Why have alpacas seen such a high, steady growth rate over the last decade?

 

Raising alpacas is a lucrative business that is appealing to people from all walks of life.  It’s what attorney, alpaca owner and president of the Alpaca Fiber Coop of North America (AFCNA) Daryl W. Goodrich calls living by the Rules of the Rich.  To summarize his article which can be found in the Spring 2008 edition of Alpaca Magazine, Goodrich says that the rich:

 

1. Seek a Favorable Business Climate

2. Seek Investment Income

3. Limit Liability from Claims by Others

4. Leverage their Money

5. Make Federal Taxes Work for them

 

Alpacas certainly fit into each category.

 

Tax Savings & Shelters

When alpacas are raised as a business, (with the intent to make money), they qualify for the following tax savings and shelters:

 

1. Section 179—a Federal tax cost recovery system

2. The Economic Stimulus Act of 2008

 

Section 179 of the Tax Code can decrease the amount of taxes you would normally owe by allowing you to deduct all or part of your capital asses (your alpaca) purchase in the year that it was purchased.  The purchase price not used as a deduction my be depreciated.  The “secret” to owning your own business, is to put your business income/loss on your personal tax return.  This is called a tax shelter.  The manner in which this will effect you personally should be discussed with your CPA or tax advisor.

 

The Economic Stimulus Act of 2008 is similar to the personal $600 stimulus checks that you received.  The government made it a little sweeter for business owners.  Remember, the purpose of the Act is to STIMULATE the economy allowing business owners to deduct purchases off taxes owed. 

 

When you purchase alpacas, you are starting a business and can qualify for these tax advantages.

 

· Business owners can elect to expense up to $250,000 (increased from $128,000) of qualifying property (up to $800,000 in value) instead of taking depreciation for assets put into service in 2008.

 

· Businesses are now allowed a 50% bonus depreciation on assets placed into service in 2008.

 

Here’s an example of how this works:

 

· A $50,000 asset is placed into service in 2008 

· $25,000 may be expensed under Section 179 

· $25,000 remains to be depreciated 

· A further $13,500 may be expensed as Bonus Depreciation (50% of $25,000) 

· Asset now has a $13,500 base from which to take standard 1st year depreciation 

· For this example we'll assume 5-year property = $2,700 1st year depreciation 

· Total deduction in 2008 is $41,200 on the asset 

· Remaining $8,800 cost of the asset is recovered under the otherwise applicable rules for computing depreciation

 

 

*Consult your tax advisor for specific details in how this will effect your personal tax situation

Financial Independence

 

With the economic slowdown and unemployment at the highest rate since the 1960’s, more and more people are changing their lifestyle, going back to the “basics” and looking for alternative sources for income.  Basic economics states that the difference between Investment Income and Earned Income is as follows:

 

Earned Income is you working for money.  It is limited by the hours in a day you can physically work, by your health and employment opportunities.

 

Investment Income is money working for you.  It continues to work for you and is not effected by physical limitations.    Alpacas are an investment; they work for you.  Although they do require daily care (who could resist being with them daily) they are “working” every day of their gestation period.  Crias (baby alpacas) may be sold or held to build your herd (tax sheltered wealth building). 

 

If you have a herdsire, outside breeding may be sold as well as their fleece, or product of their fleece.  If you have a talent for the fiber arts, or choose to open a farm store whether virtual or bricks and mortar (or barn wood) your products may be sold for additional income.

 

Another strategy for financial independence is to use other people’s money to work for you.  We use this strategy every time we buy a car, house or use a credit card.   The difference with financing your alpaca purchase goes back to the tax advantages.  You are purchasing an asset that will increase in value, may be deducted from your taxable income and depreciated. 

 

Borrowed money leverages your cash purchase allowing you to purchase a higher valued asset (alpaca) and receive a higher return on your investment (ROI). 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

We offer financing.

25% down

1% over the prime rate

4 years

The Alpaca Lifestyle

 

The attraction of alpacas goes well beyond fiscal or tax advantages.  Alpacas offer the ‘Country Lifestyle” that so many people are pursuing.   Alpacas can bring your family back to the basics .  It can involve the whole family.  There are so many activities that the family can participate in together from the responsibility of daily chores to the confidence building of competition in the show ring.  AOBA does a wonderful job in incorporating kids into the world of alpacas.  

