Syndication - what are the realistic costs and returns for buyer?

[Tiramit]

Realistically, what should one expect as a member of a race horse syndication? Aside from buy-in costs (obviously varied), what are the expected expenses for, say, a 25% stake in a decent racer in a good stable? To be more specific, say a derby-bound 3 year old in a BNT’s barn?

And what are the most common returns? Backside passes? Entry into the winner’s circle? Have the trophy visit for 4 months of the year? :winkgrin:

I’m really very interested in this process. Perhaps one day I’ll own 25% of a race horse…

[LaurieB]

The answer, as I’m sure you can imagine, varies.

If you go to www.bloodhorse.com and look in the column on the right hand side, about 3/4 of the way down the page, there are links to about 20 racing partnerships. If you browse around their websites, you can probably find at least some of the information you’re seeking.

[DickHertz]

Don’t get into one with any adminstrative fees. There are plenty of good ones w/out markup fees.

I will say that most of my clients were in a syndication at one point then just went out on their own. They said it was fun initially, but the luster wore off because they didn’t really feel like they owned the horse. I did have one owner who got to a Derby, but even he said it just wasn’t the same as being a majority owner (he owned 13% of a horse than ran 3rd in the Derby).

I guess it’s a good thing for first-time owners, though.

[Glimmerglass]

Are you looking for fun or to actually eek out some money?

My neighbor owns a piece of Pretty In Mink under the Dare to Dream Stable LLC based largely at Arlington Park. They however ship horses all over. While I’m not privy to exact numbers I’ll say this - he bought a single digit percentage stake in her for what was likely around $1k per each 1% increment.

She has achieved the following since he bought in prior to her first start:

Lifetime 10 starts 3-0-2 and earnings of about $38,382. She’s won at Hawthorne - on her first try; won at Arlington Park on Memorial Day; and just won her last start on Friday shipping to PA for a 1-mile claiming race and purse of $16,335 at Presque Isle Downs.

As you can see she’s not exactly making anyone rich but are the owners having fun? Yep. Have they gotten into the winner’s circle? Indeed. Did she cost an arm and a leg to get into the action? No.

Accordingly you don’t have to be a distant heir to the Vanderbilt family to get into a partnership which is part of the fun. Plus even if your share is about the equivalent percentage of one ear, half the tail, and maybe a hoof - you still can say you own a race horse and have friends come out to root him/her on.

The luck of my neighbor is such that he wagered $100 to win on her first time out just for fun. She won at odds well above 10-1 and he is in the winner’s circle photo He really bought this tiny piece just for fun and an outlet - he’s a principal in a lawfirm otherwise - so he doesn’t get into the heated debates of who was better Dr Fager or Damascus types of racing discussions.

[miss_critic]

What kind of expenses does she pay with that kind of ownership? I think that is what the OP is really asking. I’m curious too.

[Tiramit]

Glimmer, your neighbor’s situation is what I would expect at first. Fun at the track! However, we all know that the cost of the horse is usually the least of an owner’s worries. Coming from a hunter jumper background, I can comfortably tell someone what to expect expense-wise at various levels. However, guessing at racing expenses leaves me dumb. Now take that guess and make it a %…? :lol: Just call me clueless.

Miss Critic is correct in that I’m curious about the cost of ownership / maintenance. Maybe my question should be how much roughly would it cost to maintain a top racer per month in a top barn? And would a typically syndication expect each member to pay his or her % of the expenses each month? I can ratchet it back from there.

I’d love to someday own a string of horses. Until my lotto numbers match up, however, perhaps I could purchase a portion of a horse instead (I think I’d like the nose instead of the tail - it crosses the line first). Now off to check out Bloodhorse.

[Glimmerglass]

[QUOTE=miss_critic;3276601]
What kind of expenses does she pay with that kind of ownership? I think that is what the OP is really asking. I’m curious too.[/QUOTE]

I dropped my neighbor a note and we’ll see how forthcoming he wants to be. I certainly don’t want intrude into the details too much.

Regarding expenses I’m quite certain the amount you pay per month at a H/J barn (I board at an eventing barn) is FAR more then you’d ever pay for a race horse in training. [To be clear I’m talking about feed and board - not training, shipping, exercise riders, etc]

WhatI suppose most people want to know is: should a horse hit a cold streak or otherwise there isn’t purse money being won, then how much has to get kicked into the partnership.

[Pat_Ness]

Our horses are not top race horses, of course we are hoping they are good race horses, so I am not sure if my information would help you or not.

My husband and I are partial owners in 3 different horses at Canterbury Park. 75% for one, 50% for another and 30% for the third. Would you be interested in the costs for something like this?

