
WHY INVEST IN ALPACAS?
Investing in alpacas offers a unique opportunity that combines the rewards of a sustainable, hands-on lifestyle with the potential for long-term financial growth. Unlike many traditional investments, alpacas can reproduce annually, producing both new animals and a valuable, highly sought-after fiber. The industry is still relatively young, meaning there’s room to establish yourself and grow (whether you’re looking for a small, part-time venture or a larger, income-generating herd).
Alpaca Ownership
It is best to first consider what your individual goals are for owning alpaca.
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Would you prefer owning an inexpensive pair of pet quality males for fiber production or family enjoyment?
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Are you planning on becoming a part-time or full-time breeder?
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Do you wish to have hands-on ownership or investment only?
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Will you invest in alpacas for current financial returns or are you going to build a herd toward the day you retire?
Whichever way you choose to become involved, there is a plan for you. The alpaca industry is very young and represents a ground floor opportunity. There are a limited number of investments that have the potential to reproduce themselves every year as an alpaca does. Breeders can profit from staying small or growing into larger farms in the future. Nationwide, the average farm has 12 alpacas.*

Investment Options
Hands-On Ownership
Many investors are choosing to leave the boardroom and head for the barn. Alpacas ownership can provide a stress-reduced, rural lifestyle while generating tax deferred wealth for the future. Raising alpacas qualifies for tremendous tax benefits.
Financial Considerations
Purchasing Alpaca: At What Price Level?
There are pet/fiber quality alpacas that can be sold for as little as $300. These will not have registration papers and/or are neutered. There have been alpacas sold at auction where a very special herd sire was sold for over $750,000. But the median price for a herd sire quality male alpaca would likely be in the range of $5,000 and a very good quality male to about $15,000. Often two or three breeders will purchase a good quality male together and share the expenses as well as the use of the male. This is a good strategy if you can find other breeders with whom you feel comfortable entering into a business arrangement. Most new breeders will likely purchase a few bred females and continue to breed these females to improved quality herd sires until they produce their own herd sire-quality male. This is less costly than buying a top-quality herd sire but may take a little time. If you have chosen good quality females and good quality breedings, you should, in time, produce your own future herd sire — maybe several. Bred female alpacas or male alpacas who are of breeding age typically cost more than younger alpacas who may have to be maintained for a year or longer before they reach maturity. Mid-range price for good quality bred female alpacas is somewhere between $5,000 and $15,000, but this varies a great deal. There are many lower quality females who can be purchased for less, but it is not logical to think that you will get the best quality offspring out of such females. That “great bargain” female won’t look like such a bargain when you find that you cannot sell her poor quality offspring. What about a great looking young female out of two so-so parents? This is when you must remind yourself that phenotype (looks) is not always genotype (the traits that the parent will pass on to their offspring.) It may be wiser to go with a bloodline that has many members who are all of good quality. But in the end, it is suggested that one purchases the best quality alpaca that they can afford, and choose breedings to improve the females off-spring. One choice a new breeder could take would be is to consider a lower priced, older female who has already produced several cria. Many new breeders often want to buy young females because they may appear to be of a higher quality. As alpaca age, they may not have the same presence as the younger animal, but may still be a very high quality animal, and a terrific producer. It also may be wise for a new breeder to purchase a female that has already had offspring, and is a proven mom.
Tax Benefits
The tax code for 2010 will allow a deduction of up to $250,000 for eligible personal property used in your trade or business (alpaca breeding for example). The deduction is taken on Form 4562 and is taken in lieu of depreciation. This amount may be used to offset any other earned income you may have (will not offset interest, dividends, rental income, etc.). There are limitations if you have a Subchapter S Corporation, LLC or Partnership as the entity must have income to offset the Section 179 deduction for it to pass through to your personal return. As a simple example, if you have $75,000 in alpaca purchases (or tractors, etc) and have $100,000 of earned income you will have reduced your income to $25,000 before consideration of your other activities and deductions. The Section 179 deduction will be reduced to $25,000 in 2011 and beyond. There are always rumors that Congress will change the tax law to reflect the higher deduction limits on a permanent basis. We will let you know when (and if) that ever happens. If you have a CPA or other tax professional you may discuss these issues with them before you finalize your plans.
Real Estate Tax Considerations
Since alpaca are a federally recognized form of livestock, there may even be a reduction in local real estate taxes with a change in use that livestock creates. This is something to look into at the local level.
Income from Fiber:
Alpaca fleece is widely known as one of the world's finest fibers, but it remains very rare. For every 32 pounds of sheep's wool, less than one ounce of alpaca fiber is produced. The herds outside South America are not generally large enough to support industrial processing. However, fiber co-operatives have emerged which offer a ready market for breeders. Alpaca is also treasured by cottage industries and many breeders sell to directly to local spinners and weavers. The price that you receive for your fiber usually covers the cost for caring for your alpacas for the year. There are just over 150,000 registered alpacas in the United States today,* so the need for more farms is great in order to meet the growing demand for fiber. * (Based on Alpaca Registry Inc. statistics, 2010)
Helpful Publications
Farm Business Expenses
Publication 225 IRS Farmers Tax Guide (please note section: "What's New for 2011")
Deprecitating Property
2009 Tax Law Changes Provide Saving Opportunities for Nearly Everyone:
Massachusetts Zoning Law