 

They offer showman ship classes in halter, presentation and obstacle.  What a great way to involve the entire family if you are interested in shows.  There are also fiber art competitions too.  And AOBA also has information available for 4-H programs.

 

And alpacas are gentle and easy to care for.  They are very smart and easily trained.  They are only 36” at the withers and have toes rather than hooves.  Alpacas are disease resistant and require minimal veterinary care. 

 

Alpacas are also well suited for the growing popularity of the small farm.  They are very efficient grazers requiring minimal acreage.  A rule of thumb is approximately 7—10 alpacas per acre.  And they mow rather than pull the grass.

 

Just imagine your morning commute as a walk to the barn and your “co-workers” as a group of gentle, intelligent and interested group that communicates in a monotone of quiet hums.

 

Your “company car” is a John Deere.  As a member of AOBA, John Deere gives alpaca owners a discount on their purchases.  (Yeah, that’s tax deductable too!)

 

 

 

The Alpaca Industry

 

The alpaca industry has seen a slow and steady growth over the last 25 years.  Prices are holding steady even through tough economic times. 

 

The business of raising alpacas stems from the following demands:

 

1. Diversification

2. Involves the whole family

3. Curb Appeal

4. Strong Demand

5. Exciting Future

 

As a industry, alpacas are well diversified and are still in the infancy stage of development.  There are two basic and separate alpaca industries:

 

1. Alpaca Livestock

2. Alpaca Fiber

 

The alpaca breeders are continuing to breed for better and higher quality alpacas, not only for the show circuit but also for their end-use in the fiber market.  And we’ve already learn the benefits of involving the entire family which also creates a strong demand and effected by the curb appeal.  These qualities are durable and are driven my emotion and need also creating a strong demand for alpacas.  And since their gestation is nearly a year and they cannot be artificially inseminated, the overall growth rate of this industry is relatively small and controlled by nature. 

 

The future of alpacas is exciting.  It’s a strong market that continues to grow and develop.  Many new industries have been created as a result of the alpaca industry such as small family owned mills to process the alpaca fiber, fiber artists, transporters, shearers and specialized professionals such as accountants and veterinarians.

 

But the most exciting aspect of the alpaca’s future is their end use product—their fiber.  It has always been in high demand because of its outstanding properties of being hypoallergenic, light weight, warm and soft.  Designers love alpaca.  However, we as an industry, are not ready to sell to the international designer industry.  Although our product is superior to what is now available, we simple do not have enough supply for the demand.  And for that, there will always be a need for alpacas.

 

 

 

Leverage Example:

 

Purchase a juvenile alpaca for $10,000

Pay $2,000 cash

Finance $8,000

Later sell her pregnant for $15,000

 

This is a $5,000 profit. 

 

The gain is a 250% return on your $2,000 invested cash

Add the Tax Advantages:

· Deduct the entire purchase price of $10,000 from your income

· If you are in the 30% tax bracket = $3,000 tax savings

 

 

 

 

 

Cash Example:

 

Purchase a juvenile alpaca for $10,000 in cash

 

Later sell her pregnant for $15,000

 

Same $5,000 profit. 

The gain is a 50% return on your $10,000 invested cash

 

White River Alpacas, LLC

Informed, Fair & Respected

The How Tos & Whys of Investing in Alpacas

In an unstable economic environment, people are looking for alternatives for their financial security.  Stocks have lost $2.6 trillion since November 4th and no one knows when we’ll hit bottom.  Many people are liquidating their stock holding regardless of their value. 

Where do you turn?  Where are some investors going with their money?

Alpacas are making the headlines around the nation.  On the front page of the October 3, 2008 edition of the Wall Street Journal and in the New York Times.  People are turning to “something real”, something tangible, people are turning to alpacas.

Why?

There are five reasons people turn to alpacas as a business or investment:

1. Fear of Wall Street

2. Tax Savings & Shelters

3. Financial Independence

4. Lifestyle

5. Growing Industry

 

Wall Street vs. Alpacas

The nation’s mutual funds have decreased by $959.3 billion or 8.3% yet the Alpaca Registry says that registrations are on pace to rise 7% this year and currently stand at 140,297.   That’s quite impressive. 

In 1980 the first 10 alpacas (outside of zoo sales) were imported into North America.  To currently stand at nearly 150,000, that’s an impressive growth.  Especially when you consider that the industry closed the borders for importation ten years ago.

Continued...

Alpacas are a business for the whole family.

The Business of Alpaca Ownership