions, then it's really just a crap shoot. You'll buy some winners and you'll buy some losers, and the "rake" will likely eat most of your profits.

But, if you are good at analyzing investments, understand the game theory involved with making decisions (and honestly, I believe the game theory is really the biggest part of making money with horses) and are really good at making smart decisions, it's most certainly possible to have a positive expectation over an investment portfolio. The variance is much higher than certain other types of investing (again, I liken it to poker), but over the long-term, good investors will make money and bad investors will lose.

The "ace in the hole" in my experience is a great trainer. Someone who knows the industry, knows the horses, has strong relationships (I could write a book on how inside relationships matter) and is well respected can make or break the owner. We've been lucky to have a great trainer who keeps us from making the types of bad decisions that get horse owners in a lot of trouble.

Here is one of our newest guys ("Clearly Super," or "Soup" as we call him) who ran at Churchill Downs last weekend just before the Derby:



I'm far from an expert in this business at this point, but happy to try to answer any other questions!
 
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Thanks for the tag @JAJT .

Anyone I have hung around knows the horse racing game is a passion of mine. One of my original "fast lane" goals was to own a racehorse, and I crossed that off my bucket list when in a partnership we purchased a few old nags to run at Canterbury Park in Minnesota. @JScott you are 100% right. At the entry level claiming where you are buying horses that are just a few losses away from being turned into Elmer's Glue, the objective is to achieve a breakeven. We'd run the horses at a level just higher than their potential, hoping to keep them in a class where they could have 3-4 races where they would hit the boards but not win, therein ensuring we could keep them racing at the lower level as long as possible, happy with a smaller purse for a place or show vs. a larger purse for a win but that typically would mean a claim and a promotion from the conditions that were favorable towards paying off the horse's maintenance fees.

If you are a newbie interested in horse racing, a lot of the tracks like Canterbury have "clubs" where 50+ people pool resources to buy a sliver of a lower level horse. It gives you a fun season of cheering on your old nag with your club while learning the horse business with minimal investment.

Today, I own no horses. I am a student of horse racing, and a horse player but not an owner. In a few years, when my FU money has turned into LEGACY money I will participate at the entry claimer to moderate local prices more as a muse than a business. The best part about being a horse player (a nice word for a derelict degenerate gambler) is that you are literally matched up to take money from the undereducated spectators who come out on a Saturday to have fun, watch the horses, and lose their money. Horse racing for the horse player is gambling with an edge. It still requires a modicum of luck, but you can significantly improve the odds in your favor by understanding the business, the owners, the trainers, the jockeys, the horses and the history of all of the above.

Over the past year or so, I have spent less time at the track in part because I was busy with my passive income that wasn't passive anymore. and in part to the fact that I really don't like Tampa Bay Downs. The horses are a step up from Canterbury in Minnesota, but the facilities are a dump and my ability to work the systems I had developed in Minnesota from an experiencial standpoint I haven't been able to recreate here locally.

Horse racing is a fascinating pass time. A business for some, fun for spectators from all walks, and a muse for me. If you want to get an entry level taste of horse handicapping :

1. Visit a local track, bring $50, and lose it all that day experimenting
then, and ONLY then after you have lost your $50
2. Pick up a few of these books : https://www.amazon.com/s/ref=nb_sb_noss?url=search-alias=aps&field-keywords=andrew+beyer
 

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I would love to do this someday. There is a track within 15 miles of where I live so it's pretty easy to head down and watch some races. Several years ago I read some books and then would look at past performances and try to predict the winners. I ended up developing an eye for certain things that I felt put a horse in the best odds to win. The problem is that you then have to get odds that are worth the "gamble."

It's easy to bet on the favorite because you're basically betting on what the larger population believes to be the best horse (if you understand how the odds work). The real money is in finding the sleeper who nobody is looking at and going off on odds that make it an attractive bet.

My best win was a horse that was given 18-1 odds and ended up winning. The other issue is that you could go to your local track that has about 12 races during the day and only find 1 race worth betting on. And, just buying the past performance book for the day generally runs about $2.50, which puts you behind from the start.

@JScott Any chance you could go into more detail on what is involved in owning? Costs, outsourcing training, etc., time cost? I would also be interested in seeing some behind the scenes pictures of what it is like getting involved in that owning/training.

Thanks!
 

