How to configure virtual host in apache2 to have its own root folder

If you are going to be using the IP address to access the sites then your only option is to use aliases i.e.

root
   /site1
     files
   /site2
     files

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<IfModule alias_module>
  Alias /site1 "/home/site1"
  Alias /site2 "/home/site2"
  <Directory "/home">
    Options Indexes FollowSymLinks MultiViews ExecCGI
    AllowOverride All
	Require all granted
  </Directory>  
</IfModule>

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Alias one (site1) would be accessed by http://ipaddress/site1
Alias two (site2) would be accessed by http://ipaddress/site2

To have them on different urls you would need to setup different domain names for each - for instance you can do the following. Create the following DNS / Hosts entries

site1.local => ipaddress
site2.local => ipaddress 

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Then setup your virtual hosts as

<VirtualHost *:80>
    DocumentRoot "/home/site1"
    ServerName site1.local
    ErrorLog "logs/site1.local-error.log"
    CustomLog "logs/site1.local-access.log" common
</VirtualHost>
<VirtualHost *:80>
    DocumentRoot "/home/site2"
    ServerName site2.local
    ErrorLog "logs/site2.local-error.log"
    CustomLog "logs/site2.local-access.log" common
</VirtualHost>

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Now you would access them as

http://site1.local
http://site2.local

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and you'd need to set the base directory in your wordpress config to the proper one so you don't get redirected to the webserver's root. by default wordpress assumes it is installed at the webserver's root.

using named-based virtual hosting or different server ports for each site is much simpler.

Should work as well providing wp uses the base html tag and relative links. Given that s you speaking i assume you checked or know

No base tag - links are absolute.

RewriteEngine On
RewriteBase /site1/
RewriteRule ^index\.php$ - [L]
RewriteCond %{REQUEST_FILENAME} !-f
RewriteCond %{REQUEST_FILENAME} !-d
RewriteRule . /site1/index.php [L]

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@jh
my bad. did not notice it acted at the rewrite level... interesting ( and slightly double-edged ) feature. thanks for pointing this out
best regards