I had the understanding that leverage always helped improve cash on cash returns so long as the interest paid was less than the unlevered rate of return/cap rate. doing a quick back of the envelope calculation in excel on first year returns seems to suggest otherwise.
my quick calculations show that there is a spread required from interest rate to cap rate in order to achieve positive first year leverage. It also shows that as amortization tightens the necessary spread increases.
I'm only considering year one one returns with and without leverage, so not taking into account any NOI growth
is my analysis correct here? what am I missing?