The World's Finest
Livestock Investment

Alpacas are the world's finest livestock investment. In the world of Alpaca breeding, it's the strong return on investment that is the ultimate justification for becoming an Alpaca owner and breeder. Alpacas are in great demand around the world, and the demand in America has never been greater, in part due to the profitability.

Alpaca breeders come from all walks of life. For some, Alpacas are primarily a source of income, for others, primarily a source of pleasure. Young couples with children might own three or four Alpacas and enjoy caring for them. Retired couples, who have raised their children, sold their businesses, and retired to the country, are often owners. The family whose members include a handspinner might own two or three animals for fiber production. Many herds are owned by families, where one spouse has a city job, and the Alpaca business is managed by the other spouse on their small acreage in the country. A large number of breeders are working couples who tend their herd in the evening after work. All of these Alpaca breeders, big and small, enjoy their animals and feel good about owning an investment they can hug.

A few investors don't actually raise their animals on a day-to-day basis. They live in the city, and are building their herd toward the day they change careers to retire to the country life. Other investors invest solely for the exceptional returns and tax consequences provided by Alpacas, and therefore board their animals with Alpaca breeders. For all investors, Alpacas offer a great way to diversify their investment portfolio with a commodity that is both rare and in demand worldwide.

There are also big farms with 150 Alpacas or more, as well as small farms with only three or four. The average size herd is about ten. Most herds start out small and evolve to the size which fits the breeder's farm and financial goals. Almost all breeders are in the business for the long haul; they believe in the future of the animal.

There are essentially two ways to invest in Alpacas. You purchase animals and begin raising them, or you put your animals in the care of an established breeder. Either way, the major investment benenfit of owning Alpacas is based on the concept of compounding. Savings accounts earn interest, which if left in the account, adds to the principal. The increased principal earns additional interest, thereby compounding the investor's return. Alpacas reproduce almost every year, and about one-half of their babies are females. When you retain the offspring in your herd, they begin producing babies. This is "Alpaca Compounding." Tax-deferred wealth building is another advantage of Alpaca Breeding. As your herd grows, you avoid paying income tax on its increasing value until such time as you begin selling the offspring.

The following graph illustrates how a herd might grow in size over a ten year period, assuming you begin with five pregnant females and two males. The herd growth depicted represents Alpaca compounding at work. The initial herd, beginning with several animals, grows to 126 animals in ten short years. How many investments appreciate at the same rate?

Hands-on Alpaca investment is the most common in the industry today. This course of herd building will require the new breeder to have a small farm or acreage, properly fenced with a barn or shelter. The equipment needed to support and care for an Alpaca herd is substantially less than almost any other livestock animal.

Raising Alpacas on your own farm, in the hands-on fashion, can offer very attractive tax advantages. If Alpacas are actively raised for profit, all the attributable expenses can be written off against your income. Expenses include not only feed, fertilizer, veterinarian care, travel, farm labor, marketing accounting and attorney fees, as well as depreciation of such tangible property as breeding stock, barns and fences. These expenses can also help shelter current income from taxation.

Alpaca breeding allows for tax-deferred wealth building. A small farmer or investor can purchase several Alpacas and then allow the herd to grow over time without paying income tax on its increased size and value.

By example, Mike and Robin Tierney and their three sons live and work on their 50-acre Maple Brook Farm in Westfield, Massachusetts which has been in the family for over a century. Maple Brook has a long tradition of raising livestock throughout the Tierney family history. Mike grew up on the farm and was involved with Polled Herefords and raising and showing prize-winning quarter horses. Mike's business background started with the family-owned insurance agencies, as well as commercial and residential real estate.

The Alpaca side of their business life started with the 1993 USA Today article which targeted Alpacas as the "Investment of the '90s." At first Mike and Robin thought raising Alpacas would be a passive investment. Their first step was an investment plan with a five year return on the basic investment. However, they quickly learned what a dynamic investment opportunity they had in Alpacas and quickly revised their investment plan to a business plan.

