Roots Bought 78 Houses from Its Own Sponsor in One Day. The 78 'Market Values' in the Filing Contain Only Three Independent Numbers

What the filing looks like, and what it actually contains

Read the September 2 filing the way it is laid out and it looks like an unusually generous disclosure. Roots lists street addresses. It gives square footage, bedroom and bathroom counts, lot size and build year. Then, for each group of properties, it gives two dollar figures: "Purchase Price by Roots" and "Current Market Value."

Twenty-three such groups, covering 78 homes. Forty-six dollar figures. It reads like the fund showing its work.

Put the pairs in a column and divide one by the other, and the appearance collapses.

Thirteen separate groups of Flipside 14 properties. Thirteen identical ratios. Not similar — identical to six decimal places.

Here is that first block in full, because the point only lands when you see the spread of what it covers:

A 1,312-square-foot townhome finished in 2025 in South Carolina and a 3,422-square-foot duplex finished in 2022 in North Carolina are not the same asset in the same market. They carry the same ratio to the sixth decimal.

That is arithmetic, not valuation. A number that is a fixed multiple of another number is not an independent measurement of anything.

The direction of the arithmetic, which the round numbers settle

There are two ways a constant ratio can arise, and they mean different things.

Either the market values were derived from the prices, which would make the "Current Market Value" column decorative. Or the prices were derived from the market values, which would mean Roots negotiated each portfolio at a fixed discount to appraised value — an ordinary and defensible way to buy a block of houses.

The filing settles it. Every stated market value is round to the nearest thousand dollars. $3,310,000. $3,420,000. $2,655,000. $325,000. Every purchase price carries cents, and is labelled "allocated purchase price." And each seller's prices sum to a round total: exactly $14,825,000.00, exactly $7,000,000.00, and $3,394,999.99, which is $3,395,000 with a cent lost to rounding across eight groups.

So the sequence is: a round total price for each portfolio, spread across the houses in proportion to their stated values. The second reading is the right one, and it is the more favourable one. Roots bought these portfolios at 87.33%, 88.16% and 92.91% of stated market value respectively.

That is worth saying plainly, because it is the opposite of a gotcha: on the face of the filing, the fund paid less than the stated value of what it bought, which is what its disclosed policy promises.

The question the arithmetic raises is narrower, and it is about the appraisal, not the discount.

What Roots says it does

The Form 1-K describes the model in one sentence, and it is the sentence that matters here. The Manager:

"...intends to continue to acquire the properties, facilitate the necessary renovations, repairs, upgrades and/or capital expenditures, as applicable per property, obtain or retain, as applicable, renters, get a third-party certified real property appraisal, and then sell and/or transfer such properties to the Company at or below the appraised fair market value."

This is a legitimate structure and Roots discloses it clearly. The sponsor takes the renovation risk, the fund buys stabilised, tenanted product, and the fund is meant to be protected by an appraisal it did not commission but which is meant to be independent.

Note the phrase "as applicable per property" attaches to the renovations, not to the appraisal. The sentence does not say the appraisal is obtained per property.

And that is precisely the thing the September 2 filing cannot tell you. If a certified appraiser valued each of these 78 homes individually, the odds that thirteen groups of different houses in different towns land on one identical price-to-value ratio, to six decimals, are nil. The constant ratio is what you get when one valuation figure per portfolio is agreed, a round price is struck against it, and the price is then allocated down to the houses.

Both are compatible with "at or below the appraised fair market value." They give an investor very different amounts of protection. The filing does not distinguish them, and the layout — a market value printed next to every group — invites the reader to assume the first.

Roots' own earlier filings prove the format can carry the detail

This is the check that makes the finding more than a curiosity, and it is the one that stopped me writing a simpler and wronger version of this article.

If every Roots 1-U showed a constant ratio, the honest conclusion would be that the company simply reports this way and the column has never meant anything. That is not what the filings show.

Read that table by the third column rather than by date, and it stops being a story about filings and becomes a story about who is selling.

Georgia Flip Fund, LLC is the only seller in any of these filings that Roots does not describe as owned, wholly or partly, by its sponsor. It appears twice. Both times, every single property carries its own ratio:

Four houses, four ratios, spanning 1.09 to 2.09. One bought at 92% of its stated value, another at 48%. Older stock, individually negotiated, individually valued. In the July 2 filing the same seller supplied seven groups with seven distinct ratios.

That is the control, and Roots produced it itself. It rules out the innocent explanation that this issuer simply reports in round portfolio terms as a matter of house style. In the same document, on the same day, signed by the same two managers, the arm's-length seller's properties are priced one by one and the sponsor's are priced by formula.

The correlation across all four filings is strong without being absolute: five of the six sponsor-affiliated seller entities show a single constant ratio, and the non-affiliated seller never does. The exception is Flipside 23, LLC, partially sponsor-owned, which shows six distinct ratios across six groups in July. So this is a pattern, not a law, and it should be described as one.

