Question for the finance folks

[ihhawk]

I just signed off on the new shop building. 55k. They will start in March which is when the first 1/2 is due.

Question, for overall financial “sense” would it be better in todays climate to just pay cash for it or to finance it at 6.5% for 10 years and just make double and triple payments along the way?

Is it better to keep the cash in reserves right now vs the loan?

 

[Whiskeydeltadeltatango]

Not a finance guy, in for responses, I am a guy looking at building a steel building however. What size were you able to get for 55k if I may ask?

 

[CeeTeeHawk1]

I’d suggest paying cash, if you have it.

 

[DirtyJohns97]

If your alternative plan is to keep it in cash, pay for it up front. If you think you can make more than 6.5% with the money yourself, finance it.

 

[Whiskeydeltadeltatango]

Are you doing a loan through the builder, bank, heloc (if you don't mind)

 

[ihhawk]

Not a finance guy, in for responses, I am a guy looking at building a steel building however. What size were you able to get for 55k if I may ask?

30 x 60 x 12 tall. Also a 10ft lean to down the 60ft side. All concrete underneath. 6 windows, 2 doors, 16 x 10 garage door

I called the local bank up there and got the 6.5%. Seeing what Farm credit will offer.

I’m really wanting to keep as much cash in hand as possible so I can buy a house down here next year.

 

[Whiskeydeltadeltatango]

30 x 60 x 12 tall. Also a 10ft lean to down the 60ft side. All concrete underneath. 6 windows, 2 doors, 16 x 10 garage door

I called the local bank up there and got the 6.5%. Seeing what Farm credit will offer.

I’m really wanting to keep as much cash in hand as possible so I can buy a house down here next year.

Nice dude, congrats. That includes the concrete?

 

[ihhawk]

Nice dude, congrats. That includes the concrete?

Yes.

The gave an alternate to do a 30x 15 pad in front of the shed as well. Probably do it. It’s $5 a square ft.

 

[NCHawk5]

Is interest tax deductible or no? You’re basically relying on inflation remaining higher than interest rate for the complete term if you do cash.

 

[Bank of Hawk]

Tough call, that’s a lot of cash to part with at one point in time. If it’s business use, finance it for sure.

 

[notlongago]

I just signed off on the new shop building. 55k. They will start in March which is when the first 1/2 is due.

Question, for overall financial “sense” would it be better in todays climate to just pay cash for it or to finance it at 6.5% for 10 years and just make double and triple payments along the way?

Is it better to keep the cash in reserves right now vs the loan?

There won't be a single"right" answer, but more info will help.
Is this a personal building or business?
Does the builder offer a cash discount?
Are your emergency/savings funds fully stocked?
Do you foresee any other large cash purchases on the horizon?
Going to be hard to justify 6+% being worth it, especially when cash is losing value so quickly though, and the market outlook in the near future. But understanding there is a mental comfort to having cash in the bank has a value too, but that's more personal to you.

 

[SWIowahawks]

30 x 60 x 12 tall. Also a 10ft lean to down the 60ft side. All concrete underneath. 6 windows, 2 doors, 16 x 10 garage door

I called the local bank up there and got the 6.5%. Seeing what Farm credit will offer.

I’m really wanting to keep as much cash in hand as possible so I can buy a house down here next year.

You got all that with labor for $55k?

 

[SWIowahawks]

I’d say write the check for the first half in March. This gives you 5 more months to save on top of the cash you’ve already got. Another two months of construction until the other half is due. I see no reason to finance this. Especially, at 6.5%.

 

[NoleinATL]

I just signed off on the new shop building. 55k. They will start in March which is when the first 1/2 is due.

Question, for overall financial “sense” would it be better in todays climate to just pay cash for it or to finance it at 6.5% for 10 years and just make double and triple payments along the way?

Is it better to keep the cash in reserves right now vs the loan?

30 dollars a square foot, is it a prefab building?

As far as finance, I would talk to the contractor and negotiate a better draw schedule so you control the money longer.
Assuming it is a prefab building, negotiate the draw schedule to a deposit, site and pad, rough, finish, and substantial completion.
In that scenario, no finance charges and your money can earn interest during construction instead of financing the build for the contractor.

Then next year your shop can be depreciated as a business expense since it is used for your new handmade birdhouse business

 

[AlisonNorth80y]

I think it's important to think about what financial flexibility you'll have in the future. If you're able to make double and triple payments on the loan, you'll be able to pay it off more quickly if the financial climate improves. On the other hand, if you pay cash, you'll have more cash on hand right away, but you won't have the same flexibility down the line.