After installing ColdFusion Builder, I noticed that you can simply use the defaultLocal server or alternatively you can add another server.
In my specific case I'm experimenting with a development workstation, however being that I only have a license for ColdFusion Builder 3, I don't have an option to configure the server for ColdFusion 2016. After speaking with an Adobe technician, I was told that I could install ColdFusion 2016 separately (on the same workstation) and simply set the ColdFusion 2016 server as my external server in ColdFusion Builder 3.
This brings me to my next point, are there any benefits of including an external server even though it's installed on the same development machine, or should I simply shell out the extra capital for a ColdFusion Builder 2016 license?
ColdFusion Builder 2016 will have some bug fixes not present in CF Builder 3, as well as an updated release of the Eclipse IDE. However, if you want to set up a separate Builder-compatible ColdFusion install from the one built into CF Builder, you can find a download of the CF 11 installer on the community-supported CFMLRepo.