If so, I would be happy to share the information…

Pat Ness

[Tiramit]

Glimmer, it’s the extra expenses that scare me! :winkgrin: Yes, how much would the owners have to cough up if the horse can not pay for himself?

Absolutely Pat! I’m certainly not at the level yet where I could buy into a top horse, more it was a worst case scenario for expenses IF the horse turned out to be a good one. Realistic numbers are most welcome!

[Evalee_Hunter]

If you are involved in a partnership (anything - race horses, real estate, etc.) how much money you have to put in depends on what kind of partner you are (limited or general) & the partnership agreement.

Usually, a LIMITED partner makes a one-time buy in & that is that. No further contributions (unless the limited partner wants to increase their interest in the partnership). A limited partner usually has nothing to say about what happens with the subject of the partnership - in this case, trainer, races, etc.

Usually, a GENERAL partner has a larger financial responsibility. If more money is needed, there is a call for capital & the general partners have to put up the capital. Again, most general partners are going to have no say in what happens with the subject of the partnership.

Then there are managing partners who do have say in the care & control of the subject horse.

All this could be modified by the partnership agreement. There is really no “normal” or “average” here. You might buy in for a few hundred or a few hundred thousand depending on the size of your share & the fame of the horse or horses involved. You might never contribute another penny. Or you might buy in & have to contribute every month.

You will get a “K-1” every year showing gains & losses, even maybe interest if the partnership cash is kept in a savings account. The K-1 will tell you what states you need to file tax returns in (usually, every state the horse raced in). The K-1 will tell you the respective gains & losses to report federally & in each state. Often, being in a partnership changes your tax return from something relatively simple to something that requires a CPA each year, so you need to factor that into your thinking. If you need to file returns in half a dozen states (quite common), your tax return might cost many thousands of dollars to prepare.

[LaurieB]

Tiramit, it costs us roughly $75,000 per year per horse. That covers everything from insurance and training, to vet and blacksmith, entry and nomination fees, and transportation. It assumes no surgery or off-the-chart vet bills. And of course, we don’t pay any commission or administration fees, because we do that part ourselves. I hope that helps.

[Pat_Ness]

The trainer fee for our current trainer is $50.00 per day per horse. So that is $1500.00 for 30 days. This includes paddock fees for the races, exercise riders, swimming, centurion magnetic pulse blanket use and hot walking. The only extra fee is for additives. One filly gets U7 for an extra $2.00 fee a day. The other filly gets an ulcer med… that is about $300.00 a month (we pay vet directly). We have our gelding on Adequan and Recovery. That is about it for vet bills, except the pre race lasix and bute which we pay the vet directly and we had the choice of putting them on the additives. Also, we pay farrier.

We pay the pony to the paddock for $20.00. The jockey fee comes out of the race winnings as CBY pays through all places (even if it is only $50.00).

If things go good during the race, we would get 60% of the purse for a win. Last August our 75% filly won her MSW so we received $9000.00 of the $15000.00 purse. The jockey got 10%, the trainer got 10% and I believe that we would give the grooms a percent too if it happens this year. Last year was a bit of a different deal…

Racing at CBY goes through Labor day. We had our first race on 5/31 and our filly improved so that was good. (We had a recent trainer change the 24th of April). This week we have the NW2 filly entered back in for a $7500 claimer with a $7000 purse. I do NOT like claiming races, but our hope is this filly can get her confidence back and we can move her up. We also have our maiden MN bred 4 yr. filly in a MSW race on Thursday night. This is a nice purse for MN Breds with the total purse being 19725.00 and the winners share would be 60% of that. We are hoping for a race better then her last in February which means we would like to have her pace or speed # increase (of course 1,2,3 or 4th would be great!) Also, our gelding may get in a race for Saturday - so maybe there will be some money and safe horse coming in soon… Hope I did not disturb any racing luck…

During their layoff, between my friends and I we have the ability to lay them up so that would help in non race times.

Any other questions?

[Linny]

I interviewed a partner in Derby runner up Captain Bodgit and he said that before the sale of the colt to a breeding interest, he “about broke even.” That colt was second in the KY DERBY.

[Tiramit]

Very good points, Evalee. Especially regarding having to file in multiple states! :eek:

Wonderful information Laurie and Pat (Linny, yours was a bit sobering ). You definitely gave me the a good idea of what’s involved. Pat, if you don’t mind my asking a bit more…

What provisions do you have in your contracts for major injuries or career-ending events? If the expenses of an injury go above and beyond insurance coverage, do you split the cost by percentage? What happens if it’s a questionable outcome - does the major shareholder / managing partner make a decision (euthanasia, retirement) or do you have to seek out a 2nd / 3rd opinion?