"Today the Alpaca business is going much better than I had hoped," says Mike. "It's just great ... that's the only word for it. Demand is running far ahead of supply and we see nothing but a very bright future for this business. The people who get into this business within the next few years should recoup their investment in a relatively short time, and the total business cycle should have a long life."

Ben and Antoinette Brewster were living primarily in New York City in 1989 although they had a large farm in Virginia, when they became interested in Alpacas as an investment with appreciable tax benefits. The first to bring these animals to the South, Antoinette's original herd of five females and two males has grown rapidly to over eighty animals. As a result of this growth, the Brewsters sold their New York City apartment and moved to Lanark so she could pursue her Alpaca business on a full time basis. Although she always considered herself a real New Yorker who would never give up city life, Alpacas changed her mind.

She tells visitors to Lanark Llamas and Alpacas that getting into this business and making it such a big part of her life is one of the best choices she ever made. The many activities that comprise the life of an Alpaca breeder are challenging, and she has always been excited about the continuing potential of this fast-growing industry. Her husband, Ben, CEO of an investment consulting firm, appreciates the steady return on their initial investment.

Says Antoinette, "It never occurred to me how much I would love these animals and the tranquil and rewarding way of life they provide. I still miss the shopping and restaurants in New York City, but Alpacas put a smile on my face every time I look at them. When you invest in Alpacas, you're investing in yourself."

Cleve and Beverly Fredricksen of Ore Hill Farm Alpacas in Spottswood, Virginia made the decision to change lifestyles based mostly on family reasons. When they first moved to Virginia, they raised a number of different animals including Thoroughbred horses. However, since 1990 when they first discovered Alpacas, their focus has been full time "on these truly fantastic animals," said Cleve. "Their irresistible appeal and manageable size satisfied our personal needs while the rarity of the animals in the U.S., their blood registry, and the established worldwide market for their wonderful fiber, made the Alpaca an ideal investment."

The Fredricksens spent the first six years in the Alpaca business building their herd. It has only been in the last year that they have begun to actively market their animals. Their target market is basically regional because it is important to them to maintain quality contact with everyone who buys their Alpacas.

"There are lots of positive financial aspects to raising Alpacas, not the least of which is that it is not necessary to pour large sums of money into expensive equipment or sizable tracts of land. The money we invest goes directly into breeding stock, and that's a productive investment. Additionally, I recently went through a complete IRS audit that established that our Alpacas are a legitimate, deductible agricultural enterprise," Cleve said.

John and Lauren LoVerde of Fleecy Dale Farm, Lambertville, New Jersy, echo the sentiments and beliefs of the Fredricksens, but from a very different perspective. Married just 3 1/2 years and expecting their first child in September, the LoVerdes purchased their first Alpacas in the fall of 1995. Three yearling females was their starting point. They now have six females, two males and four babies are expected later this year. Lauren is a medical doctor and John is a computer consultant with four full time employees. The operative words here are, "very busy people." Busy or not, Lauren and John share a love of animals and country living, so the hunt for the perfect animal got seriously underway.

"Our initial plan," says John, "was to purchase 2 pet-quality males for about $3000. However, the idea of buying a female and having those adorable babies born on our farm was too hard to resist. This forced us to rethink our plan."

When we first started looking at breeding females, we were blown away by the purchase price. However, we both felt that we would be in this for the long haul; that Alpaca breeding could be a new lifestyle and business venture. So I did a very careful - and very conservative - financial analysis. I even incorrectly, as it turns out, factored in a fairly sharp drop in prices. Even with my worst case scenario, my spreadsheets clearly demonstrated that we would do better breeding Alpacas than putting the money in the stock market or other traditional investments. So we took the plunge and bought three yearling females."

John's projections all proved to be somewhat on target, just too conservative. Part of this increase was the good fortune of having two baby girls born in the first year. In addition, the yearling females have increased in value as they have proven to be great mothers and produce quality offspring.

Based on their early history, they sold one of the baby girls and then purchased two more bred females and a herdsire. All this since late 1995. With four babies on the way this year and potentially six babies for the following year, their quality herd - and R.O.I. - is growing rapidly.