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The short answer
Work it out net, in naira and then in dollars. Take the annual rent, subtract voids, management fees, repairs, Land Use Charge, insurance and the 10% withholding tax a corporate tenant deducts from rent, and divide by the total cost of land, building and fees. In our labelled example a ₦150 million Lagos block grossing ₦18 million a year nets about ₦12.4 million after withholding, an 8.3% net yield in naira before income tax, and the dollar return depends on how the naira moves over the years you hold it.
Start with total cost, not the building quote
Diaspora investors often quote a yield as annual rent divided by the builder's price. That leaves out the land, the professional fees, the title perfection, and the months the building earns nothing while it is being finished and let. The denominator should be everything you put in.
| Cost item (example) | ₦ |
|---|---|
| Land, with perfected title | 45,000,000 |
| Construction of four two-bedroom flats | 90,000,000 |
| Architect, structural engineer, approvals | 6,000,000 |
| Legal, stamping, consent, registration | 5,000,000 |
| Fittings, meters, water, fencing | 4,000,000 |
| Total invested | 150,000,000 |
Every figure in this article's tables is an example, not a market price. Building material prices move with location, transport and the exchange rate, so get current quotes from a registered quantity surveyor before you fix a budget.
From gross rent to net income
| Line (example) | ₦ per year |
|---|---|
| Gross rent: 4 flats x ₦4,500,000 | 18,000,000 |
| Less voids: one flat empty 3 months | (1,125,000) |
| Rent collected | 16,875,000 |
| Management or agency fee, 10% of collected | (1,687,500) |
| Repairs and maintenance | (900,000) |
| Land Use Charge | (400,000) |
| Insurance and common-area power | (600,000) |
| Net before Nigerian tax | 13,287,500 |
| Less 10% withholding on rent from corporate tenants (2 flats, ₦9,000,000) | (900,000) |
| Net cash after withholding | 12,387,500 |
Net yield on cost is ₦12,387,500 / ₦150,000,000 = 8.26% before any further Nigerian tax due on the rent, and before US tax. Gross yield on the same figures is 12%. The gap is the point of the exercise. Whether the withholding is your whole Nigerian tax on the rent or only a credit against it changes the final figure.
The costs that are not optional
- Land Use Charge (Lagos). The Lagos government said in March 2026 that owners and landlords, not tenants, pay it, with a 15% discount for early payment within the stipulated period.
- Withholding tax on rent. The Withholding Regulations 2024, as summarised by PwC, set 10% on rent; companies and government bodies deduct it, individual tenants generally do not. The NiDCOM diaspora tax guide also says rent carries 10% withholding regardless of where the landlord lives. Whether that 10% is your final Nigerian tax as a non-resident is not settled on the pages we read; ask a Nigerian tax adviser.
- Nigerian income tax on rent. Rent is taxable investment income under the Nigeria Tax Act 2025, and non-residents are taxed on income derived from Nigeria (Mondaq, January 2026).
Now convert to dollars
Your money started in dollars, so the return that matters to your US household is in dollars. A naira yield of 8% can be a negative dollar return if the naira weakens faster. Example: you invest the dollar equivalent of ₦150,000,000 at ₦1,500 to $1, which is $100,000. Year one net cash of ₦12,387,500 at ₦1,600 is $7,742, a 7.7% dollar yield. If the naira is at ₦2,000 by year five and rent has not risen, the same naira income is $6,194, or 6.2%, and the property's dollar value has fallen unless naira prices rose with it. Exchange rates here are illustrations, not forecasts.
Nigerian landlords often raise rents at renewal, but in Lagos the Tenancy Law limits advance rent and sets procedures for increases and recovery; see managing a Nigerian rental from the US.
The US tax layer
A US citizen or resident reports the rent on Schedule E (IRS Publication 527). Nigerian rental property is "used predominantly outside the United States", so 26 U.S.C. s.168(g) puts it on the alternative depreciation system, with a 30-year recovery period for residential rental property rather than the 27.5 years used for US rentals. Land is never depreciated. Nigerian income tax on the rent may be creditable on Form 1116, subject to limits. Our guide to depreciating Nigerian rental property works through the numbers, and is Nigerian property reported to the IRS? covers reporting.
Worked example: US depreciation on the same block
Building and fees attributable to the building, excluding land: ₦105,000,000. At ₦1,500 to $1 on the date placed in service, that is $70,000. Straight-line over 30 years is about $2,333 a year (less in the first year under the mid-month convention). That deduction offsets part of the dollar rental income on Schedule E. Figures are examples.
Questions to settle before you build
- Who are the likely tenants, and what do comparable flats in that street actually let for? Ask two agents for evidence of recent lettings, not asking prices.
- How long will construction take from abroad, and what does each month of delay cost in lost rent?
- Will tenants pay yearly in advance, as is common, and how will you hold that lump sum until costs fall due?
- Who manages repairs and voids, and at what fee?
- What is your exit: selling the block, selling flats individually, or holding for family? Nigerian tax on a later gain now runs at personal income tax rates; see selling Nigerian property from the US.
Where Pryme fits
A Pryme account opened from the US can receive rent in naira on local account details, keep it in naira for costs at home, and convert to dollars only when you choose with Swap, which shows the rate and fee before you approve. Statements, including verifiable ones through VerifyDoc.ai (receipts), make the Schedule E records easier. See multicurrency accounts.
Questions people ask
What is a good rental yield in Lagos?
There is no official benchmark. Work out net yield after voids, fees, repairs, Land Use Charge and withholding tax on total cost, then check the dollar return.
Who pays Land Use Charge, landlord or tenant?
The Lagos government said in March 2026 that owners and landlords pay it, not tenants.
Is there withholding tax on rent in Nigeria?
Yes. The 2024 Withholding Regulations set 10% on rent, deducted by companies and government bodies paying rent.
How is Nigerian rental property depreciated in the US?
Over 30 years on the alternative depreciation system, because it is used predominantly outside the US. Land is not depreciated.
Sources
- TheNigeriaLawyer: Landlords, not tenants, must pay Land Use Charge, Lagos govt announces 15% discount (Mar 2026) · accessed Oct 2026
- PwC Nigeria: Highlights of the Deduction of Tax at Source (Withholding) Regulations 2024 · accessed Oct 2026
- NiDCOM: NGEX Diaspora Guide to Nigeria's 2026 tax reforms · accessed Oct 2026
- Mondaq (Adeola Oyinlade & Co): Understanding personal income tax under the Nigeria Tax Act 2025 (5 Jan 2026) · accessed Oct 2026
- IRS: Publication 527 (2025), Residential Rental Property · accessed Oct 2026
- 26 U.S. Code s.168, Accelerated cost recovery system (Cornell LII) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.