June 17, 2026
Cash on cash, and the trap in the leveraged number
Leverage makes the headline return bigger and the property harder to hold. Both are true at once, and only one of them is printed.
Jessica Pool
June 17, 2026 · 1 min read
Cash on cash is the number most investors actually optimize, and it has a property worth understanding before you let it choose a deal for you: it gets better as the deal gets more fragile.
The arithmetic
Annual cash flow divided by the cash you put in. Put in less, and the same cash flow divides into a smaller number — so the percentage rises.
Put 20% down instead of 30% and the return on paper improves, even though the property now earns less every month, because you are dividing a smaller number by a much smaller number.
What the number stops telling you
At 20% down the mortgage is larger, DSCR is thinner, and the margin between "this pays for itself" and "I am writing a check every month" is narrower. A $150 rent shortfall is absorbed at 30% down and is a monthly problem at 20%.
The same property, at the same price, with a better headline return and less room to be wrong.
How to read the two together
- Cash on cash tells you what the money earns.
- DSCR tells you how much has to go wrong before it stops.
A deal at 11% cash on cash and 1.10 DSCR is not obviously better than one at 8% and 1.35. It is a different bet, with more of it borrowed.
In the model
Move the down payment on any listing here and watch both numbers move in opposite directions. That divergence is the trade, laid out plainly, and it is the most useful thirty seconds you can spend on a listing.
