If you want to invest in a racehorse

Thinking of buying into the racehorse market? Here's some information to keep in mind:

Jean Chatzky
Photograph: iStock

“You have to really love racing,” says Adam Wachtel, owner of Wachtel Stable in Briarcliff Manor, New York, “because it’s very risky. And the reason it’s risky is that horses get hurt. I bought a horse with a partner for $225,000. She had had three tremendous races in a row before we bought her, and in her first race for us, she got hurt and never ran again. It’s devastating—and it happens all the time.”

In racehorses, as in stocks, diversification is key. Because of the risk of injuries, you’re better off buying smaller pieces of many horses than owning all of a single horse. But even if you don’t want partners, you should not put all your eggs in one basket, said Wachtel. Beginning investors typically buy those smaller pieces through a syndicate, like West Point Thoroughbreds or Team Valor. (Find leads on sites like thoroughbredtimes.com, bloodhorse.com and teamvalor.com.)

The age of the horse can be a factor. You can buy yearlings at auction, or buy those that are already racing. Wachtel prefers the latter. “If you buy babies and they’ve never had a workout, I’d say the odds are 1 in 10 that you end up doing well and the horse is profitable. If you’re buying a horse with a track record, your odds improve dramatically.”

You can step into the racehorse market for as little as $500 for an unproven horse at auction or you could pay up to seven figures for horses that have been syndicated, which means you buy a share in a well-pedigreed horse, says Wachtel. Buying a horse yourself means high expenses—trainers, vet bills, board. The rule of thumb in New York State, where Wachtel lives, is an additional $3,000 a month, or even more if the horse has high vet bills or has a famous trainer, but other parts of the country can cost half that amount.

Depending on the market, horses have to earn a lot just to break even. In smaller markets, they must earn at least $25,000, while in larger markets such as New York, southern California or Kentucky, they need to earn upwards of $55,000 to break even. Of course, if you have a winner, or a horse that’s related to a winner, breeding rights might pay off: Find yourself owning a piece of a Kentucky Derby winner and you could be looking at stud fees of at least $50,000 to $75,000 a pop—more than 100 times a year.


For the rest of the story, click here and check out the September issue of MORE.

First Published August 16, 2011

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