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I would love to do this someday. There is a track within 15 miles of where I live so it's pretty easy to head down and watch some races. Several years ago I read some books and then would look at past performances and try to predict the winners. I ended up developing an eye for certain things that I felt put a horse in the best odds to win. The problem is that you then have to get odds that are worth the "gamble."

It's easy to bet on the favorite because you're basically betting on what the larger population believes to be the best horse (if you understand how the odds work). The real money is in finding the sleeper who nobody is looking at and going off on odds that make it an attractive bet.

My best win was a horse that was given 18-1 odds and ended up winning. The other issue is that you could go to your local track that has about 12 races during the day and only find 1 race worth betting on. And, just buying the past performance book for the day generally runs about $2.50, which puts you behind from the start.

@JScott Any chance you could go into more detail on what is involved in owning? Costs, outsourcing training, etc., time cost? I would also be interested in seeing some behind the scenes pictures of what it is like getting involved in that owning/training.

Thanks!
The discipline of the horse player is not only finding the winners, but only waging on the winners where the odds are favorable.

Some days it is tough to do as you are there to wager. Some days, you maybe should only make ONE BET. Certainly don't bet on every race just to bet. You pick your shots.
 

jon.a

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The discipline of the horse player is not only finding the winners, but only waging on the winners where the odds are favorable.

Some days it is tough to do as you are there to wager. Some days, you maybe should only make ONE BET. Certainly don't bet on every race just to bet. You pick your shots.
Kinda like investing. I regularly have to tell family that we are not going to do a deal just to do a deal.
 

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MJ DeMarco

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Fascinating topic. Watched.
 
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JScott

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@JScott Any chance you could go into more detail on what is involved in owning? Costs, outsourcing training, etc., time cost? I would also be interested in seeing some behind the scenes pictures of what it is like getting involved in that owning/training.
Okay, this could be a long one, but I'll give it a shot...

First, note that this is just my experience over the past 6 months or so. It might not be representative of bigger or smaller owners, or owners in other parts of the country or owners who have different investing strategies than I have. In other words, this is just my perspective so far...

PASSIVE OR ACTIVE

There are lots of different ways to own horses. You can buy into what's basically a syndicate -- put in some money, own part of a horse and hope that your investment increases. Basically, a purely passive investment. Or you can work with a trainer, buy a horse, make decisions about how it trains, where it runs, which races it runs, etc. You -- along with your trainer -- are actively involved in every decision and directly impact your investment(s).

Personally, I have a partner, and we buy all our horses 50/50 (he owns some on his own as well). We make all decisions (along with our trainer)...we're very hands-on. Note that the trainer is responsible for all day-to-day taking care of the horse, making sure they are fed, cared for, exercised, get necessary medical care, etc. We don't ever have to see our horses (many owners are in different states than their horses), though my partner and I both visit (with our families) at least a couple times a week, just to hang out with them, feed them carrots, etc.

COSTS

The typical costs associated with owning a horse are:

- Stall. Basically, the place it lives. Our horses are at a barn located at Laurel Race Track -- a big race track in Maryland. There are likely 1000 horses at Laurel, and our trainer has about 15 dedicated stalls for the horses he trains.

- Food. Horses get fed a couple times a time, and our trainer decides what they eat and when.

- Training. Our trainer is responsible for overseeing all the horse training and taking care of the horses day-to-day. He's at the barn by 6am with his staff for feeding and training, and either he or someone from his staff is around all day taking care of all their needs.

- Medical. There's lot of routine medical care for horses, and then there is dealing with issues, like blisters, fluid in their joints, teeth issues, muscular/bone issues, etc. Good trainers have a close relationship with a vet who is onsite everyday, and we can get the vet to our stall on 15 minutes notice if there are any issues. Obviously, the horses are high-priced investments, but we also want to make sure they are happy and healthy. In fact, things like chiropractic care are pretty common for racehorses. Also, things like getting horse shoes made and adjusted, etc.

- Moving/Transport. If we run a horse at a different track (not uncommon that we'll send them up to Pennsylvania or over to Kentucky), or if we buy a horse in a different state and need to move him/her to us, we pay for transportation.

- Travel/Trainer Costs for Buying/Racing. If we are scouting a horse at another track in a different state, or if we're racing a horse at another track besides our home track, we need to send the trainer (or someone on his team) to handle the scouting, purchase, racing, etc. So, there are a good bit of travel costs if you'll be dealing with multiple tracks in different states.

