With the rise in the popularity of horse racing, many people have started to consider investing in a racehorse, but is it a good idea?
Well, the large prize purses might sound really attractive to you, but there are a lot of things to consider before making a purchase. First of all, horse racing is an expensive and financially risky investment.
Even though you can make money owning a racehorse, it won’t happen overnight. It requires a lot of patience, knowledge of the industry, as well as luck in order to make some profits.
With that said, we are going to highlight some of the things you should consider before investing in a racehorse.
How Can a Racehorse Owner Make Money?
The most obvious way that a horse can earn money is by winning races. However, that’s not the only way you can take some profits. Horse owners can also make money from:
- Selling the horse
- Support services
The biggest income that a racehorse can have is through the purse money on winning races. Each race has a certain amount of money dedicated to the winner called the purse. The amount of money that can be won depends on the grade level of the competition and the popularity of the event.
Depending on the race, the purse can be paid to the finishers of the race. Some racing jurisdictions pay to all horses that enter the competition, while others dedicate the prize purse only to the top six.
On average, the winner of the race takes about 60% of the total purse, second place is 20%, and third place 10%.
However, the money from the purse doesn’t go straight to the owner’s pocket. In fact, many expenses come along the way, such as training fees, and jockeys that must be paid. In the end, there is usually very little profit that remains for the horse owner.
Another way that horse owners make money is through the breeding process. After racehorses complete their racing career, they are used for breeding, which is actually very profitable.
Even though there is a lot of money from winning races, the real earning potential might be as a stud. The highest-earning stud in the US is Tapit, and with a breeding process of 125 mares per year at a stud fee of $300,000 per horse, he earns over $35 million every year.
How Much Does it Cost to Own a Racehorse?
Another important factor to consider before purchasing a horse is the cost that you’ll have throughout your lifetime. If you thought that the cost of purchasing a horse is too steep, and the process ends there, wait until you hear the amount of money that is required for owning a horse.
The main expenses when owning a racehorse are the training fees. Generally speaking, each horse needs a trainer that will cover the basic care and upkeep of the horse. This process includes feeding them, boarding, transporting them, and training them on the track.
Depending on the trainer, the daily fee ranges from $60-$120 or $1,800-$3,600 in monthly expenses.
Medical Expenses and Insurance
Another significant cost for racehorse owners is the medical expenses in the process. Keeping your horse healthy at all times should be your top priority, and this means that you’ll need professional help from a skilled veterinarian to assist you.
If all things go well, and your horse doesn’t suffer from any injury, the average cost for your medical expenses should be around $500 per month.
When it comes to insurance, it is important to understand that you should expect to spend around 5% of your horse’s value on insurance. So, if you have a $50,000 horse, you can expect to pay around $2,500 per year for insurance.
Participating in horse races isn’t easy as it seems. Don’t expect to list your horse as one of the Kentucky Derby contenders all of a sudden. Even if your horse makes it through the qualifying process, you still have to pay entry fees. Depending on the level of the race, the cost of participating can skyrocket very fast.
Just to put it into perspective, the Kentucky Derby requires a nomination process where you have to pay $600 for the first few weeks. After that, the nomination jumps to a whopping $6,000 and this doesn’t include the entry fee. The entry fee for the actual race is an additional $25,000.
Owning a racehorse is a tough investment that requires a lot of dedication and understanding of the sport. There are a lot of expenses that come along the way, and the profits are not very big even though there is a lot of money in circulation.
If you want to invest in a racehorse, the first step is to learn more about the industry. That way, you’ll be able to turn your investment into profit and have fun along the way.