How To Own Alpacas Without A Farm

 

Most of us have seen the Mike Rowe Dirty Jobs video of alpaca ranching.  There’s shearing, poop clean up, spitting, breeding, birthing, teeth filing, injections, toenail clipping and general farm care.   To say the least investing in alpacas is a messy business …. Or is it?

Did you know you can invest in alpacas without ever having to wear muck boots or pick up a shovel?  Or put off that large initial investment in a farm while realizing your dream of alpaca ownership?  Agisting or Boarding Alpacas at Dutch Hollow Acres allows you realize most of the benefits of alpaca ownership without the cost of establishing a farm or consuming your time to run it.  There are 2 types of agisting investors; Active and Passive.

Active:
These investors want to be part of their alpacas life and their care.  Most of these folks plan on having a farm in the future but do not currently own one or live close enough to the agisting farm where they can be part of the alpaca lifestyle.   Active investors take part in important decisions of their investment from showing, breeding, marketing, selling under their own business/farm name.   Active agisting allows the investor to be seen as an active breeder by the IRS and entitles them to all related tax deductions.  These deductions (including the purchase of initial livestock) can be healthy sized offsets to other forms of income.

Passive:
The passive investor is the type of person who sees alpacas solely as an investment animal and do not plan on taking part in any of the day to day care or decisions.   The aigsting farm makes all or most of the investment decisions such as breeding and marking of the animals.  The IRS allows this type of investor to only take deductions against any income earned from your alpaca investment.

What do boarding fees cover?
Dutch Hollow Acres board covers all of the general care and maintenance of the alpaca which includes: Grain, hay, water, de-worming, and toenail clipping.  Additional services such as sheering, teeth filing, breeding, birthing, marketing, brokering, etc are covered by the owner.

2009 Tax Deductions:
The IRS still has a great option under section 179 to deduct up to $133,000 of your initial alpaca purchase on your 2009 return.   Assuming a $25,000 initial investment, return on investment could be…. $3,750 for 15% tax bracket,  $6,250 for 25% tax bracket,  $8,250 for 33% tax bracket, or $11,250 for 45% tax bracket.   If you make your alpaca purchase late 2009 and file your tax return early 2010 you could see a sizeable tax return right away!  The IRS will let you fully deduct the purchase price of your alpacas even if you only put 25% down and are financing the rest.

Active investors can take even more deductions such as mileage in their return.  See your tax accountant for details.  It’s advisable to get an accountant who has experience with alpacas.

Initial investment:
Most alpaca investors plan on running their own farm some day and have been holding off on the idea of investing in alpacas until they can care for them.  In actuality it’s cheaper to agist your initial investment and take advantage of Section 179 tax deductions now than waiting another 5 years.  The typical alpaca investment includes 2 females.  1 Bred female and 1 juvenile female to keep investment costs more tangible.   Assuming a 50/50 male to female ratio and 80% live birth your initial 2 female purchase can grow to a herd of 12 in 5 years (7girls, 5 boys).   Assuming you don’t sell anyone off the herd could grow to 50 in 10 years!

General 1st Year Cost Analysis:

 

Farm Ownership

Agisting

2 Females

$25,000

$25,000

Farm Startup, Barns, fences, etc

$100,000

0

Equipment – tractors, implements, etc.

$30,000

0

Hay, Grain, Water

$300

0

Vet & Misc.

$1,200

$1,200

Insurance (theft, accidental death, major health)

$813

$813

Board

0

$1,825

Total

$157,313

$28,838

 

By boarding your initial herd, you can save the money you would have invested in farm start up costs and reinvest in more females or higher quality studs and grow your herd faster.  After 5 years the sale of your alpacas can be used to purchase your new farm!  The purchase of that farm can also be used to offset the income made on the sale of those same alpacas.

Guaranteed Return on Investment:
There are many variables that come into play with alpaca ownership that can affect profitability and as with any investment there is no guarantee on return.  Often the amount of effort you put into your investment is related to the amount of profit realized from it.  As a general rule bred female offspring will sell for as much as you paid for the dam.   Our other income sources come from the sale of fiber quality/pet males, stud fees, boarding, marketing/brokering fees, and sale of raw fiber or finished alpaca products in our farm store.

The majority of alpaca investors raise and breed alpaca’s full time within 3-5 years.  Currently my husband and I choose to still hold our “day jobs” as well as manage our farm.  We find that the care of alpacas is much less than other types of livestock and allows us to comfortably do both.

To learn more feel free to ask us any questions or schedule a farm visit.
Dutch Hollow Acres
Lindsay@lklik.com

585-991-6706

How much does it cost to care for an alpaca?


When writing a business plan for your new alpaca adventures the ultimate question is what does it cost to care for an alpaca per year?   The truth is a lot more than what you’re really thinking about but we’ll get into that later.  What most folks want to know is the bare bones after the big one time purchases.   

The following numbers are based on what it cost me to care for 1 alpaca in 2008. A few things about our farm; animals are on full pasture for 6 months of the year and on hay for the winter. Our water buckets are heated in winter and fans are on 24/7 in the summer.  The numbers were broken down to literal cost per head.  For example:  If I bought a box of 100 syringes for $20 but only used 14 syringes on 1 animal that year the cost per head = $3.

