A Sure Thing for Racehorse Owners: Loose Purse Strings

It’s the dream of every thoroughbred owner.

Newport Beach resident Bob Lewis bought a pretty little filly named Serena’s Song for $150,000 in the early 1990s. She turned out to be a winner -- a big winner. Between purses and the sales price of her many foals, Serena has generated $14 million in income, almost 100 times her purchase price. Lewis, who now owns more than four dozen horses including Kentucky Derby winners Silver Charm and Charismatic, ranks as one of the racing industry’s biggest moneymakers.

Owen Blicksilver, a New York public relations executive, has a less impressive tale. Of the nine racehorses he owned over two decades, he had just one winner -- his first horse.

“I would think that every one after that was a fluke. The next one was going to win,” he said.

Blicksilver poured $10,000 to $20,000 a year into stabling and feeding his “investments” before he decided to call it quits.

“I still go to the track now and again, but I no longer get the free parking,” he said. “It certainly was a fun endeavor, but it can be expensive if you don’t get into the winner’s circle.”

Such are the disparate tales of individuals who opt to invest in thoroughbreds, which is increasingly being touted by thoroughbred owners’ associations across the country. Owners who win receive a big payoff -- first place generally secures the owner 60% of the prize money (with diminishing returns for the runners-up) -- and they can often breed their steeds for additional cash long after the horse stops racing.

But, as any owner will acknowledge, horse ownership isn’t for everyone. It usually requires a fairly substantial cash outlay to get started, and there are continuing monthly expenses. After all, this investment is an animal, and animals have to eat.

But there’s no guarantee that the horse will be able to race or win -- and both are required to recover the investor’s costs.

“It’s been my experience that win, lose or draw, it costs $50,000 a year to keep a horse at the racetrack,” Lewis said. “On the other hand, if you happen to be fortunate enough to have a very athletic horse, a horse we like to call a winner, you’ll get some of your costs back.”

In other words, this is a speculative investment for people with substantial means. Don’t bet on horses to put the kids through college or fund your retirement plan. But those who have some money to play with and enjoy horses may find it enjoyable, and if they’re lucky, financially rewarding.

There are ways to keep the cost of both purchasing the horse and stabling it more reasonable, noted Jack Disney, assistant director of publicity at Hollywood Park, who has owned several horses of his own.

Disney and two friends recently bought a steed for $3,200 at a Los Alamitos claiming race -- one in which the horses can be purchased for a set price before they run. He looked there, he added, because it was where lower-value races are run and lower-cost horses are sold. Moreover, the costs of training and upkeep at Los Alamitos are about half what they are at more prestigious tracks, such as Santa Anita and Hollywood Park, he said.

That keeps his partnership’s outlay for feed, tack and the horse’s trainer to about $1,500 a month, or $500 per partner. So far, the horse has run second and third in a few races, so Disney’s partnership is breaking even. By the same token, there’s little chance that his horse will become a huge moneymaker like Serena’s Song.

“If he wins a race, which we’re hoping for, we would be in the black, and we’re having a lot of fun,” he added. “It’s my experience that you get the same thrill from having a picture in the winner’s circle no matter whether you’re at Los Alamitos or Churchill Downs.”

Lucinda Mandella, owners liaison with Thoroughbred Owners of California, said that when prospective owners ask her about the costs, she emphasizes that the initial cost of a horse, which can be a few thousand dollars to several million, is just a start. The average cost to keep a horse in food, tack and training is $2,500 a month. If the horse gets injured or sick, vet bills can add up too, and injured horses can’t race, so the costs will ring up with no income to offset it.

“Know what you can afford and what your limits are,” Serena’s Song owner Lewis said. “Don’t be caught up in the emotional thrills of owning a horse. This is a numbers game. It can certainly be exciting, but the thrills can turn to gloom very quickly.”

Lewis said it took him about four years to break even on his equine investments. Investors need other sources of income to have the staying power that’s necessary in this game, he said.

That doesn’t mean that all thoroughbred investors need to be rich, experts say. But smaller investors generally need to find partners. The best option for that, Disney says, is friends and relatives. But some trainers set up partnerships too. Still, Mandella, of the thoroughbred owners group, cautioned that it’s important to do plenty of research before putting money into a syndicate or partnership. As in most industries, there are some bad apples -- and some poor pickers of horses. Investing with either is a sure ticket to loss.

“I can’t tell you how many people come in here and tell me horror stories,” she said.

Mandella believes that prospective owners should do about a year of research before buying. The good news: A substantial part of that research involves doing nothing more than hanging out at the track. Go to the early morning workouts at Santa Anita and talk to the owners, trainers and jockeys to start learning more about what makes a winner, she suggested.

In addition, owners’ associations often offer free seminars on thoroughbred ownership. Mandella says she holds seven to 10 free workshops in Southern California each year, including one called “Introduction to Race Horse Ownership,” which covers topics such as what horses cost to buy and maintain and how to find a trainer. The workshop schedule can be found at the thoroughbred owners group website at www.toconline.com.

In addition, anyone interested in investing in horses can usually find a wealth of information at the nearest track -- or at the various racetrack websites, she said.

“If I can emphasize anything, it would be the educational process,” Mandella said. “If you take the time to investigate everything you can before making the investment, you will have a lot more fun.”

Kathy M. Kristof, author of “Investing 101” and “Taming the Tuition Tiger,” welcomes your comments and suggestions but regrets that she cannot respond individually to letters or phone calls. Write to Personal Finance, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail kathy.kristof @latimes.com. For past columns, visit latimes.com/kristof.