How to Calculate ROI on a Lagos Rental Property (With Examples)

TL;DR: ROI on a rental = (annual net income ÷ total cash invested) × 100. Gross yield ignores costs; net yield subtracts service charges, agency fees, maintenance and voids. Below are three worked examples — a Sangotedo 3-bed, a Lekki Phase 1 2-bed, and a Yaba mini-flat — so you can see exactly how the math behaves.

Most investors "calculate" ROI the way they estimate fuel consumption: optimistically, and without writing anything down. Then they're surprised when the numbers don't match the feeling. Let's fix that with actual arithmetic.

The three numbers you need

Gross yield = (annual rent ÷ purchase price) × 100. Quick, useful for comparing areas, and incomplete.

Net yield = ((annual rent − annual costs) ÷ purchase price) × 100. This is the number that pays your bills.

Cash-on-cash return = (annual net income ÷ actual cash you put in) × 100. Matters when you didn't pay 100% upfront — developer payment plans, mortgages, staged payments.

For buy-and-hold Lagos investing, net yield is the number I want every client to know before signing. Everything below uses it.

The costs most people forget

Before the examples, the deductions. On a typical Lagos rental:

Cost item	Typical range
Agency letting fee (on re-let)	10% of annual rent
Service charge (estates)	₦500K – ₦2M+/year
Maintenance reserve	~1% of property value/year
Void period	1–2 months' rent equivalent
Insurance	~0.3–0.5% of value/year

Amortise the letting fee across the tenancy (a 10% fee on a 2-year tenancy ≈ 5% per year). Be conservative on voids — assume 1.5 months until the area proves otherwise.

Example 1: 3-bedroom in Sangotedo — ₦85M

	Amount
Purchase price	₦85,000,000
Annual rent	₦7,000,000
Gross yield	8.2%
Less: service charge	−₦800,000
Less: agency (amortised)	−₦350,000
Less: maintenance (1%)	−₦850,000
Less: voids (1.5 months)	−₦875,000
Net annual income	₦4,125,000
Net yield	4.9%

Still respectable — and that's before appreciation, which in this corridor has been running 20%+ annually. Total return (yield + appreciation) is where Sangotedo shines.

Example 2: 2-bedroom in Lekki Phase 1 — ₦140M

	Amount
Purchase price	₦140,000,000
Annual rent	₦10,000,000
Gross yield	7.1%
Less: service charge	−₦1,500,000
Less: agency (amortised)	−₦500,000
Less: maintenance (1%)	−₦1,400,000
Less: voids (1 month)	−₦833,000
Net annual income	₦5,767,000
Net yield	4.1%

Lower net yield than Sangotedo, but superior liquidity and steadier appreciation. You're paying for the privilege of owning where everyone wants to buy.

Example 3: Mini-flat in Yaba — ₦28M

	Amount
Purchase price	₦28,000,000
Annual rent	₦3,200,000
Gross yield	11.4%
Less: service charge	−₦0 (non-estate)
Less: agency (amortised)	−₦160,000
Less: maintenance (1%)	−₦280,000
Less: voids (1.5 months)	−₦400,000
Net annual income	₦2,360,000
Net yield	8.4%

The humble mini-flat beats them both on yield. Lower entry, lower overheads, relentless demand. This is why Mainland cash-flow investors smile quietly while Island investors talk about "address value."

The payback lens

Flip net yield into payback period: 100 ÷ net yield = years to recover your purchase price in rent. Sangotedo: ~20 years. Lekki Phase 1: ~24 years. Yaba mini-flat: ~12 years. None of these include appreciation — add that and the picture improves everywhere, most dramatically in the growth corridors.

Frequently Asked Questions

What is a good ROI on rental property in Lagos? Net yields of 4-6% on the Island and 7-10% on the Mainland are realistic as of 2026. Add appreciation for total return — that's where growth corridors pull ahead.

How do you calculate rental yield in Nigeria? Gross: annual rent ÷ purchase price × 100. Net: subtract service charges, agency fees, maintenance and void provisions first. Always compare net to net.

Should I include appreciation in ROI? For total return, yes — but keep it separate from yield. Yield is what the property pays you; appreciation is what the market might give you. One is contractual, the other is a forecast. Don't spend forecasts.

What costs reduce rental ROI in Lagos most? Service charges in estates (often the single biggest line), void periods between tenants, and maintenance. Agency fees sting on short tenancies — negotiate longer leases where possible.

Is 5% net yield good in Lagos? On the Island, yes — especially paired with appreciation. On the Mainland, you'd want more, since appreciation is slower. Context matters more than the number alone.

How can I increase my rental property ROI? Reduce voids (price realistically, maintain well), control service-charge bloat (attend estate meetings), consider shortlets in high-demand areas, and buy below market through distress or off-plan — the cheapest yield boost is a lower purchase price.