Is This a Good Diversification of Your Investment Portfolio?
Are you an investor who also loves horse racing? Have you ever wagered on a horse or several while visiting your local track?
Do you ever look down at the winner’s circle and think you’d like to be one of those getting your picture taken?
But then you immediately start thinking about the fact is you know nothing about horses and what’s involved in getting a horse prepared to run that race, you just love to watch them run. And yes, it’s nice to get your winnings after the race. But what about the winnings and an investor’s share of the horse because of the finish or the breeding after the horse is done competing?
You are a true investor when you look outside the box and consider racehorses as an investment. You invest in stocks and mutual funds already and don’t have all the insights and knowledge of those businesses or investments. But you consider the company, and the history of the returns, and you take a hunch that the stock will produce a good return.
So too can you invest in racehorses!
Yes, some individuals and corporations own racehorses and run them at such races as the Kentucky Derby. But those horses are rarely owned by one individual. They are most often owned by a group of investors who have pooled their money to get the chance to be in the winners’ circle.
Investing in a racehorse isn’t much different than investing in NASCAR, commercial buildings, multifamily properties, or any other syndication investment today. You can find private syndicators for all niches allowing you to diversify your investment portfolio. These investors pool their money to get a portion of the investment return but don’t have to worry about the daily operations of the investment because they leave that to the larger ownership interest or investment managers.
Horses can be a business not unlike other businesses with managers, employees, and supplies. Many have considered horse racing a rich man’s investment due to the cost. Not anymore, if you’re looking to diversify your portfolio and have always loved horse racing then it’s time to consider investing in a racehorse.
Buying A Racehorse
Individual investors can purchase a racehorse from an owner or at an auction. When your business is horseracing, you should have the knowledge and expertise to make a solid decision on a horse. The value of the horse will involve the bloodline, trainer, and wins. If you’re buying a foal or colt, you know that your cost will involve a trainer, transportation, track fees, and horse boarding facility and those are expensive.
Instead of buying an individual horse and encumbering all the costs associated with ownership yourself, consider buying a fraction of a racehorse. No, you cannot buy just the knee or hoof, you purchase a percentage of the horse’s ownership. The cost of buying a horse in this manner allows you to buy an interest in one or several horses if you choose.
When you’re buying fractional interest, the term is syndication. In syndication, you have an ownership group managing the investment taking a wage or salary, managing the horse, and providing essential information back to the investors. Like other investments when buying into syndication you could be purchasing shares in one horse, or you could be purchasing shares in a larger group of horses. Either way, you own a percentage of the horse, and you get that percentage of profits if the horse does well.
On the myracehorse.com website, you can purchase shares in seven different horses currently. Shares are typically 0.025 to 0.050 and the cost can vary for those shares. Horse information is provided including the trainer, age, sex, and if the horse is on a particular circuit.
Not only will you get the history of the horse you can also see the results from past races and more information on the investment and offerings.
Share price, total offering, and ownership are broken down so you can, as the investor, see where the money will be spent.
West Point Thoroughbreds is another viable horse investment option. The group provides detailed information on syndication ownership, and you can book an ownership consultation if you choose.
Is Racehorse Investing Profitable?
Horses are living animals and not unlike all living and breathing animals, things can happen.
Yes, if your horse does well and stays healthy you can make money in horseracing. As it has been termed, horseracing ownership is a lifestyle investment. While the horse is racing you have constant costs for the horse, trainers, managers, jockeys, etc. The winnings for smaller venues may cover the cost of the horse. But the prestige of being in the winner’s circle could be of more value in the end.
A horse that has had success through the years could have its greatest value as a breeding horse. With a good lineage and a horse having race success, the horse investment could be worth more after the races than before for breeding.
The truth is there are more horses than winner circles. Therefore, many investors don’t make much or any money on a horse.
Savvy investors understand that there is more to an investment than just making money. The cost of the horse passes down to you as an investor based on your shares. If you have losses in your horse investment but have gains in other investments, then a horse that doesn’t win may be a good investment.
As an investor in a horse through a syndication LLC, you will be provided a Form K-1 annually showing your investment and the expenses for your share in the horse. This document can be submitted to your CPA or accountant to complete your taxes for the prior year.
In the End!
In the end, you as an investor need to complete all the due diligence possible before making an investment decision. Whether your investment is a new apartment complex, gold or silver, or a horse make sure you are covering all your bases before and you know exactly what the expectation is in the end.
I’d consider an investment in a racehorse as a disposable income investment option. An investment, that if done well, you can have a significant return on your money. But also, you need to consider it’s a horse, and with that comes the potential to be a flop.
If you are looking for a stable investment option that hedges inflation, consider investing in gold through your IRA or as individual bars or coins. We have more information about the top 5 gold IRA companies and here is some more information about those companies.
Disclaimer: investing is a risk, you need to consider all those risks before making an investment decision. The information in this article is to help discover if investing in a racehorse is a good option for you. We do not guarantee any returns and are not liable for any decisions made based on this information.
Race Horse Ownership
As a co-owner in a syndication you can invest as little as a few hundred dollars for a fractional ownership to a few thousand dollars for personal ownership. If you purchase a horse that has a good lineage with wins, the cost may be in the millions of dollars range.
Yes, you could make money off your investment. A horse with good success and good bloodline would make more money on breeding after it is done racing than during its racing lifetime. However, most investments are deemed to be a loss.
Yes, with a Self-Directed IRA one could invest in a racehorse. As an alternative investment consult your lawyer, CPA, and other professionals.
According to the Oxford Dictionary a Syndication is "the transfer of something for control or management by a group of individuals or organizations". Thus, you have a managing group and investors based on percentages. Investors could have different levels of ownership.