Is shipping built in to your trainers’ fees or is that above and beyond? What about care goods such as blankets, wraps, etc? Is that the trainer or you?

Who takes control of the horse if retirement is the decision and do you have breeding language built into your contract (as in the case of your fillies) or must you sell once it is past racing state? Does the agreement extend to foals or terminate with the first horse?

Thank you for indulging me!

[Laurierace]

The only insurance available for a race horse is mortality. There is no health insurance or major medical. Without insurance the sky is the limit as far as how high the medical costs can go.

[Tiramit]

Really? Wow, that certainly changes the picture! :eek: I’m used to the h/j major medical policies.

[Pat_Ness]

My husband and I are majority owner for 2 and equal owner on 1. These are all with family and or friends so that helps - most of the time.

We pay for shipping and always choose box stall shipping which has been from FL to MN and back. That has run from 1300 to 1700 per trip. Local trips I ship my own horses.

We do not carry mortality insurance, but we did get liability insurance and as stated, no major medical available. We have all agreed that whatever can be done to save the horse will be done as long as they are at minimum pasture sound. We are not interested in breeding these horses.

I will be buying back one of them and according to the contract - we will have a horse insurer give us a fair market value - basically that would be for a new career and not in racing or breeding.

My friend is planning on buying another of the fillies as a performance horse and our partner for the gelding is planning on taking him.

Our hope is they run well enough and enjoy it for a few years. We have made a few mistakes, but at least not at the expense of our horses, but more the finances.

Our trainer has the blankets, wraps and all equipment except our name plate halters. Some of the other trainers have not had these things and I have used my own.

This contract was written by my sister and approved by the rest of the group for the horse that we own 30%, but it’s goal was to build in a safety net for our horse.

For my husband and I, I believe we have put maybe $30,000.00 into this since we started with one 2 years ago. That does not include purchase price. We have made about $8000.00. Not a real good return, but I LOVE going on the backside and I have found a trainer that let’s me help out handwalking. With our first filly there was a LOT of vet expenses due to huge toe grabs on her hinds - thank you very much. I was new and hated them but kept telling myself to trust the trainer. I digress…

We are not wealthy people, we love horses and I work an 8 to 5 job, but for now, this is an interesting new horse aspect and possibly we might break even! Something that is not possible for the little bit of showing I have done.
Pat

[Linny]

Each partnership has its own rules about expenses. Some cover expenses for X months with the buy-in. Some charge high mark ups but minimal expenses. Groups that use trainers with a solid reputation for “getting them ot the races” may not make you rich but if they are running you should be at least getting enough to cover expenses.

Be sure to read the rules very carefully and understand exactly what the partnership’s policies are regarding horses that are not making costs. Look into what options are available if your horse is severely hurt, dies or becomes unable to race. Some groups offer you options and deals on other stock they manage.

Find out what privileges come with your share. Can you get backstrech access, paddock passes, possibly seats for your home tracks “big days” of racing? Do they handle licensing for partners or are you on your own? Some of the big name groups have a client relations person who handles alot of the paperwork and details stuff for clients. They take good care of you but you will pay for it!

Check into who is training the horses. As in every horsey venture their are good horsemen and …well… those you wouldn’t want to support. If they have a good reputation with young stock, you will likely see your prospects racing sooner. If they are known for running “older horses on turf” don’t be standing by the mailbox waiting for a check right away!

I advise (as did Glimmerglass) clicking the links on the BloodHorse home page section on partnerships. Read up on how they are structured (I know, it’s kind of boring compared to looking at the photos of the new young stock they have to sell you!) and try to figure out how the “Partnership” makes money. That will tell you much of what you need to know!

[Pat_Ness]

About licensing. I have a license from Canterbury, Fonner, Tampa Bay Downs and Remington Park. We have all done this on our own with minimal help from the trainer. It has been quite fun to meet and learn this aspect as well.

Having a horse through our own little group has been a lot of fun. My Mom, brother, two sisters and a friend are together with one horse. All of us got our Tampa Bay Downs owners license and all thought it was a hoot! We did not have to go down there of course, but when I did I also got my picture license and I was able to go to the backside and able to paddock my horses a few times as well with the owners license.

It is probably an expensive venture, but it is a great learning experience and I get up at 4:30 at least 4 times a week to go down and watch training and help out hand walking.

[Tiramit]

Pat, if and when I move ahead with this idea, I hope to land in a situation as friendly as yours. It sounds like you’re having fun and having the chance to work with your horse would be a dream.

I’m going to print this thread off and keep it for the future WHEN I purchase a share in a race horse. Thank you!