Financial Aspects of Alpaca Ownership

When assessing different business opportunities, most people would probably fail to include or even think about alpaca breeding as a possible business endeavor, especially if they do not have much experience with raising animals for a living. Most who are not familiar with either animal husbandry or alpacas may even question the practicality of getting into this kind of business. Surprisingly, there are many untold financial benefits of alpaca ownership that most people do not know.

Starting up an alpaca ranch is not as expensive as it may seem. Most of the needed capital to start breeding and raising alpacas will revolve around having your own ranch or property to raise these animals, and can cost less than $20,000, a decidedly cheaper alternative than most other start-up businesses and franchise. Most importantly, unlike most other businesses, owners can expect to enjoy very quick investment returns after only a year to a year and a half, with the proper care and knowledge.

Alpaca owners typically enjoy a 30% to 75% return on investment each year.  This is far higher than most businesses, where a 10% return is normally considered a great success.  Because an alpaca female can only produce one cria per year, the population is growing slowly, and the breeder’s market is expected to continue for the next 20 years.   

Female alpacas can be expensive (a quality bred female will cost between $12,000 and $20,000).  However, if bred to the proper male, her cria are typically worth more than her.  Additionally, female alpacas can often be bought in packages at a reduced rate.  Typically, purchasing two or more females will result in a 20 – 30% savings over the cost of a single female.  As a result, you can start breeding alpacas with two quality females for as little as $18,000.

Alpacas can be insured against sudden deaths or against theft, and alpaca purchases are actually tax-deductible.  In 2010, $250,000 worth of alpaca purchases be written off.   Also, any amount over $250,000 can be deducted in successive years. In a 45% tax bracket this equates to a savings of an astounding $112,500, making the effective purchase price just $137,500.

Rest assured, we don't recommend spending $250,000 on alpacas in your first year. However, this amount can also be applied to all equipment expenses, and is a great way to build a farm, and establish equity.  .It's also a great way to upgrade your existing farm and get a tax break at the same time.
 

Example #1:
Buyer Takes Full Advantage of Tax Incentives
Purchase Price of Alpaca Package $250,000
Section 179 Deduction Amount $250,000
Tax Bracket 45%
Tax Savings $250,000 x .45 = $112,500
Net Purchase Price $250,000 - $112,500 = $137,500


Example #2:  Real World Example
Criative Acres’ “Colorful Huacaya Girls”
2 Quality Bred Females bred to Award Winning Males
Purchase Price of Alpaca Package $16,000
Purchase Price of Alpaca Package $16,000
Section 179 Deduction Amount $16,000
Tax Bracket 45%
Tax Savings $16,000 x .45 = $7,200
Net Purchase Price $16,000 - $7,200 = $8,800


Example #3:  Your Example
Fill out the fields below to see how much
money you can save by purchasing alpacas
Purchase Price of Alpaca Package $
Section 179 Deduction Amount
 
Tax Bracket %
Tax Savings
 
Net Purchase Price
 
 


In the real-world example listed above, the purchaser of this package will receive 2 quality females and a high-quality male for a net purchase price of just $8,800.  Because the purchaser is buying multiple alpacas and taking advantage of the intense tax advantages, the purchaser of this package is essentially receiving one female and the breeding-quality male for free.

Depending on the size of the operation, alpacas can be either a part-time or a full-time business. Some owners work day jobs and care for their alpacas in evening, while many owners have quit their jobs and devoted their time to the business itself stating that the trade is profitable enough that they are able to live by their income. The size of the herd that the owner may choose to raise can be as small or as large as they choose it to be, while still enjoying a healthy return on investment and tax advantages.

If you possess a love for animals, an interest in trying out something new, and the willingness to learn, then alpaca breeding is easily one of the best businesses to take up. With solid returns, it is undoubtedly one of the more underrated yet extremely profitable trades to invest in.

If you have any questions, or would like more information, please send us a message.

For more details on Section 179, visit the official Section 179 website at http://www.section179.org.

 
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