Smart investors invest in thoroughbreds the same way venture capitalists invest in startups.
That's according to Barry Irwin, the owner of Team Valor International, the renowned breeder and trainer of thoroughbred racehorses that won the Kentucky Derby with Animal Kingdom in 2011.
Headquartered in Versailles, Kentucky, in the heart of what is known as the Bluegrass Region, Team Valor International forms partnerships for racing and breeding. Team Valor International's horses are racing or breeding in several different continents and several different countries around the world.
While you might think an investor is buying a horse, Barry explains that the investor is actually working with a limited liability corporation (LLC) which owns the horse.
Each horse that Team Valor International buys and offers for syndication is in a separate limited liability company. It has its own LLC agreement, it's own bank account, it's own meetings. Everything is separate, Barry says.
"To keep a horse in training in this day and age," Barry says, "it costs about $60,000. That money generally goes to the trainer. The trainer will charge you a daily rate and then on top of that daily rate, he will add special things in like vitamins, supplements, maybe some special tools or modalities he uses around the barn to keep your horse in good shape. And then you have to pay a blacksmith about $110 or $20 to shoe your horse once a month.
"You pay your vet for any kind of treatments the horse needs or any kind of medication it might require. You also have to pay to put your horse on a truck or a van and move it from one place to another in order to race or to move to the next race so by the time you add everything up, it costs about $60,000 a year to have a horse in training."
In today's episode of the Capital Gains podcast, Barry talks about racehorse ownership and how investors can make and lose big money investing in thoroughbreds. One thing's clear from this interview: investing in racehorses isn't child's play.
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