🦄 Unicorner Startup of the Week: Roots

✍️ Notes from the Editors

It’s Tech Week time! If you text either of us this week, chances are we aren’t getting back to you until next Monday’s email. We’ll be running around LA covering a bunch of events. Follow our journey on Twitter.

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Last week’s poll: 36% of votes for “Experiences”

- Arek and Ethan 🦄

Build equity in your home

Roots is a fractional home ownership platform where renters build equity in their homes. Roots does this by providing a budget for customers and then purchasing the home for them so they can move in. The customer will start paying rent for that home and build equity with each payment, which they keep even if they decide to leave. This “test drive” allows homeowners to see if they like the home before they decide to purchase it from Roots.

🔗 Check it out: roots.homes

💰 Business Model

Roots operates on a rental and sale of property model. Once Roots buys a home for the customer, rent payments begin and are dependent on size (prices start around $2700 for 2 bedrooms, $2900 for 3 bedrooms, and $3000 for 4 bedrooms, including equity and all utilities). Additionally, when the customer looks to purchase the home from Roots, the sale price is the original purchase price plus 4% annually (30-year historic year-over-year appreciation trend).

📈 Traction and Fundraising

👫 Founders

💼 Opportunities

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🔮 Our Analysis

The rental market is keen for disruption, with the median household wealth of homeowners being 3,965% higher than that of renters. The biggest path to wealth in the United States is through homeownership, and with rising housing prices, interest rates, and inflation combined with wages that have not kept up to par, that goal is becoming either unattainable or increasingly elusive. There is a need for flexibility in this rental and homeownership market where customers are able to live in a home and participate in the homeowner upside.

Enter Roots, a platform where customers can live in homes for rent and earn equity in that home with each payment. This flexibility allows homeowners to choose their home, which is then purchased by Roots. They then start renting the property from Roots for a 12-month period. After this period, customers have the option to continue renting the home while building equity, purchase the home, or move to different options. Since homeownership is becoming increasingly expensive, companies like Roots find a strong market of customers who are looking to build wealth in homeownership without having to make high down payments or take on mortgages. Additionally, Roots is able to capitalize on additional revenue streams other than the sale of property and rental income, such as discounts from builders, titles, insurance, and commissions. This diverse revenue mix makes it less dependent on changes in the real estate market and increases growth potential.

Currently, Roots operates in Las Vegas but is looking to expand to other cities that are in the secondary and tertiary markets. With $2.2 million of seed funding underway, Roots has set its sight on its next goal to put 100 customers in homes and bridge the gap between the extreme options of either renting or owning.

📚 Further Reading

Written by Hrishi Jadhav

📖 Weekly Read Recommendation

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