Less cash in, same cash flow
Financing shrinks the cash you put in. If the property still cash-flows after the mortgage, dividing a positive cash flow by a smaller investment raises your cash-on-cash return.
The double-edge
Leverage magnifies both directions. If rents dip or rates rise, the mortgage can turn cash flow negative, and the same math that boosted your return now works against you.
Find your comfort zone
Higher leverage means higher potential cash-on-cash but thinner safety margin. Model a rent drop and a vacancy before deciding how much debt to take on.
Frequently asked questions
Does a mortgage increase cash-on-cash return?
It can — by reducing the cash invested, as long as the property still cash-flows after the payment.
Is more leverage always better?
No. It magnifies losses too and thins your cushion against vacancy and rate changes.
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.