- Miscellaneous. Things like custom silks (the jerseys that the jockeys wear), winner circle photos, etc. are extra costs that can add up. But, you're generally going to be making money before you're paying for stuff like that.

If you're going to breed horses, there are obviously other costs involved. My partner is in the process of doing this for the first time, and he expects to pay about $40K over the next couple years to get the foal ready to race (or be sold).

Note that we don't pay our jockeys. The professional jockeys typically get a percentage of any winnings (10% is common), so they don't cost anything unless we make money on the race. That said, if you want to get the best jockeys, it helps to have a great trainer (since the jockeys want future work with the same trainer) and great horses (since the jockeys want horses that can win).

TYPES OF RACES

This is a really important part of racing. There are different types of races, but they basically fall into two categories -- Claiming and Non-Claiming:

Claiming Race: About 50% of all races across the US are claiming races. These are races where every horse in the field is available for purchase for a fixed price. For example, a $20,000 claiming race is one where anyone can purchase any of the horses in the field for $20,000. You make a "claim" on the horse you want to buy before the race, and after the race, you own that horse for that amount of money.

Note that any money the horse wins during that race goes to the previous owner, and regardless of what happens during that race, you still own the horse afterwards. If you claim a horse, the horse wins the race and then the horse dies 5 minutes after the race ends, the previous owner gets the winnings (the "purse") and you get to pay to bury it. But, if the horse has the race of it's life and is suddenly worth 3x as much, you still get the horse at the claiming price (I'll tell a story about this below). There's risk/reward with claiming.

Also note that you don't generally want a horse you claim to win. Not only do you not get the winnings (again, it goes to the previous owner), but as a horse wins more races, s/he is generally forced to run in harder races. The best case scenario when you claim a horse is for it to run a really strong 2nd -- you get a horse that has proven it's value, but you aren't forced to move it up in class on the next race.

Non-Claiming Race: There are different types of races that aren't claiming races, and these are generally reserved for the better horses (they have higher purses). These are often called Allowance Races, Stakes Races and Grades Stakes Races (each is subsequently better class of horses and higher purses). Horses that run in these races are generally purchased/sold in private sales or auctions, though it's not uncommon for a claimed horse to run up the ranks and participate in these types of races.

STRATEGIES

I mentioned in a previous post that there is lots of game theory associated with racing. I'll give an example here of a horse we recently purchased (pictured in my previous post) named "Clearly Super," or "Soup."

We've scouted Soup over the past few months. He's a 4-year old who hadn't won his first race, but had some solid showings and we decided to claim him from a big track in Kentucky. Our trainer used to train at this track, so he was able to get some information on this horse from other trainers, and it appeared the $20,000 claiming race he was running in was a steal. If we could pick him up for $20,000, we'd be thrilled.

Here was the end that claiming race (click for sound):

Keeneland Racing on Twitter

Soup won his first race by a BIG margin, and his times were fantastic. There were actually 15 other people who placed claims on him, and when there is more than one, they do a random drawing to decide which owner wins the claim. We got lucky and won the lottery, so we got to claim him for $20,000.

Now, we had to decide what to do next. Because he won the race, we were forced to move up in class (he could no longer run races specifically for "maidens" -- horses that had never won a race). But, because he had such a great showing, we had several options:

1. We received private offers to purchase him for up to $50,000. That means we could have turned around and sold him immediately for 150% ($30K) profit.

2. We could run him in another claiming race. From a game theory perspective, we had several options:

2A. We could run him in a lower-priced claiming race ($20-40K) -- he would almost certainly get claimed at that those prices (remember, we were offered $50K for him), so we'd get $20-40K in a resale, PLUS we would win money if he did well in the race. If he didn't run well in the race (or had bad luck), we could end up making a small profit on the claim, not winning any purse money and losing him in the claim.

2B. We could run him in a higher-priced claiming race ($50-75K) -- he likely wouldn't get claimed, but we could potentially win a big purse if he did well in the race. If he did do well (and/or got claimed), we could make a lot of money. But, if he didn't run well, his value would go down, and it could hurt our profitability.

3. We could run him in a non-claiming race (allowance or stakes race). If he did well, we could win a lot of money and his value could go up a LOT, and we couldn't lose him to a claim. Potentially, we could keep running him in these races and just keep rolling in the cash month after month. But if he didn't do well, it would hurt his value for future sales and he might not qualify for these types of races again.

And, don't forget, there's always a chance of a horse getting hurt, in which case you can potentially lose your entire investment.

