Should I Build Now… or Wait
Wait for Interest Rates to Come Down?
Another “Ahhhh… Now That Makes Sense!” Building Question
It may be one of the most reasonable questions a building buyer can ask today:
“Should I wait until interest rates come down?”
Maybe.
But before you decide, there may be another question worth asking:
What is WAITING costing me?
We tend to notice interest rates because they are easy to see. 6%. 7%. 8%. There it is, right on the financing proposal.
The economic value of actually HAVING the building can be much harder to see.
And sometimes, that number matters just as much.
Should Cheaper Money Mean a Less Costly Decision?
Nobody knows with certainty where interest rates will be six months or a year from now.
Rates could fall. They could remain elevated. They could even rise.
So rather than trying to predict the financial markets, perhaps there is a simpler exercise:
Calculate what having your building sooner might actually be worth to YOU.
If you wait twelve months hoping for a better interest rate, you aren’t only waiting for cheaper financing.
You are also waiting twelve months to USE the building.
What is THAT worth?
Grab a Pencil… Here’s a 5-Minute Exercise
Imagine your building were completed and available for use today.
Don’t worry about getting these numbers perfect. Use reasonable estimates based on your own situation.
What could having the building NOW be worth each month?
Rent or outside storage you could eliminate:
$________ / month
Additional income or productive capacity the building could enable:
$________ / month
Travel, fuel, hauling or delivery costs you could reduce:
$________ / month
Labor or operating efficiencies you could gain:
$________ / month
Equipment, inventory or materials better protected from weather, damage or loss:
$________ / month
Time and convenience: What is having everything where you need it actually worth to you?
$________ / month
Other measurable savings or benefits:
$________ / month
TOTAL ESTIMATED MONTHLY VALUE:
$________ x Multiply that by 12. = $________
ESTIMATED VALUE OF HAVING THE BUILDING FOR THE NEXT YEAR.
Now we have another number to put beside the interest rate.
Next, Estimate the Cost of Owning Sooner
Ask your lender to help you estimate the financing cost of purchasing now versus the financing scenario you are considering by waiting.
The important comparison isn’t necessarily:
“What is my entire monthly payment?”
Part of that payment may be principal going toward an asset you own.
Instead, ask:
“What is the estimated additional financing cost of owning this building during the period I am considering waiting?”
Then compare:
ESTIMATED VALUE OF HAVING THE BUILDING SOONER:
$________
ESTIMATED ADDITIONAL FINANCING COST OF OWNING SOONER:
$________
DIFFERENCE:
$________
Now THAT can be an interesting number.
A Simple Example
Suppose having a building today could reasonably:
Save $1,500 per month in rent or storage.
Create $2,000 per month in additional productive capacity or income.
Save $400 per month in hauling, fuel or travel.
Create another $500 per month of measurable efficiency and convenience.
That’s approximately:
$4,400 per month
or
$52,800 over twelve months.
That does NOT automatically mean someone should build now.
It simply means that waiting twelve months has a potential economic consequence that deserves to be considered alongside the possible savings from a future lower interest rate.
Suddenly the decision isn’t only:
“What interest rate can I get?”
It becomes:
“What does this building DO for me?”
Ahhhh…
Now that makes sense.
PRICE and COST Aren’t Always the Same Thing
This thinking applies beyond interest rates, too.
When comparing buildings, it is tempting to compare the numbers at the bottom of two proposals and assume the lower number represents the lower-cost choice.
Sometimes it does.
Sometimes the buildings, materials, engineering, usable space, longevity, maintenance requirements, erection methods, flexibility or included components are materially different.
The important question isn’t simply:
“Which one costs less?”
It may be:
“What am I receiving for each dollar, and which solution creates the best value for MY needs?”
There isn’t one universal answer.
That’s precisely why asking the questions matters.
Ahhhh…
Now that makes sense.
Don’t Predict. Calculate.
We can’t tell you where interest rates will be next year.
We can’t tell you what your time is worth.
We can’t determine how much additional income your business could generate from more space.
And we certainly can’t decide what convenience is worth to you.
But YOU can estimate those things.
And sometimes putting those numbers on a piece of paper turns a difficult emotional decision into a much clearer business decision.
So before deciding to build now…
or deciding to wait…
try one more calculation:
What is the building worth to me while I’m waiting?
You may discover that waiting makes perfect sense.
You may discover that it doesn’t.
Either way, you’ll be making the decision using more than just the interest rate.
And THAT may be worth five minutes with a pencil.
Want Some Help Working Through It?
A Miracle Truss® Building Consultant can help you think through the building-related questions and provide the information you need to compare your options.
Bring your own numbers. Bring your questions. Bring your calculator.
We’ll bring the building knowledge.
The decision is still yours.
This article and any related worksheet or calculator are provided for general educational and planning purposes only. Estimates depend entirely on the assumptions and information entered by the user and are not guarantees of savings, income, return on investment, financing availability or future costs. Miracle Truss does not provide financial, lending, tax, accounting or investment advice. Financing terms should be confirmed with your lender and tax/accounting considerations with your qualified professional.
