The stock market yields around 7% annualized returns over long periods of time, but rental property investments can offer higher rewards and a quicker payoff. That’s why many people turn to investment property as a way to achieve financial freedom and build wealth. But before taking the plunge, it’s crucial to understand what you’re getting into.

Real estate investment involves buying a residential or commercial property and renting it out to tenants. The property can be a single-family home, condo, duplex or multifamily apartment. The goal is to make a profit by increasing the value of the property and collecting rent from the tenants, which you can use to cover your mortgage and operating expenses. This can give you a steady stream of income, allowing you to retire sooner or become financially independent.

While real estate has a lot to recommend it, including the ability to generate consistent cash flow and appreciation over time, it isn’t without risk. The biggest is that the market can shift unexpectedly. A real estate investor needs to be ready for this, and a solid emergency fund can help you navigate any downturns.

Another risk is that you may not be able to get the return on your investment that you expect. It’s important to find a rental property that can generate positive cash-flow, which is when the total monthly income from rent and other sources of revenue are greater than the costs associated with owning and managing the property, such as the mortgage payment, insurance, property management fees, expected repairs, vacancy periods and HOA fees (if applicable).

There are other factors that can impact your ROI as well. For example, being located within a top school district has a bigger impact on value and demand than some investors realize. Likewise, the condition of a property can have a significant impact on whether it’s able to attract a good tenant base and sustain a consistent income.

One of the most common mistakes people make when investing in rental property is not budgeting for unexpected costs. It’s not uncommon for repairs to cost more than expected, so it’s essential to have a cushion of money in reserve. You’ll also want to plan for property tax increases and other surprise expenses that can eat into your profit margin.

Becoming a landlord means more work than just signing a check, which is why it’s important to consider the time, skill and energy level that you have before committing to this type of investment. Forget the TV sitcom stereotypes of clueless landlords—to be successful, you’ll need an accountant’s eye for detail, a lawyer’s grasp on tenant-tenant law and, if you manage your own properties, a firm-but-friendly disposition.

Investing in rental property isn’t for everyone, but if you do your homework and are prepared to take on some extra responsibilities, it can be a good way to grow your net worth. Remember to track your expenses with Rocket MoneySM, a free app that helps you keep on top of your finances.