Thursday, October 29, 2009

Upgrading For Profit

Adventures Of A Horse Crazed Mind just did a post on whether a person can make money on upgrading horses or not. In my usual wind-bag fashion, I exceeded the comment character a lot! LOL

But this is an area that I have loads of experience with...enjoyed doing...and if we get the horse property we are looking at bought, Megan and I will return to doing in the near future. I stopped doing it for the last few years mostly because I didn't have the proper facilities, was short of the time it takes...and to be completely honest...I got tired of dealing with goofy assed buyers. One good thing about the crashing economy, a lot of the douche-bags that thought they needed to buy a horse aren't in the market anymore. I think we are returning to a more normal set of people looking to buy prospects or saddle horses and I sure don't mind dealing with those kinds of people. With so many good quality, potential laden horses available on the market...for super cheap prices, I see a future possibility of again taking pride in upgrading horses and giving them the training they need to become productive and enjoyable companions to owners who don't have the time/experience to make a solid horse of their own. Ya know...not all cowboys enjoy breaking and training their own horses either! I know lots of them who simply want a well-broke, using type horse that isn't going to dump their butt in the middle of nowhere.

In the past I've made good money off of horses I've bought for resale. Actually, I've never lost money on a horse if you consider that I usually pay between $300-500 for the horse and resell for $2,000-$3,500 within a year.

There are rules of thumb that apply if you want to do a bit of trading/upgrading.

1)Expenses-these costs are going to apply to any and all horses you purchase-whether it's a horse for your own personal use or one that you know is for resale. I have never figured the ordinary costs of maintaining a horse into whether I consider the sale a profit or not. I could do that because I was already maintaining multiple personal horses and the additional cost of maintaining a sale horse or two is quite minimal. I suppose if I did take the time to add up all of the hours spent, each tube of wormer, paid myself for trimming feet, etc, etc...I'd be in the hole on every horse. But what is any different about that than the money pit my own personal horses are? No-for me it's essentially, I gave $500 for this horse, had him for 9 months and sold him for $3,000. Well, that's $2,500 more than any of my personal horses ever made me so...ta-da...profit! LOL-I know, I have a sick and twisted way of twisting reality.

2)You need facilities where you can maintain multiple horses without the cost of the facilities multiplying per horse. Boarding on a per horse basis is not cost effective-and if that is the only way you can maintain a horse and have facilities to work with them, your expenses are always going to outweigh what you can resell the horse for. To keep expenses down-do as many things yourself as you possibly can-take a hoof trimming class, do your own worming and vaccinations, learn to be your own vet-tech and pre-chiro examiner. And of course, you need to be your own trainer.

3)Haunt your local sales barns. Sometimes local ads are a good place to look, but that usually incures travel/time expenses. Sale barns provide numerous horses to chose from and it's a single trip. Killer market or no killer market...You have to pay attention to what you are bidding on. Get to the sale early. Do what the rest of the "traders" do...walk around with a notebook and a halter or bridle over your shoulder. See a horse you like, get in the pen with them and look them all over, watch how they react. Can you catch them? Do they look like they have saddle marks? Can you pick up their feet? If they are saddled, talk to the owner, ride the horse. Don't try to ride and slide them, just get on and see if they move off of your leg, can they neckrein, do they stop, do they back? It's never very hard to figure out if a horse has been properly rode at some point in their life. A well-trained horse who had a gunsel as an owner will usually actually sigh with relief when a knowledgeable rider, giving the correct cues gets on them and eases them around a bit. Pick your top 5, write down their numbers(and the owners names if possible) and make a few notes to yourself-list the top 5 in the order you would buy them and write how much you think you should give for them on the same page. If there is only one horse there you like...then there is only one horse you bid on in the sale barn. If number 5 comes in before number 4-1-don't bid aggressively. Make a couple of bids, but let him go unless he is so cheap you still have budget money. Spend your budget and LEAVE!!! Go pay for your horse(s) and get out of there.

4)Beware of your emotions!! If you truly want to be able to buy and sell horses for profit...especially if you want to do it HAVE...H.A.V.E to be able to curb your emotions. To purchase a horse with the intention of making them a better horse that many people would love to own and be proud of means you have to start with a horse that has the potential to become that horse. Remember, you are buying horses with the intention of making a profit on them. Yes, we are going to take good care of the horses we buy, yes we are going to invest more money and lots and lots of time into turning them into productive citizens...but the bottom line keep doing it it has to be profitable...breakeven is great....profit is even better!