Cost per head per year in Western NY for 2008:

Hay: $38.50
Grain: $30
Minerals: $4
Wormer: $24
Rabies: $20
CD&T: $2
Syringes: $3
Vet Misc: $30
Heated Water (electric): $20
Summer Fans (electric): $10
Shearing: $25
Teeth: $10
——————–
Total: $216.50

Sounds like you could make a profit on that right?  I know what you’re thinking.  Alright! All I have to do is sell 1 female alpaca and poof massive profit!  It’s time to think a bit harder before you get too excited.  Remember you have to think of your start up costs too.  Cost of the livestock, property, buildings, fencing, electric, trash, water, equipment, gas, marketing, fiber processing, show fees, travel, and the list just goes on and on and on.   Don’t panic!  It’s not that bad since anything farm related has a nice tax benefit to it.   Also, the # of animals you have depends on your cost per head.  The more animals you have the lower cost per head.  It’s always much more expensive to care for 1-2 animals than it is 20-30.  The Vet charges per visit not per head!  You’re also running fans, heating water, buying supplies that expire before you can use them, etc for 1 animal or 20.   Right now our cost per head is pretty high since we only have 8 alpacas so all of my expenses are divided by 8.   Some of the larger farms I’ve talked to claim they have managed to get their cost per head down to $65-75.   Efficiency is the key.

The best thing to do before your first purchase is to be prepared.  On farm visits ask tons of questions and write down everything!  Talk to accountants, and constantly reference your business plan to make you stay on course.  Alpaca ownership can be very rewarding and comfortably profitable.  Like with any new business it does take time to settle in and make a profit.  The best thing about alpaca ranching is you can easily keep a full time job while managing your foundation herd until the investment starts to turn a profit.  Many alpaca farms I visited still keep that full time day job and the ones that opted to fully give up the rat race managed to leave in 3-5 years.

See Our Other Posts!
 Starting an Alpaca Farm: New Buyers Guide
Agisting Vs Farm Ownership
Alpaca and Taxes

Starting an Alpaca Farm:

New Buyer’s Guide

  • Research – start your reading engines! Alpaca’s as an investment.
  • Accountant – the tax benefits from owning alpacas are fantastic and in most cases Uncle Sam will pay for a HUGE chunk of your alpaca purchase. You are also sales tax exempt when buying farm related items
  • Farm Visits – you can never visit enough farms – it’s best to buy your first alpacas from a local farm. Better yet, interview the current owners as much as their animals. They are your greatest source of information.
  • Setting up your business
    • County Clerk’s Office – Apply for a DBA $31
    • Find a bank – set up your checking account apply for an EIN
    • DBA Sole Proprietorship is the simple method but for liability reasons really consider becoming an LLC in the near future
    • Selling = Charging sales tax
  • Marketing
  • Physical Farm
    • If you already own a farm great! I have horses but alpacas need different housin/fencing than what I have for a horse. Horse owners you need to keep reading.
    • Acreage – rule of thumb – 10 animals to 1 acres – this assumes rotational grazing to keep your hay usage and worm exposure in check
    • Hay/Feed – they are easy keepers
    • Confinement
      • 4′ high fence is ok but 5′ is better
      • 7 strand high tensile fence or stock fencing
      • Welded wire is ok if topped with 1×6 boards or hot wire to keep the sex crazed boys off it
      • Woven wire is better in a 2″x4″ or Diamond mesh pattern
      • “They” will tell you alpacas won’t challenge a fence, but tell that to a hormone crazed male who wants to gobble up another male or get to a female.
      • Do your best to have a fence that will keep predators and deer out
      • Stock panels!!! Greatest thing on the planet and cheap.
        • Use these for your catch pens and smaller paddocks
        • Tractor Supply offers 16’x52″ for under $25. Staple them to a post and they can become temporary gates too
      • You MUST have catch pens and smaller paddocks. Really think about the layout of your pastures and barn before getting your alpacas
      • Alpacas are cat like in nature. Don’t expect them to come when called, be easy to catch or want to be pet or snuggled. Keep gates and catch pens in corners, it’s much easier to herd alpacas into them
  • Health
    • Find a vet first! They are harder to find than you’d think. Learn to give your own shots – It’s a LOT cheaper to buy your own supplies from valleyvet.com than it is to call your vet all the time.
    • Known your animals healthy vitals
    • Weight – buy a livestock scale $300 – $600
    • Remember – these are livestock not pets, you want to have the healthiest animal possible so they can breed and be sold so keep that body score a 5
  • Sales
    • Yes, you have to think about this before even owning one
    • !!!EVERY ALPACA IS FOR SALE ALWAYS!!!
    • I know it’s a hard concept to grasp but they are your business not your pets
    • If you have an alpaca that has hit that fuzzy spot in your heart raise the price! If someone actually buys your animal at the inflated price then great! Now go buy someone else’s favorite alpaca :o)