What is cash-on-cash return?
Cash-on-cash return is annual cashflow after debt service divided by the equity you actually invested (down payment plus acquisition costs).
Formula
Cash-on-cash = (NOI − annual debt service) ÷ equity invested × 100
Example
NOI €18,000, debt service €12,000, equity €120,000: 6,000 ÷ 120,000 = 5%.
Why it matters
It shows what leverage does to your return — positive when net yield exceeds the loan rate, negative when it does not.
Frequently asked questions
How is it different from net yield?
Net yield ignores financing; cash-on-cash measures the return on your own money after the mortgage.
Can cash-on-cash be negative?
Yes, when debt service exceeds NOI — a warning sign that the property does not carry its own loan.