Return on Assets (ROA)

Return on assets is income divided by the total value of assets used to produce it. For a single rental the closest version is NOI over the property value, which is the cap rate. Cash on cash return swaps the denominator for your own cash and subtracts the loan payment from the top.

On the default deal, NOI of $40,210 on a $500,000 property is an 8.0% return on the asset. Cash on cash is 6.3% because debt service takes $30,698 and the denominator shrinks to $150,000. The asset earns the same either way; the financing decides how much of that reaches you.

Comparing the two tells you whether the loan is helping. When cash on cash is above the asset return, leverage is positive. When it is below, as here, the loan costs more than the property yields and a larger down payment would raise the return.

Further reading: Return on Assets (ROA) on Wikipedia.