So, now that you know what an alpaca is, the next question is "Why do people feel compelled to own two--or three---or twenty? For Jen and I, the investment potential was a large factor. Combined with the wonderful presence of these animals, it seemed like the perfect combination to fund our retirement and have fun doing it!
As early as the Incan civilization, the value of alpacas was recognized. They were the basis of wealth for the Incans and considered legal tender even after the Spanish conquered Peru. You will hear alpacas referred to as "the world's finest livestock investment". It is far from being just promotional hype. In addition to generating an average annual return of up to 50%, alpacas offer many other benefits that support this claim:
*Alpacas are easily managed on small acreage.
* Alpacas reproduce slowly (1 cria/year) and cannot be artificially inseminated or hosted by another animal. With importations closed, this all means a limited supply as demand increases.
* Alpacas are inexpensive to raise. They require minimal feed, shelter, fencing and veterinary care.
*The tax advantages include expense deductions, depreciation, and deferred capital gains. See Income Tax Information for more details.
*Building a herd is a form of deferred wealth building that appeals to many individuals and families. An investment in an alpaca continues to multiply each year as new crias are born.
*As a "passive breeder" who boards an animal on another farm, many tax advantages are still available.
*Alpacas are fully insurable against loss and come with reproductive guarantees.
The alpaca industry is currently a "breeder's" market, with the goal to establish a herd large enough to support the supply requirements of a commercial fiber market in the USA. The evolution to a fiber market has become a more important focus in North America. The closing of the Alpaca Registry to further importations, coupled with the fact that females only produce one cria per year will support the price of alpacas at their present level as more individuals become aware of the value of alpaca fiber, the delightful personality of these animals, and the wonderful investment and tax advantages they offer.
As you investigate the wonderful world of Alpacas, there are many investment perspectives on the financial opportunities that are potentially available. You will find some full time breeders who make a six figure income and more in the alpaca business. There are also breeders making little more than smiles. Many farms have built their business through years of dedication and have invested in a quality breeding program designed to produce show quality alpacas. Some have made their money through investment speculation with volume exchange as a goal. From a purely investment perspective, the alpaca industry enjoys great returns when compared to other livestock investments. There are multiple benefits and financial rewards that require some dedication and most of all: passion.
Another key factor to the success of the alpaca industry has been the ability to support a lifestyle change for many investors. Alpaca breeders come from all walks of life and with many different approaches to the business. From young couples with children who enjoy caring for alpacas, to retired couples who are ready for a change in career and responsibilities, to the couple who still maintains a working career with one person tending to the alpacas on their new acreage in the country.
The major tax advantages of alpaca ownership include the employment of depreciation, capital gains treatment, and if you are an active hands-on owner, the benefit of offsetting your ordinary income with expenses from your farming business. If alpacas are actively raised for a profit, all the expenses attributable to your farming efforts can be written off against your income. Alpaca breeding allows for tax-deferred wealth building. An owner may elect to let his herd grow over time without paying income tax on its increased size and value until they are decide to sell an alpaca. New buyers should research and educate themselves in the advantages and risks of alpaca ownership by talking with breeders and speaking with a tax consultant.