5)Know your target market. If you are geared toward middle class citizens that means that sometimes you will have to turn down purchasing the uber nice, high quality prospect in favor of the adequate, more public appealing one, even if the prices are similar. It all boils down to turn-around time. For resales to be profitable-you need to pay less than a $1000 for the horse and know you can market it for at least $2,500(and that is cheap). Anything you price over $4,000 is going to be on the market longer-unless they are winning at something. Personally, my target range was always $3,000-3,500. And as much as we all like to bitch about it...color sells. A plain bay is going to stand in your lot longer than the palomino. Be careful when purchasing paints though. A strawberry roan paint like Megan's horse will sell all day long. A sorrel and white overo...not so much. A pretty bay like Shooter or Beretta will be snapped up. A washed out sorrel/bay with no interesting going to have to be winning something before the average person looks twice. Size matters! I once bought a beautifully trained TB gelding. As gentle a horse as you could ever find. He was 16.1H when I bought him for Megan to use for HUS/Jumping. He was too big a moving horse for her, so I started looking to rehome him. He matured at 17H. If he had been 15H I could have sold him in a heartbeat as a trail horse because he was uber quiet, soft and had absolutely no spook. Everyone who tried him loved him...but he was too tall. I did find a good home for him with a girl in Meg's 4-H group-she went on to use him just as I had planned and did well with him. But since it took me the extra year to get him sold, I guess you could say that he was as close as I have ever come to losing money on a horse.

6)You have to get out there and become a public figure-so to speak. That means going to the local auctions on a regular basis(to look or buy, not to sell!), going to gymkhanas, trail rides, horse shows and play-days. Participate in them on your sale horses as much as you possibly can. If you want to market nice, average, all-around horses-you have to show people that is what you have. You have to find the horse's niche and let them shine. People don't have to love me personally to want to buy a horse I am selling. All they need to know is that my word is good and the horse is what I say he is. Selling horses is remarkably more about the sheer number of people you know or meet than anything. Get to know other horse traders, killer buyers, training barns, boarding facilities, 4-H leaders, tack shops, talking "horse" is going to rule your life.

And my own personal criteria...Rule #1 for me

Never buy a horse you would not like to own for yourself. Every single horse I have ever bought has been because it is a horse I would like to personally own. That made my selection a lot narrower when I looked but then it kept me from making emotional purchases too. I've bought sick horses, lame horses and thin horses...but I don't buy really young, really old, infirm or crippled horses. They have to have the potential to become productive members of the equine set in a relatively short amount of time.

The only other bit of advice I have your sale horse!...Don't FALL IN LOVE WITH your sale horse. The whole point is to find someone else who falls in love with them.


Adventures of a Horse Crazed Mind said...

You are the BEST! lol Oh man, where do I start? Yes, the market is flooded with horses right now but I've stored away the ones that I think are valued right and of good quality and these horses are still selling at a normal rate. Buyers are still out there for good horses.

I was giggling when i read your theory on the cost of keep and how to calculate profit. I am WITH YOU!!! But DB is not:( I tried to explain it to him this way- if you had a boat that you bought for $1000 and used for a summer and then sold that winter for $1500 you would not account the cost of gas, moorage'd say "I made $500!".

The facilities issue is the most expensive part of the equation for me. If I had my own place I'd be singing a different song.

As you know I'm an internet junkie. With things like craigslist I think there is a better chance to find a good horse on the internet now than there has ever been. Just like with any buyer/seller relationship, you learn to read through the lines and ask the right questions to find a prospect worth the trip. The sale yards here suck! Not even an option. They are so much different than those in the states.

Target market- Key! You SO hit the nail on the head. And with the price points. I know a broker who tries to make 1000 on every horse she sells... not 2000, not 5, one! I know some folks who want to turn a $2000 horse into a $10,000 one.. It is like playing "Deal or No Deal" greed can be of issue!

I have to add that being able to judge market value is important.

As for, "Be known"- I never really thought of this point before but can see that you are right. I know a few gals who can sell a horse in no time b/c they seem to know everyone.

Buy horses you'd own yourself. Good point.

You rock! THANK YOU!!!

Paint Girl said...