So, what do you do? We decided to take a big chance and run him in an allowance race at the Kentucky Derby, where he could potentially win a purse of about $50K but we wouldn't risk losing him to a claim.

He didn't do particularly well in that race (though he actually did better than expected), and we didn't win any money -- in fact, it cost us money to take him to Kentucky, run him and bring him back.

Now we need to decide what to do next. In general, we like to run our horses in the lowest claiming races possible where they won't get claimed -- this gives us the best chance of keeping the horse, and also gives us the best chance of winning money (since lower claiming races have lower competition).

Could we get away with a $40K claiming race and not lose him now that he lost the allowance race? What about a $30K claiming race? Or do we try another allowance race -- Preakness is coming up in a few weeks, and it's right in our backyard, so no travel costs! Or do we enter him in a $20K claiming race, have him almost certainly get claimed, but win the purse money in addition to breaking even on the purchase/sale?

Many times, it comes down to our trainer talking to other trainers to find out which horses they plan to run. If we find out a trainer is planning to run a really good horse in a low claim race (perhaps an owner needs the cash or is consolidating), we might want to steer clear of that race because we risk losing our horse to the claim and risk not winning the race because there's a really good entry.

Also, our trainer generally knows which other trainers have owners who are looking to buy. If we know there is an owner looking to buy up to $30K, it may convince us to run a horse that we think is worth $20K in a $30K claiming race, in hopes that the owner might overspend on our horse. Likewise, we might not run a horse in that $30K claiming race if we don't really want to lose him for $30K and we know there's an owner who is ready to buy.

We've had situations where we've entered a horse into a claiming race thinking he won't get claimed, and then the morning of the race we find out through another trainer that they have an owner who plans to claim our horse -- and we've scratched the horse from the race just to avoid losing him based on this information.

Here's another situation that's interesting (to me, at least)...

We have a horse now that won a couple races recently and then got a bad blister on his hoof. We had a couple options based on this -- we could just give him an extra week of rest and he'd probably be fine, or we could send him to the farm (literally a farm owned by a friend of ours) for a few weeks of R&R and to recover.

The risk of not giving him time off is that running too soon could exacerbate the injury. The risk of sending him to the farm is that it will break his winning streak (horses actually gain confidence when they are consistently winning), he won't be training, he will likely gain some weight and he may not feel much like racing when he comes back.

Ultimately, we decided to send him to the farm, and he's been there for the past three weeks. This puts us in an interesting situation when he comes back. He was a valuable horse after his last few runs/wins, but are other owners going to think there is something seriously wrong with him given that we sent him to the farm during a win streak (there's nothing seriously wrong...it was just a blister).

Because there is so much confusion surrounding his disappearance, there's a really good chance that we could we run him in a lower priced claiming race that he would almost certainly win, and there's a good chance he won't get claimed because other owners don't know if there is a serious problem with him (they would also be concerned about a problem given that we're running him for a low claiming price).

But, there's also the chance that another trainer could find out that he just had a blister, and will realize that we're running him in the low claiming race just for the free money (knowing that he's unlikely to get claimed), and then that trainer could pass the information to one of his owners who could essentially "call our bluff."

Just like poker, it's a game of imperfect information where each side is trying to figure out what the other side is thinking, trying to figure out what the other side thinks the other side is thinking about them and trying to figure out what the other side thinks the other side thinks the other side is thinking.

Perhaps I didn't explain all the nuances there, but there is a lot of game theory that goes on when it comes to racing, especially in the lower class claiming races.

Okay, I'm sure I've missed some stuff, so happy to clarify anything or answer any questions...
 

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I know this may not be a sophisticated observation. But when I watched the Kentucky derby the other day the fastest horses had a unique way of moving their legs. It just stood out to me.

I personally bet on some of the middle tier horses as I believe history is only part of the odds.
 
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JScott

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Here's another example of why racing involves a lot of game theory...

This is Island Queen ("Ily" as we called her) with one of my boys:



She's one of my favorite horses so far...such a sweet girl. And she won a decent sized race about two months ago.

But, after that race, she got really, really stubborn and essentially decided that she didn't want to race anymore. Our trainer would take her out to train, but she just didn't want to run.

We would joke that she watched too much Seinfeld:


Anyway, we realized that she was going to be a hand-full to continue training, and so we entered her in a claiming race at a price where we knew she'd get claimed (she was coming off a win) but where we also knew that we wouldn't raise too much suspicion.

