Start with gross yield, then stop trusting it

Annual rent divided by the purchase price gives gross yield. A ₦40m flat renting for ₦4m a year is a 10 percent gross yield.

Nobody actually receives gross yield. It is the number in the advert.

Subtract the real costs

Service charge, insurance, property tax or ground rent, agency and management fees, repairs, and a vacancy allowance for the months nobody is paying. Assume something breaks every year, because it does.

Rent minus those costs is net operating income. Divide that by the total you paid — including legal fees, agency fees and any transfer or stamp duties — and you have the honest yield.

Then subtract the loan

If you borrowed, take the annual mortgage payments out of net operating income. What is left is your cash flow. It can easily be negative on a property that still looks like a good deal on paper.

Negative cash flow is survivable if you chose it deliberately and can fund it from income. It is how people lose properties when they did not.

Title and paperwork, especially in Nigeria

Verify the title at the state lands registry, confirm the Certificate of Occupancy or governor's consent where required, run a search through your own lawyer rather than the seller's, and never pay a deposit into a personal account.

Land fraud and multiple-sale disputes destroy more diaspora property money than bad yields ever have. Pay for the search. It is the cheapest part of the deal.

Stress-test it

Redo the numbers with rent 20 percent lower, three months vacant, and interest rates two points higher. If it still survives, you have a rental. If it only works in the best case, you have a bet.