Great info!
We bought Fritzy at an auction 3 years ago. We had never purchased a horse this way before, but had been to a horse auction. We did everything you mentioned, except for ride her. I think we lucked out with her, and I probably wouldn't buy another horse this way, only because it was too stressful! And I am sure the 100 degree temps didn't help matters any!
I agree with Chelsi, with the internet most people advertise Craigslist or Dreamhorse now. I used to love getting the paper to look at horses for sale, but no one advertises in the paper anymore. Now I love to browse online! Which is better, because pictures can be posted, where as an ad in the paper was just a black and white typed ad, at least in the old days anyways!

Michelle said...

These are great tips! I don't have the facilities to try this, but maybe someday......Thanks for sharing!

LuLo Designs/Blue Eyed Tango said...

Sounds like great advice here but I think you're not the norm out there and it's great to hear that you actually care for the horses finding good homes. I personally don't understand how people can actually make money off of buying and selling horses in the price range you're speaking about...if they're going to be totally taken care of? Couple of questions: Do you actually check the horses teeth? What if they need their teeth floated? Do you do that as well or know a vet who does it inexpensively for you? Or do you just not purchase that one because of that added cost? What if you get stuck with a horse that has a real health issue you were unaware of....maybe you're just that good at going over them with a fine tooth comb so to speak but I know there are all kinds of unethical people who sell horses and mask all kinds of problems just to sell that horse fast for the profit. This is not to be critical and is an honest inquiry...just wondering because we have six horses of our own (that we could never sell) because we have put way too much time, money and effort in them. They have always had the best of care. It's not cheap.... even just feeding them alone. Do you have pasture for the months that you have them before selling so you don't have hay/feed expenses? Are they turned out 24/7 so you don't have stall expense? No we don't do any of the health care ourselves but it's still not cheap to own a horse even if it's only for a short time.....perhaps we should learn how to vaccinate/maintain our own horses so we're not paying out the wazoo!! LOL! Is it that hard to do yourself? You've given me some food for thought! Thanks for the post! I like your #1 Rule too!

Laura said...

Another awesome post! Thanks for sharing that. Really great tips for someone considering that as a business. I hope you guys can get another/bigger property to do some of that yourselves again!

I would totally buy a horse from you if I was on the same side of the continent! :-)

I think the facility costs would be huge if you didn't own your own place with lots of hay/pasture.

Christina said...

Great tips. The market is certainly down right now but if you are smart you can still turn a profit and pair horses with great homes.

BrownEyed Cowgirls said...

Horse Crazed-I always forget you are in Canada. I suppose the auction barns might be a lot different up there. It has never mattered where I was in the US-there was always a horse or so that ran through even the crappiest auctions that was worth investing a bit of time in. But that probably is me being a dinosaur. I spent a fair amount of time in sale barns growing up. It's a comfortable place for me to be. Even if you are not interested in purchasing anything from your local sale barns, I recommend spending some time there. You will learn who the traders are, who the KB's are, you will learn a lot about the market, learn how to judge a horse's weight/condition/conformation/temperment and just get to see a lot of horses in general. It helps develop "the eye".

Facilities, facilities, facilities! That always seems to be an issue, unless you already own a place. It's always the largest expense/investment when you have horses. I've owned, I've rented and I've boarded. Boarding per horse is the most expensive, which is what I'm doing now-so until we get something else located/purchased sale horses are not an option for me. I've rented some...interesting...places. I've spent a lot of time cleaning other people's property up to make it work. I've done without round pens or fancy facilities far more than I have ever had them. It's all about ingenuity. You just start with the space and a perimeter fence and go from there.

People are going to say that I am wrong for saying that. But I've had horses my entire life and always found a way to make it work. My equine budget is built into my daily life just like a lifelong mortgage. There has been a couple of times in my life where I've thought about all of the other things I could be doing with the money that was earmarked "horse money", but they were simply fleeting thoughts, not a serious contemplation. I've never seriously done without anything because I had horses to take care of. Sale horses have bought me cars, made down payments on homes, bought hay/panels and other equipment and gave me money to move. A steady income? Not really, but certainly a viable option that has kept my personal horse expense to a minimum.

Reluctant Cowboy said...

Good advice but for me I couldn't sale water in a desert. I have one that should be doing barrel futurities in 2010 and I am already backing off the concept of selling. Heck one we sold had a retirement clause that when it was time he could come back to us for his final years. ..............
I'm glad he's back home :)

BrownEyed Cowgirls said...

RC-Buying and selling isn't for everyone. Some people really enjoy having the same horse forever. I think most people do. But there are those of us who really enjoy being able to ride a large quantity of horses in our lives, learning different techniques and seeing what each horse can teach us. That only happens if you buy and sell lots of different horses.

