The Economics of Racing Partnerships

The yearly cost to properly care for and race a Thoroughbred horse is substantial. In addition to the standard feed, stable and veterinary bills, there are also significant training expenses, entry fees, farriers, insurance, and transportation costs.

Karakorum offers Thoroughbred racing partnerships for every level of interest. Your partnership in the Karakorum Racing Team allows you to share the costs of Thoroughbred ownership while enjoying all the benefits. Following is a brief overview of where your money goes and why it costs so much to own a Thoroughbred horse.

Determining a Thoroughbred’s Value

A Thoroughbred’s value is determined by its ability to perform in important races (most of which are run at distances from five-eighths to one and one-half miles) and its expected ability to produce other Thoroughbreds that will be successful in these races.

Experts in the Thoroughbred industry evaluate unraced yearlings and Thoroughbred bloodstock based primarily on pedigree and conformation. A Thoroughbred’s pedigree includes the horse’s genealogy, as well as the winnings and placings in stakes races, plus total purses won by members of the horse’s family.

Moreover, a Thoroughbred with good conformation – an athletic-looking appearance and generally proportionate features (in addition to excellent pedigree) – often tends to bring the highest price at auction. However, competitive bidding between determined prospective owners also has an affect on value – resulting in significant variations in price among relatively similar Thoroughbreds.

Estimated Operating Expenses

Your initial purchase of a Karakorum Thoroughbred partnership covers the cost of a yearling (or, sometimes, 2 year-old). Ongoing operational expenses are automatically billed to your credit card. Partners can purchase as little as ½%, which is 1 share of a 200-share limited partnership, of ¼ unit, which is 2 ½% of a 10-unit co-ownership partnership. A single partner can own up to25% of any horse.

Monthly Maintenance and Training Costs

The approximate monthly costs for a 2 year-old horse in training at NYRA break down as follows:

• Trainer – $85 a day (called the “day rate”), approximately $2,550 a month. This covers salaries for stable employees, worker’s comp, the trainer’s fee, and other professional costs. Trainers’ day rates vary.
• Vet – $300 a month
• Blacksmith – $200 a month
• Stable Supplies – $100 a month
• Vanning – $200 a month
• Medication – $400 a month
• Schooling, stable bonuses, and other miscellaneous costs – $80 a month
• Partners are billed for their pro rata share of their horses’ expense.

The average annual cost for a Thoroughbred horse in training will be between $45,000 and $50,000 to cover all training and maintenance, plus whatever special costs arise – emergency vet care, long distance vanning, and stakes fees, to name a few. Costs will differ slightly depending on where the horse is trained. Note that most horses do not spend the entire year in training; during lay-up periods, costs per day are somewhat lower. All in all, you can realistically assume that an actively training Thoroughbred horse will cost approximately $50,000 per year to support.

The above estimates are for a juvenile (2 year-old); expenses for an older racehorse will be slightly higher, though of course as the horse should be racing by then, it could earn purse monies to offset part of those expenses. Remember, though, that the average (that’s the median – half earn more, half less) racehorse earns about $16,000 per year in purse money. Additionally, costs could change substantially depending on the location the horse must be shipped to race competitively, the health of the horse, and other factors out of Karakorum’s control.

Additional Thoroughbred Expenses

If the horse wins a purse in a race, the owner generally pays additional expenses out of those purse earnings. These expenses include:

• Jockey Fees – these fees range according to the finish and usually are 10% of the purse for first; 5% of the purse for second and third; $90 for an unplaced mount.
• Trainer’s Commission – 10% of all money earned by the horse (in addition to the daily rate).
• Horseman’s Group (NYTHA) – 1% of the purse earned.
• Backstretch Pension –1% of the purse earned
• Jockey Injury Fund –.7% of the purse earned
• Backstretch Insurance and Jockey Club fee -- $15 per race
• Barn Commission – a gratuity to the help at the barn, usually 2% of the purse.
• Additional Fees – such as nomination expenses and entry fees.

Given these significant expenses, it’s easy to see how even a good racehorse can face an uphill battle just to cover its costs. Thoroughbred racing’s biggest owners usually operate at a loss – and, of course, they can afford it.

For the rest of us, rather than having an expectation of making a profit through a partnership such as Karakorum, you can enjoy the opportunity to be an insider – and be on equal footing with the stars in a sport that you love!

Tax Implications

In an ever-changing tax environment, understanding the many tax implications of a racing partnership can be a challenge. Karakorum suggests that our partners consult with their certified public accountants (CPAs) or other qualified financial professionals regarding their tax situation.

The Thoroughbred Owners' and Breeders' Association (TOBA) provides a general overview of the sport’s tax issues