Ultimately, she got claimed in that race and we got the maximum value out of her possible. But, in that claiming race, she literally stopped towards the race and refused to finish. The new owners have a challenge on their hands (though they got her for a great price, so that's the trade-off).

Here's the race...she's the #7 vying for the lead at the beginning of this clip:

View: https://www.youtube.com/watch?v=eyiO-iZpqhI&t=1m26s

In the jockey's own words, "She's a great horse and I thought we had a shot to win it. But, around the last turn, she decided she was done for the day. Nothing I could do."

Personally, I was on the fence about the ethics of the situation, but all horses have some issues, and every time you claim a horse, the first thing you do is bring in the vet to give it a checkup and see what issues were hiding in plain sight. And hope that there's nothing too major... In this case, it was a psychological issue, not a physical one.

That said, my partner once claimed a horse that had a heart defect...the horse died a few days after he claimed her. We'll never know if the previous owner knew about it or not...but that's part of what makes horses a complicated investment vehicle.
 
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I never got into horse racing until I moved to Louisville. I live 10 mins away from Churchill Downs. The neighborhood that surrounds it is very rundown. I don’t think a lot of people realize that when they see it on tv. It is in a bad part of town.

I have gone about 10 days a year (for the past two years) and have lost money every time. It is still addicting. Not even for the money, as I don’t take a lot because I cannot afford to lose a lot. Usually around $25-50 which is great for all day entertainment IMO.

I’m going to check out those books and see how I fare this year. Thanks @Vigilante.
 

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@MJ DeMarco Fastlane would be a great horse name! Unscripted would be even better!
I may borrow those. If so, the boss gets paddock visitation rights when ever he wants.
 

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When I was betting casually, as long as my wins from the day could cover my expenses for the day (program, food, drink, private table, etc...) I considered it a win.

Hard to sustain wins betting straight win/place/show tickets, but better once you get to know how to play some of the more exotic bets.
 

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Quite a few years ago my grandfather bought a "share of a racehorse" (some fractional ownership thing) I was less interested in the share than I was in that the managers of the horse got to be "owners" and pay for almost nothing but got 20% of the winnings and any else (after bills and fees of course) were distributed to the "owners"

I think grandpa got 20 or thirty bucks each time the horse won something and like 100 whenever it was bred.

If you only had a passing fancy of owning a racehorse, fractional may be the way to go....If you have a real love of the sport....developing a fractional program would be a much more comfortable way of owning a stable. ( Could even be fastlane of ya could get 10 or 15 horses in your stable)
 

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I liken owning horses to playing poker -- it tends to be much easier to make money the higher stakes you play. It's not that the game is different at higher stakes, but that it's easier to overcome the fixed expenses that are part of the game.

In poker, you pay a "rake" to the house (their fee for dealing each hand) -- if you're playing low stakes poker, the rake can be a significant percentage of the betting stakes, and it can be difficult to make a profit after accounting for the rake. But, if you move up in betting stakes, the rake doesn't increase as quickly, so at higher stakes, it's easier to make a profit despite the fee you pay to the house.

With horse racing, there are monthly fees associated with just owning horses -- a good rule of thumb is $100 per day per horse for the stall, food, training, medical treatment, etc. If a horse is running once a month trying to win a $3000 purse, it can be pretty difficult to overcome the base cost of just owning the horse to make a profit. But, if you own horses that are running in races that pay $100,000 purse, the daily cost of ownership is a small percentage of the potential winnings.

Now, in terms of the investing model, owning horses is a lot like investing in real estate (yeah, I like analogies)...

You can "flip" horses -- this means buying a horse at a specific price that you believe is under the real value of the horse, using some strategy, game theory and good training to improve the statistics of the horse, and then reselling within a 1-6 months for a profit (and hopefully winning some purse money in races along the way).

You can "buy and hold" horses -- this is basically the idea of buying a horse that you believe can consistently win races, and just hold it long-term for the cash-flow it generates from those races.

You can "develop" horses -- basically, buy a female horse, breed it, raise the baby horse for a couple years, and then either race or sell the baby when it gets old enough to run. Obviously, this is a longer-term play -- you'l spend $30-40K just raising the foal for a few years until it's ready to run, not to mention the "stud fees" (the cost of breeding that inputchip alludes to in his post above).

