Partnership FAQ
Q: Is it better to buy an Interest in a colt or a filly?
A: This is really a decision an individual owner must make. Both will have opportunities to run for large purses at multiple tracks, but colts are more likely to run in the Classics with the largest purses. “Good” quality race fillies and mares will generally bring a nice price at auction when their racing careers are over because accomplished broodmares are always in demand. “Good” colts have less residual value when their careers are over because the demand for sires is much less than the demand for broodmares, but "Great" colts can have tremendous residual value.
Q: How does the horse get its name?
A: Honor Roll Racing hosts naming parties and members vote when horses are purchased that have not yet been named or have not yet raced. There is a set of rules for naming that can be found at the Jockey Club Web site. Once a name is selected, it must be checked against the database of existing and retired names by the Jockey Club. If it is not already taken, it will be sent to the Jockey club for approved.
Q: When will my horse run its first race?
A: Of course there are no guarantees, but we try to select horses that generally mature early enough to run their first race during the summer or fall of their two year-old season.
Q: How many times a year can I expect my horse to run during a given racing season?
A: It varies, but a typical number of races for a quality thoroughbred is 6 or 7. Some horses recover from races quickly and will run many more than 6 or 7 times.
Q: Are LLC’s only set up to buy two year-olds in training?
A: Every horse or small group of horses regardless of the circumstances is represented by a separate LLC. With respect to two-year olds, It is possible that the right two year-old could be bought privately or at one of the sales. In the recent past, we have purchased the majority of our horses privately. Many privately purchased horses are in training just as horses preparing for under tack sales are. Where and when a partnership horse is bought depends entirely on when the right individual is identified by the team and where value is found.
Q: What happens to my money if expenses are not as high as anticipated?
A: Any funds above what was budgeted for a period of time will be used for future expenses or returned to individual owners. The course of action depends on how much money is being earned by the horse representing the partnership.
Q: Does Honor Roll Racing mark up horses purchased before selling them to the investors?
A: No, they are sold back to clients for the price they were purchased for by Honor Roll Racing.
Q: How much will the Company typically spend on a horse?
A: We believe you don’t have to spend a lot of money to get a nice quality allowance or stakes horse. You can find many historical instances of graded stakes winners that were purchased for less than $40,000 as a yearling or two-year old. Honor Roll Racing has purchased horses for our clinets that became multiple stakeswinners for under $30,000 and several of those cost significantly less than that $30,000. We also privately purchase horses that have been previously campaigned, with an eye on improving them through a change of circuit, surface, or distance. We have been successful doing this and often spend less than $20,000 for these horses.
Q: What is the typical required investment to become an Honor Roll Racing Owner and what does it cover?
A: Partnerships shares are generally broken down into 4.5% or 9% ownership shares. An initial share purchase covers the price of the ownership share in the horse as well as expenses for up to a year. We believe taking the expense money upfront gives clients a much more accurate view of the cost of ownership and also allows them to simply enjoy the ownership experience without worrying about paying monthly maintenance fees. Historically, the cost for a 4.5% share has been between $1,000 and $3,500 with most partnerships being at the middle to upper end of that range. We pride ourselves in finding value for our clients.
Q: What happens if expenses exceed the estimated amount of expense money collected and the Company account is in deficit?
A: Members will be billed for their portion of the additional expenses if this occurs.
Q: If I want out of the partnership, how is that handled?
A: The expectation going in is that this is a long-term venture to enjoy the horse and his or her racing career. All members agree up front to stay in the Company until the horse is sold or its racing career has ended, but exceptions will be made in certain circumstances. The Honor Roll Racing team works very hard to be as flexible as possible.
Q: When does the Limited Liability Company (LLC) that owns the horse end?
A: When the team decides that it is a good time to sell the horse or the horse\'s racing career has ended? At this point, any remaining debts will be paid and existing LLC assets will be distributed to members.
Q: Who will train my horse?
A: This will depend on the circuit that the partnership horse is best suited for and, at times, may depend on the time of year. Feel free to contact us for a list of trainers we are currently utilizing.
Q: Is it possible to invest in a partnership that would have emphasis at particular tracks?
A: At present, we don\'t organize our partnerships by geographical location, but if there is enough interest from one specific part of the country, we can create a partnership specifically for that situation. We are flexible in the structure and organization of our partnerships. We\'ve crafted several special offerings in the past based on specific requests from our clients.
Q: What sort of insurance do we have for our horse?
A: Initially, as a Company, we typically do not carry mortality insurance for our horse. We may opt to pick up mortality insurance at any point in the horse\'s career if that appears to be warranted. Each member has the option of getting this insurance for himself up front. Honor Roll Racing staff will assist members in getting this insurance if they desire it. The Company will carry basic liability insurance at all times.
Q: What are the tax implications of this sort of investment?
A: In general, there are two kinds of tax categorizations in horse racing partnerships of this kind. Owners can be classified as active or passive members of the partnership. Members of the partnership who spend more than 500 hours in a given year actively participating in the management of the horse and partnership are considered "Active". Active members can generally deduct any losses against ordinary income. "Passive" members don\'t participate in the management of the venture to any great extent. They still receive tax benefits if there are losses, but passive members are initially restricted to writing off losses only against passive income. Any losses that cannot be written off in the year they are incurred because of this restriction are carried over to be used in the following year(s). Once the partnership has ended, any remaining losses to be written off can be used against ordinary income. Please check with your tax advisor for exceptions and details specific to your situation.
Q: What are the advantages of partnership investment (partial ownership)?
A: There are many benefits to investing in a partnership. The horse that runs for the partnership is yours, regardless of your level of ownership. You get all the thrills and excitement you get as an individual owner (and sometimes more as part of a team), without the requirement for a huge investment in time or money. John Christensen of Honor Roll Racing manages all aspects of the partnership and keeps you well informed so you can sit back and enjoy your investment, confident that the right decisions regarding your horse\'s career are being made.
