CALLING ALL NEW OWNERS
BY DAN MASON, HRRN
From time to time, I’m asked how do you get into the horse business? I too asked that question many years ago. This is the second of a five part series that might help some HRRN fans who were contemplating jumping into the business. In this series, I will cover 15 guidelines that have shaped my experiences over three decades.
GUIDELINE 4: PARTNERS OF GO IT ALONE? I’ve done it both ways. One good avenue if you are looking for something in the middle is to do a 50/50 partnership with your existing trainer. That’s a pretty simple way to start. You pay 50% less and spread the risk while you learn the business. That’s the first way. The second way is to form a partnership with a few “trusting and good” friends deferring to your trainer on the big decisions on where to run and when to run. I can tell you this. There is no better feeling than standing in the winner’s circle with a large group of your partners and their families enjoying a win. You feel a great sense of fellowship knowing that you are part of something bigger. It’s a wonderful time and a pinnacle type “peak” in the story book of the peaks and valleys of being an owner in horse racing. Of course you can always go it alone and that might fit some personalities best and that’s fine as long as you defer to your new trainer that you have just hired to advise you and protect your investment. I must tell you though this is not my favorite course of action. It can be a little risky, costly and a lot of pressure for a new owner. Why not spread the risk a little in the beginning if possible, or at least until you learn the business.
GUIDELINE 5: HOW MUCH DOES IT COST? You pay your trainer for each horse what is called a “day rate”. That covers your horse’s feed, care and exercise by your trainer and his/her staff. It doesn’t cover veterinary costs, farriers or other small items like vitamins and immunizations that your horse may need. As far as the vet, you generally get billed for that separately. Day rates vary by what part of the country you live in and what track your horse might be located at. My day rate is $75 per horse. That’s only for the basics. I race at Laurel-Pimlico so that is pretty much the rate here for the top trainers in Maryland based at the race track. Charles Town is less because the purses are less. New York and California are more because the purse structure is more than Maryland. In addition to the day rate, your trainer will most likely get 10 percent of all of the purses won by your horse…and don’t forget the jockey gets 10% too. So, at least in Maryland, you should plan on spending on each horse a minimum of $2500 per month if you go it alone. Holy horse you ask, what does it take for one to be profitable? I’ve run that number one thousand times in my head and here’s what I came up with. It takes an average of one start per month minimum with a finish no worse than third. That’s why it is so important that you allow your trainer to manage your horse properly. You run him/her here they belong and be careful not to run them over their head. All you do by that is deprive yourself of a purse paycheck, fill the race for someone else to win and put your horse in a race he/she cannot win. That is not the way to run the railroad! On first glance you might think the day rate is too high! With workman’s comp, labor and the cost of hay and straw going up all the time..it isn’t. The truth is that your trainer only breaks even on a day rate. Unless he/she is getting bonus money from the purses, it isn’t a winning proposition for them. No good trainer ever lived off a day rate that I know of. And if they don’t win, you will take your horse to someone who can.
GUIDELINE 6: WHAT ABOUT THE IRS Oh yes, our friend from the IRS. Take it from one that has been audited not once but twice. IT AIN’T FUN!! However, if you follow the rules and do what you are supposed to do, it won’t be an issue. The IRS issues guidelines on horseracing. Remember you cannot look at this as a hobby because losses from a hobby are not tax deductible. You can get the official wording from your accountant but in layman’s terms from my account Bruce Mogol in Timonium, Maryland, quoting Bruce now says, “an activity involving breeding, training, showing, or racing of horses is presumed not to be a hobby if profits result in two out of seven consecutive years.” There are other tests the IRS applies but I will give you a few more that I’ve never forgotten as I’ve sat in my beige metal chair across from “Ian” the IRS Agent. The IRS expects you to be involved in your business. Now that doesn’t mean you are telling your trainer what to do 24-7. It does mean you attending seminars on horse ownership and showing proof that you are an eager student of the business so that you can to grow to a respectable level. Another one was record keeping! If you are audited, you look so much smarter having an impeccable set of records rather than making poor Ian sift through a brown shopping bag of receipts. You will get points for great record keeping. On a humorous note, my favorite one was, and I’m paraphrasing here: Can you prove that you are competent in anything or any other business? Talk about a blow to the self-esteem. I guess what they are saying is that you have to be a responsible business citizen. It would have been nice if they’d phrased it better. At the end of my two audits, I am happy to report that I had NO CHANGE orders on both! I felt like I had just won some lifetime achievement award. I kept that letter for years and long past the 3 years you are supposed to keep things around.
In PART 3 we will look at these guidelines:
GUIDELINE 7: LET YOUR TRAINER DO THE JOB!
GUIDELINE 8: DEALING WITH INJURIES. DON’T SHOOT THE MESSINGER!
GUIDELINE 9: MY HORSE JUST GOT CLAIMED!