I've only ever sold a couple of horses that I have bred/raised myself. And that was years and years ago. Now, what I put on the ground I do so for myself and consider them a lifelong commitment. I do not think of horses that I buy for resale in the same terms. Not that I am not committed to taking good care of them while I have them and making sure they are sold to good homes, but after they are sold it is their new owner's responsibility to determine their fate. My job is to make sure they have a better chance at a good life when they leave than they did when I got them.

BrownEyed Cowgirls said...

BET-I think I used to be the "norm". I still know a lot of good horse people who do what I used to do without deeming it "rescuing a horse". A lot of us slowed down on the number of horses we turned simply because of the crazy buyers we had to deal with for a few years. People got some weird, weird ideas of how buying a horse should go.

To answer some of your questions...There are three areas that I love, LOVE to find on sale horses
1)Bad teeth! That is so freaking easy to fix. Yes, I check every horse's teeth and get them floated right away. Bad teeth cause a multitude of "problems" that people cannot seem to get "trained" out of horses and yet a simple manual float($30-70) and they disappear. It's like magic!
2)Bad shoeing jobs! Yet another one that is so easy to fix and makes a massive number of problems go away when you fix it. You would be amazed at the number of lameness and unsound horses that magically become sound when you pull too tight or F*ed up shoes off.
3)Chiropractic adjustments. Runaways, flippers and broncs are usually in pain somewhere. A little down time, a chiropractic adjustment and a bit of training and it's often not even like you have the same horse. I usually stay away from horses with severe, dangerous issues as it is never a 100% surity. But some are definitely worth the investment.

BrownEyed Cowgirls said...

I got a bit sidetracked this afternoon but wanted to touch on the health/mental issues BET mentioned that people will try to mask when they are selling horses...

Yes, there are people out there who do these things. Usually not the type of horses I buy to fix up and resale. A lot of the horses I buy come out of killer pens or lower end auctions. I've never known anyone to bother drugging a horse that is going to be run in loose. Occasionally someone will bute or ace a saddle horse. The only time I think I bought a horse that may have been drugged was one that was most likely buted.

I don't really care if someone tries that or not. It all goes back to giving these horses a new chance. Fix the areas that caused the problems in the first place and 99% of the time the horse is fine. I buy horses with issues-whether that is poor care or lack of or poor training. I expect things to pop up. I'm more surprised when they don't than when they do.

Vaccinations are easy to give. Have your vet or a tech show you how. Just tell them that you want to learn in case you have to ever administer antibiotics.;)

Expenses don't have to multiply exponentially with each horse you own. One horse is expensive. Ten horses is expensive. Two to nine-it's arbitrary. Is a 3rd horse really that much more expensive than two? Is 6 really that much more expensive than 4? It depends on what your facility circumbstances are and what you are capable of doing for yourself. If you have to pay someone for every service-Yea, it is going to make a difference. If you do pretty much everything yourself and just have to pay for an additional service here and there...It's likely not going to break your pocketbook.

Melanie said...

What a great post! I think it is great that you have had good luck on buying or breeding and then re-selling/selling horses. We have always been rather lucky in this area too, but I agree that it is definitely not the norm.

Your rule about only buying or breeding horses that you yourself like and would ride is key. Of course, your horses are ALL gorgeous, and I can't imagine that you would ever have trouble selling them. :)

City girl turned Country Girl said...

Great post BEC!!! Love the tips and very right on points!! I hope you get that land so you can get back into the business!! You really are a great horsewoman and anyone who buys from you is darn lucky!!

Leah Fry said...

Thanks for the very informative post. I'm with Michelle: anyone who buys a horse from you is lucky.

Andrea said...

This is a good post. I bought an OTTTB for 750 and rode him for 8 months. I sold him for 11,500 to a little girl and her mother wanting to learn how to do hunter/jumpers. It was THE best turnover ever. I miss that horse everyday, but I bought him with the intent to sell him. He is now pampered in a fancy jumper barn and taken to shows, I am sure he couldn't be happier. A lot better than living in the swamp I have for a back yard!! haha

It's not hard to let them go when they are going to a wonderful home. That is the whole part of riding and training them. Like you said, make sure you like the horse and then make sure it can do what you want it to do, and do it well. Horses that are good at their jobs sell a lot better than horses that are just green broke so so rides.