That’s a lot. Median earnings for racehorses in 2001 were less than $6,000, according to Thoroughbred Times. A moderately successful horse might win $50,000 to $75,000 annually in a typical three-year racing career, which includes seven races a year. About 7 percent of all Thoroughbreds reached those earnings in 2001. Of the 35,000 Thoroughbreds born annually in the United States, 55 percent will never win a race, 97 percent will never win a stakes race (those with purses averaging $100,000), and 99.98 percent will never win a Grade 1 stakes race, such as the $4 million Breeder’s Cup Classic. The winner of a race usually gets 60 percent of the purse, with the remainder divided among the next four horses.

A Thoroughbred can cost anywhere from a few bucks to upward of $10 million, says Malcolm Commer, an equine economist at the University of Maryland. The nation’s most prestigious horse auctions are held at Keeneland Association in Lexington, Ky. At its September 2003 sale of yearlings, 2,969 horses sold for an average of $92,329 each. The highest price paid was $3.8 million, and 27 horses went for $1 million or more.
The highest profile buyers at Keeneland sales are John Magnier and Michael Tabor of Ireland and Sheik Mohammad bin Rasheed al Maktoum of the United Arab Emirates royal family. Regular buyers also include Schwartz, pharmaceutical magnate Eugene Melnyk, NetJets CEO Richard Santulli, John Ammerman, who is the former chair of Mattel Toys Co., and G. Watts Humphrey, who sits on the Federal Reserve Board.

No matter what you pay, your ultimate goal as a buyer is to find a horse that will win the largest possible share of the combined $1 billion racing purses nationwide, then shoot up in value for breeding purposes. The nation’s most successful stallion commands $500,000 a breeding session, and can do more than 100 sessions a year. More typical stud fees are $5,000 to $20,000 a session.

Your horse’s purchase price is just the beginning where costs are concerned. Plan to pay $35 to $100 a day for training, depending on where your horse is being trained and by whom. Vet charges run $150 to $500 a month for a horse in training. Shoeing can cost $100 to $400 a month. If your horse is traveling to attend races, transportation can total tens of thousands a year. Commer recently transported a horse to England and back for $16,000. There are also jockey fees, which are typically 10 percent of what a horse wins. In addition to their standard fee, trainers also take a percentage of a horse’s earnings.

Entering your horse in the important races also carries a premium. Top-end races have both nomination fees (so that your horse is eligible to run) and entry fees (if you choose to enter the horse). These fees vary depending on how early you pay them. For a top race with a purse of $1 million, you could pay anywhere from $30,000 to upward of $100,000.

Expenses, of course, are deductible for owners who can show that they race horses as a business. A post-9/11 economic stimulus package increased the rate of depreciation for racehorses from 10.7 percent to 37.5 percent in the first year. The IRS also allows you to deduct the first $100,000 of your equine investments from your total taxable income each year. Gains from horses sold after two years are treated as capital gains, which are taxed at a lower rate than standard income.

Because getting a horse up and running can be not only costly but also time-consuming, many owners enter the field through joint ownership, also known as syndication. The two best-known syndicates are Dogwood Stable (www.dogwoodstable.com) and Team Valor (www.teamvalor.com).

Commer runs his own syndicate, Contrarian Stables, through which he has syndicated 39 horses to a total of 22 investors. No two of those 39 horses are owned by the exact same group of investors. In his syndicate, investors must purchase at least one-tenth of at least five different horses. In the last two years, the least amount for which he has sold a one-tenth share is $4,000, and the most is $25,000. Some of the horses make money for their owners, and others lose it. "In any group of five horses," says Commer, "I tell people that if you get one good horse, three mediocre ones, and one bad one, then you are ahead of the game."

Schwartz never doubts that his horse investments have paid off, though he cannot pinpoint precisely how much. "This is a balance sheet business," he says, "not a profit and loss business."

And, anyway, his motive is not the money but the thrill. "There’s nothing in the world that can compare with watching your horse win a race and standing in the winner’s circle," Schwartz says. "To me a day at the races is absolutely the most enjoyable way to spend a day. It’s like going to a county fair."

One major perk of owning horses is the invention of names. Schwartz named Degenerate Jon after his son, Jonathan. "Even at 5 years old, my son loved going to the track," Schwartz recalls. "He was our little degenerate." Schwartz’s daughter lent her moniker to the more mildly named Stephanie Leigh. Both horses went on to run in major races, Degenerate Jon in the Kentucky Derby, a race that Schwartz still banks on winning someday. "Degenerate" Jonathan, all grown up now, owns three horses of his own—a certain sign that this family has no plans to quit horsing around.

Schwartz recently named a horse after the future he is planning with Sheryl now that he has put himself out to pasture from the fashion world. When the company sale was in the works, Schwartz called a retired friend and asked him what retirement was really like. "Every day is Saturday," his friend informed him. Great name for a horse, Schwartz mused. Everydayissaturday. Now that’s one he can bet on.

Getting on Track > The Greatest Game (www.thegreatestgame.com) matches new owners with advisers and seminars. > State horse owners’ or breeders’ associations can provide referrals. > Two important horse-racing publications—Thoroughbred Times and the Blood-Horse—are excellent sources of industry news.

Photography by Adam Coglianese