Suppose I bought a house for $100,000.  If I could get $10,000 in rental revenue (after property management and property taxes,) my return on investment would be 10%. 

Or would it?

Sure if I paid the $100,000, my return would be 10%. 

But chances are I only put a small "down payment" (let's say $25,000) toward the house.  This means I have interest expense (let's say another 5,000 a year.)   

So I really did not make a $100,000 investment.  I made a $25,000 investment, which is generating $5,000 in rental revenues (after interest and property expenses.) And this works out to a 25% "cash on cash" return on investment.

So when you hear ...

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