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The short answer
Rental yield is annual rent divided by the property's value. Stears data reported by BusinessDay in July 2026 put yields across Lagos Island areas between 3.09% (Ikoyi) and 5.85% (Chevron). Those are headline figures: after empty months, management, repairs, insurance, property charges and income tax, a landlord's net return is usually well below the gross yield, as the worked example shows.
Gross yield and net yield
- Gross yield
- Annual rent ÷ property value × 100. Easy to quote, and what most listings mean by "yield".
- Net yield
- (Rent actually collected − all running costs) ÷ property value × 100. What you actually earn on the money tied up.
- After-tax yield
- Net yield after income tax on the rental profit.
Always ask which one someone is quoting. The BusinessDay report of Stears figures does not say whether its yields are gross or net, so treat them as headline figures.
What yields look like in Lagos
| Area (Lagos Island) | Reported yield, July 2026 |
|---|---|
| Chevron | 5.85% |
| Ikota Elegushi | 5.02% |
| Oniru | 4.88% |
| Victoria Island | 4.59% |
| Osapa London | 4.28% |
| Lekki Phase 1 | 3.95% |
| Ikoyi | 3.09% |
The same report noted that the most expensive neighbourhoods are not the highest-yielding. It also cited Lagos Realty's 2026 report for average two-bedroom rents of ₦17.25m a year in Ikoyi, ₦15m in Victoria Island, ₦10m in Lekki Phase 1 and ₦8.5m in Ikate. We did not find comparable sourced yield figures for Abuja or Port Harcourt.
The costs that turn gross into net
- Empty months (voids): time between tenants, and time spent repairing and re-letting.
- Management: if an agent or manager collects rent and handles tenants, they charge a fee; agree it in writing. In Lagos lettings, Ownkey reports that the tenant customarily pays the 10% agency fee and an agreement or legal fee of about 10% on a new let, so these are not usually the landlord's costs, but a managing agent's ongoing fee is.
- Repairs and maintenance: plumbing, painting, roofing, generators, pumps and repairs between tenancies.
- Service charges on estates and blocks, where the landlord pays for vacant units.
- Insurance and property charges: building insurance and state charges such as land use charge. Check your state's current bill.
- Income tax: rents are part of an individual's chargeable income under the Nigeria Tax Act 2025, according to Mondaq's January 2026 summary.
Worked example: from gross to after-tax
Example. A flat bought for ₦80,000,000 lets for ₦4,500,000 a year. All cost figures are assumptions for illustration; use your own quotes.
| Line | Amount |
|---|---|
| Gross rent | ₦4,500,000 (gross yield 5.63%) |
| Less one empty month (1/12 of rent) | −₦375,000 |
| Rent collected | ₦4,125,000 |
| Managing agent at 10% of rent collected | −₦412,500 |
| Repairs and maintenance | −₦300,000 |
| Building insurance | −₦100,000 |
| Land use charge and other property charges | −₦150,000 |
| Net rental income | ₦3,162,500 (net yield 3.95%) |
| Income tax if the whole amount falls in the 18% band | −₦569,250 |
| After-tax income | ₦2,593,250 (after-tax yield 3.24%) |
The 18% line assumes the landlord's other income already fills the lower bands, using the Nigeria Tax Act 2025 bands reported by BusinessDay; which expenses are deductible is a question for a tax adviser. The point is the gap: a 5.63% headline yield becomes about 3.2% after costs and tax in this example.
Compare it with the alternatives
The October 2026 three-year FGN Savings Bond paid 14.071% a year, as Nairametrics reported, with no tenants or repairs. A property investor is therefore relying on the property's value rising over time, not on rent alone. Price growth is not certain, and property is slow and costly to sell.
Other things that cut the return
- Arrears: a tenant who stops paying mid-tenancy, and the time and legal cost of recovering the property.
- Major works: roofs, wiring and boreholes do not fail every year, but when they do the bill can equal several months' rent. Set aside part of each year's rent for them.
- Buying costs: legal fees, survey, title perfection and agency fees on purchase add to what you actually paid, which lowers the true yield.
- Financing: if you borrowed to buy, interest comes before your income. At high interest rates, a mortgaged rental can lose money every year.
Rules that affect a landlord's cash flow
In Lagos, the Tenancy Law 2011 limits how much rent in advance a landlord may demand. As summarised by Ownkey, a landlord may not demand more than one year's rent from a new tenant for a yearly tenancy, or more than six months from a sitting monthly tenant. The full rules and the notice periods are in our guide to Lagos Tenancy Law on rent advance and notice. Using unregistered agents also carries risk; see fake house agents in Lagos.
What to check first
- Work out net yield, not gross, using real quotes for every cost.
- Assume at least one empty month a year until you have evidence otherwise.
- Budget for income tax on the rental profit.
- Compare the after-tax figure with what the same money earns in a government bond.
- Decide whether you are investing for rent, for price growth, or both, and test each separately.
If you would rather own property through a pooled investment, read how real estate crowdfunding is regulated first.
Where Pryme fits
Landlords and tenants both need clean records. With Pryme's partner VerifyDoc.ai, any customer can generate a regular or a verifiable receipt for rent paid or received, which anyone can check is genuine and unaltered.
Questions people ask
What is a good rental yield in Nigeria?
Reported yields for Lagos Island areas in July 2026 ranged from 3.09% in Ikoyi to 5.85% in Chevron, per Stears data in BusinessDay. Net yield after costs and tax is lower.
How do I calculate rental yield?
Gross yield is annual rent divided by property value, times 100. For net yield, subtract empty months, management, repairs, insurance and property charges from the rent first.
Do landlords pay tax on rent in Nigeria?
Yes. Rent is part of an individual's chargeable income under the Nigeria Tax Act 2025, taxed at the personal income tax bands.
Who pays the agency fee in Lagos, landlord or tenant?
Ownkey reports that in Lagos lettings the tenant customarily pays the agency fee and an agreement fee. A landlord who uses a managing agent pays that agent's ongoing fee.
Sources
- BusinessDay: Rental yields challenge assumptions as Ikoyi trails Lekki corridor (16 Jul 2026) · accessed Oct 2026
- Ownkey: Real estate agent commission fees in Nigeria, who pays (1 Aug 2026) · accessed Oct 2026
- Ownkey: Nigeria real estate market dynamics, advance rent (21 Jul 2026) · accessed Oct 2026
- Mondaq (Adeola Oyinlade & Co): Personal income tax under the Nigeria Tax Act 2025 (5 Jan 2026) · accessed Oct 2026
- BusinessDay: Nigeria Tax Act 2025 personal income tax explainer (12 Jan 2026) · accessed Oct 2026
- Nairametrics: FGN Savings Bond rates as October 2026 offer opens (5 Oct 2026) · 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.