With Homeownership Far Out Of Reach For Many, This Real Estate Fund Is Giving Its Tenants A New Way To Build Wealth


Start generating passive income through real estate

Check out these featured investments from Benzinga's Real Estate Offerings Screener.


Start generating passive income through real estate.

Own a piece of your favorite cities through diversified real estate investments in the country's top markets

*Terms and conditions apply. Visit Nada's website for more details.

A new real estate fund is hoping to put a kinder, gentler face on building wealth through real estate. Although all real estate funds have a stated goal of generating wealth, Roots is taking a rather unique approach to the concept. First of all, non-accredited investors can buy shares in the fund. Then it gets interesting.

Yes, Roots follows the traditional model by using investor capital to purchase properties and pays distributions from the rental income. This is a tried and true method, but also one that benefits the investor almost exclusively. The increased investor profits come through rent increases or property appreciation. It’s all well and good for investors, but it puts quite a squeeze on the tenants. 

With the Roots business model, the tenants themselves can actually benefit through the “Live it Like You Own It” program. In this model, the tenants who live in properties owned by Roots have an opportunity to share in the profits generated by their rent payments. 

Whenever tenants meet certain criteria, like making on-time rent payments, they qualify for quarterly bonuses. These bonuses are paid in the form of rent rebates, which are invested into the fund. 

Under standard rental arrangements, tenants only get a roof over their heads in exchange for the rent they pay. The Roots model actually allows tenants to build wealth and save money as they pay. This is an essential benefit, as a recent study by GoBanking Rates shows that 69% of Americans have less than $1,000 in their savings accounts. The average savings account balance for most Americans is only $650.

According to Roots, the average tenant saves $1,877 in their first year of tenancy. After five years in a Roots property, the average tenant has squirreled away nearly $7,000 in savings. These stats are based on a tenant paying an average rent of $1,200 per month. 

For tenants, the opportunity to participate in something like a “Live it Like You Own It” program is a very unique opportunity. Currently, there is no other similar program that will allow them to build wealth as they rent. It remains to be seen whether Roots’ business model will catch on, but it offers an appealing package for both investors and tenants. 

As it stands, investors are the only ones who really “win” from the rental property investment model. It has created a situation where renters find themselves on a hamster wheel where the rising rents that build investors’ wealth keeps them from saving the money they need to buy a house. 

On the other side of the equation, Roots allows non-accredited investors to buy shares for only $115 and build wealth while still lending a helping hand to their tenants. Roots’ approach to investing and wealth building while making their tenants partners in the process has the potential to be a game changer for both parties. This is an interesting business model and one worth keeping an eye on.

More on Real Estate from Benzinga

Market News and Data brought to you by Benzinga APIs
Comments
Loading...
Posted In: Real EstateAlternative investmentsreal estate investingRoots
Benzinga simplifies the market for smarter investing

Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.

Join Now: Free!