--- title: "How to Calculate ROI on a Lagos Rental Property (With Examples)" url: "https://buyrentlagos.com/articles/how-to-calculate-roi-on-a-lagos-rental-property-with-examples" published: "2026-04-16T15:00:00+00:00" updated: "2026-10-08T04:23:17.821623+00:00" author: "Laide Matthews" category: "Renting" verified: false --- # How to Calculate ROI on a Lagos Rental Property (With Examples) 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. > **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. ## Related reading - [Rental Income Tax in Lagos: What Landlords Must Know](/articles/rental-income-tax-in-lagos-what-landlords-must-know) - [Shortlet vs Long-Term Rent in Lagos: Which Earns More?](/articles/shortlet-vs-long-term-rent-in-lagos-which-earns-more) - [Lagos Tenancy Law: What Every Tenant & Landlord Must Know (2026)](/articles/lagos-tenancy-law-what-every-tenant-landlord-must-know) - [Maryland Lagos Property Guide: What Your Money Buys](/articles/maryland-lagos-property-guide-what-your-money-buys)