Buy a Few Animals

Everyday, more and more people become aware of the investment potential  of the alpaca. But it may be a surprise to them that alpacas are also a pleasure to raise. They are extremely gentle, easy to handle and exceptionally clean. Unlike most commercially raised animals, alpcas are extremely environmentally friendly - their soft padded feet never disturb the earth, they eat only the tops off the grass, and they consume only minimal amounts of food.

The hands-on method of raising alpacas, as either a part or full time business, requires the breeder to have a small farm or acreage. The majority of breeders in the U.S. are raising their alpacas on less than 5 acres of land "alpacas can be raised in herds of approximately 5-10 alpacas per acre. Your property should be properly fenced and have a small barn or shelter. And you'll want to plan out your water source and feeders. Of course you'll need a selection of tack and medical supplies as well. See our Alpaca Readiness Guide to learn more about what you'll need to prepare for your alpacas arrival.

Alpaca breeders come from all walks of life, bringing with them their own unique dreams, goals and abilities. Therefore, there is no one perfect way to start. Many new breeders start with a breeding pair of females and purchase stud services. Others may choose to include a stud--either purchasing shares of a male or purchasing it outright. Whatever approach you choose should be based on your long-term goals and your current situation.

HaSu Ranch understands you may have a lot of questions. Animal prices vary widely depending on color, conformation, fleece quality, fleece quantity, age and gender. We specialize in helping new breeders plan their breeding program, select animals that meet their needs, and determine the costs associated with raising alpacas. Contact us today for a free consultation on your farm and business development.

overview of 2 approaches to the alpaca business

There are basically two common approaches to raising alpacas. Both of them have been utilized successfully within the industry. The first approach, called the flat herd size scenario, reflects a program designed around selling all offspring to provide the shortest payback period to recover the initial outlay. The second approach, called the growth herd scenario, blends the selling of offspring with an element of herd growth.

Major assumptions of both scenarios

• The sale price of a female offspring (of breeding age) you raise is equal to the original cost per female in your initial herd. Younger offspring that are not of breeding age sell for les than the mature animals. In this analysis, 5 pregnant females were purchased for $22,500 each. There are 2 herdsire quality males included in the initial purchase at $15,000. The sale prices for the males you produce were assumed to average $5,000 each. This allows for the fact that all males produced and sold would not be herdsire quality.
• You insure the herd for the full mortality. Smaller herds are often fully insured against all risk, with no deductible, for about 3.25 percent of the value (paid up front, on an annual basis).
• You would have roughly $12,500 in start-up costs for such things as barns, fences, and equipment. These improvements should also add value to your real estate and could be depreciated for tax purposes.

Financial Observations

• The average annual before-tax cash flow return on the original investment is 26% (27% in years 2-10).
• The payback period, based on before-tax cash flow, is slightly over 4 years, with the original herd still intact

Growth Herd Scenario view PDF chartist (1,934 KB)

• Cash flow return %'s in this scenario increase to 64% by year 10
• The 10-year cumulative cash flow is $93,000 higher than the flat herd size scenario. Cash flows are lower in years 1-3 years and higher in years 4-10. The payback period, based on before-tax cash flow, is 5 years--one year longer than the Flat Herd size Scenario. This is a result of foregoing short-term sales in favor of putting additional females into production.
• Eight breeding females have been added to herd, a $180,000 value by end of year 10, which is in addition to the overall cash flow benefit as compared to the Flat Herd size Scenario.
• Growing the herd size is a tax-deferred method of wealth building.

Both Scenarios

• There are opportunities to increase profits by boarding animals ($600 - $1,200 per animals), or by offering stud services ($1,000 -$3,000 per breeding).
• The major tax advantages of alpaca ownership include the use of depreciation, capital gains treatment, and the benefit of offsetting your ordinary income from other sources with expenses from your ranching business. See Tax Consequences of Owning Alpacas.
  
• The financial return using the agisted (boarding) approach is also very good and not often matched by other investments.
  
• Quality, color, gender of offspring, and strength of the overall industry could influence results positively or negatively.

It is important that you make a purchase decision based your personal tax and financial situation, as well as your own assessment of the alpaca industry.