Rental yield is the most important number for any investor buying property for income. It tells you what percentage of your purchase price you earn back each year through rent. Yet many Lagos property investors cannot calculate it and many agents quote misleading figures.
Here is how to do it properly.
Gross Rental Yield
The simplest calculation. Take the annual rental income, divide it by the purchase price, and multiply by 100.
Formula: (Annual Rent / Purchase Price) × 100 = Gross Yield %
Example: You buy a 3-bedroom flat in Lekki Phase 1 for 45 million Naira. The annual rent is 3.5 million Naira. Gross yield: (3,500,000 / 45,000,000) × 100 = 7.8%
This gives you a headline figure, but it overstates your actual return because it ignores costs.
Net Rental Yield
This is the number that matters. Net yield accounts for the costs of owning and managing the property.
Costs to deduct from annual rent: property management fee (typically 8-12% of rent collected), vacancy periods (budget 5-10% depending on location and property type), maintenance and repairs (budget 5-8% of annual rent), insurance, and land use charge.
Formula: ((Annual Rent - Total Annual Costs) / Purchase Price) × 100 = Net Yield %
Example: Same property. Annual rent: 3.5 million. Management fee (10%): 350,000. Vacancy (8%): 280,000. Maintenance (5%): 175,000. Land use charge: 50,000. Total costs: 855,000. Net income: 2,645,000. Net yield: (2,645,000 / 45,000,000) × 100 = 5.9%
The difference between gross and net in this case, nearly 2 percentage points is real money that many investors fail to account for.
What Is a Good Yield in Lagos?
Gross yields in Lagos typically range from 5-10% depending on location and property type. Net yields generally fall between 4-7%. For context, this is competitive with many global cities and significantly better than bank deposit rates in Nigeria.
Higher yields tend to come from: smaller units (1-2 bed apartments), developing areas with lower purchase prices, and furnished or serviced apartments.
Lower yields but stronger capital appreciation tend to come from: premium locations like Ikoyi and Banana Island, larger properties, and areas where prices have already matured.
Using Yield to Compare Investments
Yield is most useful as a comparison tool. If Property A offers 5.2% net yield and Property B offers 6.8% net yield, Property B earns you more relative to what you paid assuming similar risk profiles. But always pair yield analysis with appreciation potential. A lower-yield property in a high-growth area may deliver better total returns over 5 years than a high-yield property in a mature area.
JESFEM's Property Intelligence tools on our website calculate yield automatically for every listing, using current market data for each Lagos area. Try it on any property page to see the numbers for yourself.