I have a partner who is very serious about the business. He's owned dozens of horses over the past few years, and really knows the industry inside and out. Personally, I just love horses and enjoy the investing and gambling aspects of the industry (I try to take the gambling out of it, but it's a very high-variance investment, in general).

I'm a little too attached to my horses -- every time I buy one, I just want to retire it to the farm, let it live out its life in luxury and visit it every once in a while. But, my partner keeps me a bit more pragmatic. Because of my soft spot for the animals, this will likely never be a very serious investing model for me, but I do enjoy it and find the business fascinating.

Finally, in terms of making money, it's really just like any other type of investing. If you don't invest a LOT of time and effort into learning the business, learning how to evaluate investments, learning the strategies and tactics that go into making smart investment decisions, then it's really just a crap shoot. You'll buy some winners and you'll buy some losers, and the "rake" will likely eat most of your profits.

But, if you are good at analyzing investments, understand the game theory involved with making decisions (and honestly, I believe the game theory is really the biggest part of making money with horses) and are really good at making smart decisions, it's most certainly possible to have a positive expectation over an investment portfolio. The variance is much higher than certain other types of investing (again, I liken it to poker), but over the long-term, good investors will make money and bad investors will lose.

The "ace in the hole" in my experience is a great trainer. Someone who knows the industry, knows the horses, has strong relationships (I could write a book on how inside relationships matter) and is well respected can make or break the owner. We've been lucky to have a great trainer who keeps us from making the types of bad decisions that get horse owners in a lot of trouble.

Here is one of our newest guys ("Clearly Super," or "Soup" as we call him) who ran at Churchill Downs last weekend just before the Derby:



I'm far from an expert in this business at this point, but happy to try to answer any other questions!
Now flipping horses sounds like fun. Never imagined you could do that.
 

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JScott

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Now flipping horses sounds like fun. Never imagined you could do that.
We keep our horses on average about 3-4 months...coincidentally about the same amount of time we keep our house flips...

Though I get a lot more attached to the horses than the houses... :(
 

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My wife and I went down to our local race track yesterday to check out the races. We went purely to have fun.

I only bet a max of $2 per race. Out of the 6 races I bet on, we ended up -$6. Regardless of the amount, it was fun to analyze the races and put money on a horse. Plus, my wife had never been there so it was a cool experience to take her for the first time. We only won race #2 and came close in a couple others.

There was a guy I saw in the winner's circle who walked by later in the day. I asked him if he owned the horse that won and he said he did and he just claimed the horse 3 weeks ago for $20,000. I think he was in some kind of partnership based on seeing who the owners were in the racing program. He had another horse entered in a later race, but he didn't win. It would be interesting to know how much he won on his horse that came in first.

At my track, it is possible to claim horses as low as $5,000. The lowest yesterday was $7,500. It seems definitely doable and even more so if you go in with another person or more. I just wouldn't know what I would do with it since I don't have any experience in owning or training a horse. It's something I think I would want to do someday, though, even just to say I did it.
 
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It would be interesting to know how much he won on his horse that came in first.
If you have a copy of the racing form from that day, you can look at the race and generally see what the total purse was (what all the owners split). In general (though it will vary from track to track and state to state), 1st place will get about 60% of the purse, 2nd will get about 30% of the purse, 3rd will get about 10%, and the other horses might get a nominal amount.

Sometimes there are bonuses... For example, if you run a horse in Maryland that was bred in Maryland, there is a 30% bonus on any winnings. We send our horses all around the east coast for races, but the Maryland bred ones stay in Maryland simply because of that bonus.



At my track, it is possible to claim horses as low as $5,000. The lowest yesterday was $7,500. It seems definitely doable and even more so if you go in with another person or more. I just wouldn't know what I would do with it since I don't have any experience in owning or training a horse. It's something I think I would want to do someday, though, even just to say I did it.
A couple things:

- The biggest thing you'd need to do is find a trainer. It's likely that there are at least a couple trainers that work with horses at your track (and depending on the size of the track, perhaps dozens). The trainer can take care of EVERYTHING if you want him to. I know a lot of horse owners who don't even live in the same state as their horses -- they just let the trainer take care of the housing, feeding, training, medical issues, racing, transporting, etc. You can be as involved or uninvolved as you want.

- The daily cost of owning the horse will vary by trainer and location, but expect about $50-100/day. This includes housing, food, trainer and basic oversight. There are extra costs for medical issues, dental issues, new horseshoes, transport to races, etc. On average, I assume all-in of about $2500/month per horse with my trainer.
 
