We all know the benefit of waiting for free agency: The unquestioned king of the NBA, LeBron James, will be set free for a possible pairing with friend Dwyane Wade. The dream is as alive as it has ever been.

So… what’s the cost?

In short, money.

The salary cap for next season is currently projected at $54.0 million. Utilizing this figure as a benchmark, I will attempt to demonstrate what the costs and the benefits are to the Miami Heat of rebuilding via free agency versus starting the process at the upcoming trade deadline.

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Free Agency: If the Heat were to elect to rebuild through free agency in the summer of 2010, as has been Pat Riley’s plan for the past three seasons, the team would be confined by the limits of the salary cap. That’s $54.0 million, and no more!

None of the exceptions commonly thrown around would be applicable. About the only way for the Heat to exceed this figure would be by signing minimum contract players (teams can sign as many such players as they choose, no matter their salary cap situation).

The Heat currently has Michael Beasley and Daequan Cook under contract for next season, and James Jones has a partial guarantee. That’s $9.0 million already used up. Dwyane Wade and another max contract free agent would be at least another $33.1 million. And the upcoming first round draft pick would eat even more.

Here’s how it might look:

Current Roster Players (Beasley, Cook, and Jones guarantee): $9.0 million
First Round Draft Pick (assumed #15 overall): $1.4 million
Max Contract Players (Wade and James?): $33.1 million
Total: $43.6 million

Unless the salary cap gets an unexpected jolt, the Heat would have just $10.4 million with which to complete its roster, of which no more than $7.6 million could be spent on any one player. That kind of cash might buy a high-quality third starter, with the entire rest of the roster, 7-9 players, relegated to minimum contracts.

That’s a big risk, with the potential for a big return.

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Trade Deadline: If the Heat were to start the rebuilding process at the trade deadline, the team would have no salary cap constraints. They could conceivably spend nearly twice the amount described above, as some teams are doing this season!

Of course, all roster improvements would need to come primarily through trade, and the Heat doesn’t have many trade assets to speak of. But if trade partners could be found, the Heat would be eligible to receive back players with salaries of up 125% + $100,000 of those they trade away. That’s more than $70 million of potential salary to surround Dwyane Wade with.

The Heat would also have access to both the mid-level and bi-annual exceptions. The mid-level exception would allow the Heat to sign any free agent up to the average salary (~$5.8 million). It may be split and given to multiple players. The bi-annual exception would allow the Heat to sign one additional player to a one or two-year contract starting at $2.1 million.

The Heat would also be allowed to sign its first round draft pick.

We’re talking about more than $100 million to play with.

Of course, this is just a depiction of how much the team could spend. There are many reasons why it would never happen: (i) all trades need two willing parties, (ii) finding takers for every Heat free agent is patently ridiculous, and (iii) we’re talking huge luxury tax considerations.

But it does raise an important question: what’s the right strategy?

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The answer could depend on what’s available next month.

A trade for Amare Stoudemire – pairing him with Wade – would be a solid start. And since Amare is scheduled to become a free agent at season’s end, it would not risk the free agency alternative. The Heat should undoubtedly focus its efforts to this end.

If more could be layered on top of this combination before the trade deadline (with the prospect of the mid-level, bi-annual and first round draft pick exceptions to come), going all in at the trade deadline could prove to be the better strategy.

If not, LeBron James here we come!