Lagos landlords frequently quote gross rental yields of 6, 8, or even 10% when justifying a property purchase. These numbers are not fabricated — they represent annual rent divided by purchase price, and they are accurate as far as they go. The problem is that gross yield is not what you take home. Between the gross yield and the money that actually reaches your account sits a collection of costs that most yield calculations ignore. This article gives you the real net yield picture — by property type and location — and explains how to build your own honest calculation before buying.
The gross-to-net gap: how much does it actually cost to run a Lagos rental?
The cost items that separate gross from net vary by property type, location, and whether you manage the property yourself or through an agent. Here is a realistic breakdown for a typical Lekki Phase 1 3-bedroom apartment renting at ₦4.5m per annum:
- Gross annual rent: ₦4,500,000
- Service charge (estate levy): ₦400,000–₦800,000 per annum. In many Lekki estates, the service charge is paid by the tenant, but in others it falls on the owner. Confirm which applies for any property you are evaluating.
- Agency renewal commission: 10% of annual rent (₦450,000) paid to the letting agent at each renewal if you use an agent. Some landlords negotiate this to 5% on renewals. On a buy-to-let with no plans to self-manage, budget this every 1–2 years.
- Vacancy allowance: Even well-located properties in Lekki average 1–2 months of vacancy per year over a long hold (tenant changeovers, market softening periods, brief refurbishments). At ₦4.5m annual rent, 6 weeks vacancy costs approximately ₦520,000.
- Maintenance and repairs: Budget 1–2% of property value per annum for routine maintenance. On a ₦90m property, that is ₦900,000–₦1,800,000 per annum averaged over the hold period. In a good year it is lower; in a year when the generator needs an overhaul, plumbing repairs are needed, or repainting is required between tenants, it is higher.
- Generator maintenance (if owner-managed): Standalone properties with private generators: ₦150,000–₦400,000 per annum for servicing and periodic component replacement, separate from diesel cost. In estate-managed properties where generator maintenance is covered by the service charge, this may not apply.
- Withholding tax and land use charge: Lagos State Land Use Charge is assessed annually on property owners. The current rate is approximately 0.076% of land value per annum for owner-occupied and tenanted residential properties, with variations by zone. Withholding tax on rental income is levied at 10% on commercial properties, with residential properties having specific treatment under Personal Income Tax rules. Consult a tax adviser for your specific situation — but budget at least ₦100,000–₦200,000 per annum for compliance costs including Land Use Charge and accountant fees.
The net yield calculation: working example
Continuing the Lekki 3-bedroom example (purchase price ₦90m, annual rent ₦4.5m, 5% gross yield):
- Gross rent: ₦4,500,000
- Less service charge (owner-paid): ₦600,000
- Less agency renewal: ₦450,000 (amortised annually)
- Less vacancy allowance: ₦520,000
- Less maintenance: ₦1,000,000
- Less tax and compliance: ₦150,000
- Net annual income: approximately ₦1,780,000
Net yield on ₦90m purchase: approximately 2.0%. This is not unusual — it is the reality for much of the Lekki market when costs are accounted for fully. The 5% gross yield advertised by the selling agent becomes a 2% net yield after the costs that the agent does not include in their yield calculation.
Net yield by property type and location
The net yield picture varies significantly by property type and location. Here are representative benchmarks:
- Lekki Phase 1 apartment (2–3 bed): Gross 5–7%, Net 2–3.5%
- Ikoyi apartment (2–3 bed): Gross 4–6%, Net 1.5–3%
- Ajah estate house (3–4 bed): Gross 6–9%, Net 3–5% — better net yield than Island properties because purchase prices are lower relative to rents
- Abuja apartment (Wuse 2 / Maitama, 2–3 bed): Gross 5–8%, Net 2.5–4.5%
- Lagos Mainland house (Magodo / Omole, 3–4 bed): Gross 4–6%, Net 2–3.5% — lower because of high maintenance costs on older housing stock
- New GRA Port Harcourt apartment (corporate let): Gross 7–10%, Net 4–6% — the strongest net yield segment, driven by corporate tenant demand that keeps vacancy low and justifies higher rents relative to purchase price
Short let vs long let: the yield trade-off
Short let gross yields in Lagos peak corridors (Phase 1, Ikoyi, Chevron) can reach 12–20% on a per-night basis when fully occupied. Net yields after platform fees (typically 15–20%), cleaning turnover costs (₦5,000–₦15,000 per turnover), linen and consumables replacement, guest damage provisions, and off-peak vacancy often land in the 5–9% net range — genuinely higher than long let in the same location. The trade-off is operational intensity: a short let is a hospitality business, not a passive income stream. Landlords who do not treat it as such — investing in reliable power, responsive management, and consistent quality — see net yields collapse to long let equivalents or below.
How to build your own net yield calculation
Before purchasing any buy-to-let property in Lagos, build a conservative net yield model using these steps:
- Establish gross annual rent from current market comparables in the specific estate (not district averages).
- Confirm whether service charge is paid by tenant or owner for that specific building and estate.
- Budget agency renewal at 10% amortised over expected tenancy length.
- Apply a 10–15% vacancy allowance on annual gross rent.
- Budget maintenance at 1.5% of purchase price per annum.
- Add Land Use Charge and compliance costs.
- Divide net income by purchase price to get net yield.
If the net yield after this calculation is below 2.5%, the investment case rests primarily on capital appreciation rather than income. That is a legitimate investment thesis, but it should be stated explicitly rather than hidden behind a gross yield number that implies passive income it does not deliver.
Bottom line
Lagos buy-to-let can be a sound investment — but the investment case should be built on accurate net yield, not gross yield. The most common mistake is comparing gross yield quotes across different markets without accounting for the cost structures that make them incomparable. Build your own net yield model for any property before you commit capital. The properties that look most attractive on a net basis are typically in Ajah estates and Port Harcourt New GRA — not in the premium Island addresses that attract the most agent attention. Browse buy-to-let properties on Cabans and apply your own net yield filter before shortlisting.