Abuja versus Lagos rental yields, measured properly

A gross yield is annual rent divided by purchase price. It is the number in every pitch deck and it is close to useless, because it assumes the unit is let every day of the year, costs nothing to hold, and never turns over.

The three adjustments that matter

1. Vacancy. Abuja's civil service cycle produces longer voids than Lagos in the same price band.

2. Service charge that the landlord carries rather than the tenant, which is common in serviced blocks.

3. Turnover cost: agency commission on re-letting, repaint, and the fortnight of works between tenants.

What that does to the ranking

Applied to the five segments we track, two of them swap places. Mid market Abuja apartments look strong on gross yield and mid table on net, because their voids run longer. Lagos mainland family houses look unremarkable on gross and near the top on net, because tenants stay put for years and turnover costs barely register.

The best net yield we have measured belongs to the least glamorous asset class on the list.

How to run it on a specific unit

Take the annual rent. Subtract an honest void allowance, which means asking the managing agent how long the last two lettings took, not what they hope. Subtract any charge you carry. Amortise the re-letting cost over the average tenancy length. Divide what is left by the all in purchase price, including consent and legal fees, not the headline price.

The number you get will be lower than the one you were shown. It will also be the one you actually receive.