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We bought three 2 year olds at auction this week, and are up to 6 horses. Four of them are 2 year olds who have never run (and don't even have names yet). The 2 year olds are so sweet and fun...it's like having kids. Hopefully they'll be ready to run by the end of summer, and a couple of them have great pedigrees and we're hopeful that they'll do well.
 
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We bought three 2 year olds at auction this week, and are up to 6 horses. Four of them are 2 year olds who have never run (and don't even have names yet). The 2 year olds are so sweet and fun...it's like having kids. Hopefully they'll be ready to run by the end of summer, and a couple of them have great pedigrees and we're hopeful that they'll do well.
 
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Thanks @JScott . I looked up the equibase charts and see on there that 1st place received $24,600. 9th place got $250.

How much does it cost to enter a horse into a race? I'm thinking just some minor everyday race, instead of something like the Kentucky Derby.

Do you also hire a jockey? How do the jockeys get picked for which horse they ride on? The horse that was owned by the guy I talked to had a well-known jockey for the track. He came flying up at the end out of nowhere. Then, on the next race, he did it again.

I have so many questions. I want to get back down to the track to do it again, but need to learn a little more on how to pick the horses confidently.

I'm not sure I would go out on my own right now, but I think it would be fun to maybe partner up on one. Any advice on how to find a trainer?
 
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Thanks @JScott . I looked up the equibase charts and see on there that 1st place received $24,600. 9th place got $250.
Funny...that means the race was very similar to the image I posted...

How much does it cost to enter a horse into a race? I'm thinking just some minor everyday race, instead of something like the Kentucky Derby.
See my post from May 9 that discusses the types of races. In general, unless you're running a large allowance or stakes race, it doesn't cost anything to enter. Even for the bigger races, the entry fee is nomimal ($1000-2000 or so). For the big stakes races (like the Kentucky Derby or Preakness), it may be more expensive...we're not to that level yet, so I'm not quite sure how those races work... ;)

Do you also hire a jockey? How do the jockeys get picked for which horse they ride on?
Trainers know the jockeys and the jockeys decide which horses they want to ride. For example, our trainer works with two jockeys for 90% of our races at our home track (if they're busy or riding another horse in that race, we have some back-up jockeys that we use). The jockey gets 10% of any winnings -- if they don't win, they don't get paid. (May be different for the really big races.)

Typically, the better the trainer, the better the horses he'll tend to have, and the more the good jockeys will want to work with him and his horses. We actually picked our trainer because he's relatively new to our area (he doesn't yet have a lot of horses so we get very personalized attention) but he has a great reputation from when he was a trainer in Kentucky. So, the good jockeys like to work with him, as they know his horses have a good chance of generating winnings.

We actually were able to get Kentucky Derby winner Edgar Prado to ride one of our horses in a race the day before Preakness this year -- Prado had gotten his 7000th win a couple days earlier and he actually approached us about riding for us (he almost got his 7000th win on our horse, which would have made our horse a minor celebrity). So, having a good trainer with a good reputation is important.

The horse that was owned by the guy I talked to had a well-known jockey for the track. He came flying up at the end out of nowhere. Then, on the next race, he did it again.
Things like this are going to be a combination of trainer and jockey. The trainer probably knew that the horse was a strong finisher, and may have told the jockey to save him for the final stretch. This is something the jockey wouldn't know if he hadn't ridden that horse before. But, the jockey also needs to be able to feel out the horse during the run and make real-time decisions.

As an example, we have a great horse who doesn't see well out of his right eye. If he gets too close to another horse on his right, he gets spooked and will pull up. So, our trainer has to make sure that the jockeys know this, so they either run him on the outside or they make sure not to run him in a pack. A jockey would never know this on his own, but once he knows, it's up to him to make sure that he uses that information during the race to make smart decisions.

As another example, we have a horse that absolutely can't come from behind. If he falls back behind the front pack, he gets discouraged and won't run hard. So, our trainer always gives the jockey instructions to run him hard out of the gate and try to get an early lead (basically, the horse has to go wire-to-wire to win). This is something the jockey just wouldn't know on his own if he hadn't ridden that horse before, but the trainer knows since he trains him everyday.

I have so many questions. I want to get back down to the track to do it again, but need to learn a little more on how to pick the horses confidently.
Picking a winner in a race (handicapping) is a lot different than picking a horse to purchase. Every time a horse wins a race, it moves up in competition (generally), and if you claim a horse that can handle it's current competition but not the next level, you can be in for a bad surprise down the road.

