This example might help you, too. (Note that it agrees with Anotherreader and Arebelspy:
You have a $100,000 property which you finance with an $80,000 mortgage and a $20,000 down payment. Your rental income equals $10,000, your expenses equal $5,000, so your income equals $5000.
Your cap rate equals the $5,000 of income divided by the $100,000 purchase price, so 5%.
Your cash on cash equals the $5,000 of income divided by the $20,000 down payment, so 25%.
Note what Anotherreader pointed out: If you bought the property for all cash, your cash on cash return equals the $5,000 divided by your $100,000 "down payment" so 5%.. just like the cap rate.
Two other related comments:
Your true overall property-level internal rate of return (IRR) equals the cap rate plus the appreciation rate. E.g, if the cap rate equals 5% and the appreciation equals 3%, your property's internal rate of return equals 8%.
Leverage works in a positive sense when you borrow money for less than your project internal rate of return. E.g., if you borrow money at 4% and invest in a project earning an 8% project IRR, you get a big bump in your profitability... which will show up in your cash on cash return.