What it does establish is that the format carries per-property detail whenever per-property detail exists — and that in the September 2 filing, covering 78 houses and $25.2m, it does not.

Nothing here says a rule was broken. What it says is that two filings that look identical in layout can differ completely in how much information they contain, and the reader is given no way to tell which one they are holding. The only way to find out is to do the division yourself, which is not a reasonable thing to ask of somebody investing $100.

Why this is structurally different from an arm's-length purchase

Every REIT buys property. The distinguishing feature here is who is on the other side.

The Manager is Roots REIT Management, LLC, a wholly owned subsidiary of Seed InvestCo, LLC. The sellers were wholly or partially owned by Seed InvestCo, LLC. The sponsor therefore sets the price it receives and, through the Manager, accepts it on behalf of the fund. The appraisal is the only independent element in the transaction, which is exactly why the question of whether it was taken per property or per portfolio is the question that matters.

The 1-K discloses the surrounding economics honestly, and they should be read alongside: the Manager takes a 10% property management fee calculated on all rents collected each month; it "may forego payment for up to five percent (5%) of the value of each property in exchange for equity in the Company"; and affiliates of the company may hold interests in the same joint ventures and subsidiaries, which the filing itself flags as something that "could cause potential conflicts of interests."

None of that is hidden. It is in the annual report, in plain sentences. The point is that when the sponsor is on both sides, a "Current Market Value" column is doing more work than usual, and it should therefore be the most rigorously sourced number in the document rather than the one that turns out to be a multiple.

The financial context this sits in

Two figures from the same 1-K belong next to this deal, because they set the scale.

Roots is growing fast and levering up. Mortgage loans payable went from approximately $31,148,548 at the end of 2024 to approximately $88,680,304 at the end of 2025, roughly a tripling, while 288 properties were acquired during 2025. The August 25 purchase adds 78 more, and the August 6 filing added another 44.

And the fund is currently loss-making on a GAAP basis. For 2025 Roots reported a net loss attributable to the company of $2,422,553, against net income of $126,978 in 2024, with an accumulated deficit of $18,379,652 at year end.

That loss deserves a fair reading rather than a dramatic one. A rapidly expanding, depreciating, mortgage-financed residential portfolio produces GAAP losses almost by construction: depreciation is a non-cash charge and acquisition-heavy years front-load costs. A GAAP net loss is not evidence that investors lost money, and Roots' unit NAV has risen over the period. But it is the number that sits underneath a marketed 17.17% average annual return since inception, and the two are measuring genuinely different things. We go through that return figure and how it is constructed in our full Roots review.

What an investor should actually do with this

The practical question is not "is Roots a scam." Nothing in these filings supports that, and the disclosure is better than several larger competitors manage. The practical question is narrower and answerable: ask Roots whether the August 25 portfolios were appraised property by property or in aggregate, and by whom.

That is a fair question with a short answer, it is the one piece of information that determines how much the discount is worth, and an issuer that files this promptly should have no difficulty answering it. If you hold units, it is a reasonable thing to put to investor relations. We have asked and will update this page with whatever comes back.

More broadly, this is the same reading discipline that applies to every sponsor-affiliated purchase in this sector: when the same party is on both sides, the valuation is the only protection, so find out where the valuation came from. We applied the identical test to the seven NAV REITs that declared in one week, where the trap was a "net distribution" column that meant a different thing in each filing, and to Fundrise's flagship fund, where 86.72% of a $1.23bn portfolio is valued by Fundrise itself.

Sources

All figures in this article come from SEC EDGAR primary filings by Roots Real Estate Investment Community I, LLC, CIK 0001866803, retrieved September 3, 2026.

• Form 1-U, accession 0001493152-26-041171, filed September 2, 2026, reporting events of August 25, 2026 — the 78-property acquisition, seller entities, sponsor relationships, per-group purchase prices and Current Market Values.
• Form 1-U, accession 0001493152-26-036317, filed August 6, 2026 — Flipside 29, Flipside 30 and Georgia Flip Fund acquisitions. This is the filing that supplies the control: affiliated and non-affiliated sellers side by side in one document.
• Form 1-U, accession 0001493152-26-031858, filed July 2, 2026 — Flipside 23 and Georgia Flip Fund acquisitions, both priced property by property.
• Form 1-U, accession 0001493152-26-026854, filed June 2, 2026 — Flipside 13 acquisition.
• Form 1-K for the year ended December 31, 2025, accession 0001493152-26-020769 — the acquisition and appraisal policy, manager and sponsor structure, 10% property management fee, net loss and accumulated deficit, mortgage loans payable, units outstanding and NAV per Unit.

Ratios and totals were computed by CrowdfundedWealth directly from the dollar figures printed in the filings. No figure in this article is estimated or modelled.