Buying a Successful Race Horse

What is a successful race horse? Let’s try to define that a little better.

One owner wrote an interesting letter to the TDN. He stated that in the US, total overall purses are about $1 billion dollars a year, and he estimated that the total costs of training all thoroughbred horses was about $2 billion dollars per year. He stated that he bought 5 horses a year at sales, and bred another 5 mares to race each year for over 20 years. He reports he has lost money almost every year, or maybe broken even when he has sold his good mares after racing them.

There is plenty of room for error in the cost estimate, but at a minimum it is 98% likely that total costs are at least $1.5 billion. Given there are a few horses that earn $1 million+ in a year, the results for the median horse are not encouraging.

It would be nice if the partnership operators released an annual return percentage, but none that I have talked to is willing to disclose that number. They are all honest and tell you not to expect a positive return, but the extent of the expected loss is still a mystery.

All this tells me is:

Any race horse that breaks even is a successful horse.

How do you buy a break even horse?

Let’s consider all the possibilities:

1. You can buy a horse at a yearling sale, and incur the costs and risks of breaking the horse, and preparing it to race
2. You can buy a horse at a 2-year old in training sale and get it to the races in 2-6 months
3. You can claim a horse out of a claiming race
4. You can buy horses privately
5. You can buy a mare and breed her yourself
6. You can buy a partnership that owns one horse (either yearling, 2-year old, or claim)
7. You can buy a partnership that owns a group of horses (from as few as 2 to as many as 12)
8. you can start your own partnership and raise money from investors

Each strategy has its pros and cons. Let’s briefly summarize what I have learned so far.

1. the 2-year old in training sales are the most straight forward strategy because you can see the results fairly quickly, but maybe these horses are being asked to do “too much, too soon”
2. the yearling sales allow for more patience, but there is a higher risk of buying a horse that will never race
3. the claiming game is very competitive, watching Zilla has been interesting
4. private sales and breeding are complicated
5. each partnership deal is unique and there are a confusing number of structures and the price points vary from $150 to $150,000