Also, many horses have medical issues that may not affect them today or tomorrow, but could affect them next week or next month. For example, if a horse has sore hips, the trainer can do some things that will help him run well in the next race, but could cause the condition to worsen after the race.

This is another place where having a great trainer comes into play. A great trainer will be able to watch the horse in training over a couple days or week (before you try to buy the horse), and can see what the horse looks like day in and day out. Does it look healthy, does it look comfortable and have a loose stride, how is the current trainer treating the horse, etc. Also, a great trainer knows a lot of people and can get "inside" information. We've passed on a couple horses when our trainer has found out (from talking to jockey and other trainers) that there were underlying medical conditions that would make the horse less impressive than he appeared.

But, there's also a good bit of luck involved. My partner once had a horse that he purchased, and the horse had an underlying heart condition and died before my partner could ever run him. Did the previous owner/trainer know about it? We'll never know. (In my opinion, it would be absolutely horrendous for an owner to race a horse that was sick, but there are a lot of unscrupulous owners out there.) Long story short, my partner was out $40,000 on that horse...and worse yet, had to make the decision to put the horse down because he was suffering and wasn't gong to recover... :(

I'm not sure I would go out on my own right now, but I think it would be fun to maybe partner up on one. Any advice on how to find a trainer?
If you know any horse owners at that track, ask them for an introduction. Trust me, trainers will be thrilled to talk to you -- they are in the business of sales as much as they are in the business of training horses, and are always happy to talk to potential "customers."

If you don't know any owners, hang out at the paddock (this is where the horses walk around before each race and prepare for the race). The trainers will often be at the paddock with their horses before a race, and you'll start to recognize some faces. Wait until those trainers aren't in the middle of a race, and then just introduce yourself. Ask if you can take them out for coffee and ask some questions about how the process works.

Also, trainers often have owner that are looking for partners. You may be able to find an owner who is happy to sell you 5-10% of a horse (you have to be a licensed owner if you own more than 5% in most states), and let you get your feet wet for a small amount of money.

We bought a few horses this past week at auction, and wanted to buy an expensive one that we liked -- but my partner and I didn't want to spend that much cash. So, we asked the trainer if he knew anyone who might be interested. Turns out the trainer himself was happy to buy 10% and knew someone else who was looking to invest as well. So, we did a 4-way partnership on that one.
 
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InspireHD

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Great information @JScott .

I was actually trying to start up a conversation with that guy whose horse won, but he seemed a little disinterested in talking. He had another horse entered in the upcoming race and I think he was just more focused on that at the moment. I was considering going again and just keeping my eye open for people who were hanging around looking like they were owners and casually starting a conversation.

When you say buying 10%, are you talking like someone putting in 10% of the claim amount? Say, it's a $7,500 claiming race, they would just put in $750? Are they also paying 10% of the maintenance costs too? Does their name get put in as an owner too and it's generally known that you can just own part of a horse? Or are their regulations around it?
 
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I was actually trying to start up a conversation with that guy whose horse won, but he seemed a little disinterested in talking. He had another horse entered in the upcoming race and I think he was just more focused on that at the moment. I was considering going again and just keeping my eye open for people who were hanging around looking like they were owners and casually starting a conversation.
Hang out near the paddock. The only people allowed in the paddock are the trainers and owners (for the most part), so if someone is in the paddock, they are probably good to talk to.

When you say buying 10%, are you talking like someone putting in 10% of the claim amount? Say, it's a $7,500 claiming race, they would just put in $750? Are they also paying 10% of the maintenance costs too? Does their name get put in as an owner too and it's generally known that you can just own part of a horse? Or are their regulations around it?
There are lots of ways to do partnerships, but yes, with us, the 10% was 10% of the purchase money (most of our horses are bought at auction, not claiming). And yes, you're generally responsible for 10% of the monthly costs as well. Though hopefully the horse is winning, and the winnings cover the monthly costs. :)

As for getting listed as an owner, that depends on the partnership. For several horses, my partner and I are both listed. But, I actually prefer for just him to be listed as the owner. That way, when we race in a new state, only one of us has to get licensed. For example, the licensing in NY is really stringent (interview along with background check). If we race in New York (we haven't yet), if the horse is listed in both our names, we both need to go up there, fill out the form, sit for the interview, etc. If he's just listed as the owner, only he has to do it.
 

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