Need a Commercial Real Estate Loan? This Startup Can Help

By Gary Richetelli

For better or worse, peer-to-peer lending platforms like Lending Club have been in the spotlight for years now. Other players in the booming fintech industry have been decidedly lower-key. But as new laws and regulations make it easier than ever for regular people to put their money to work in alternative investments, a few worthy fintech startups are finally earning a place in the sun.

RealAtom is among the most interesting of the bunch. The D.C.-based startup (technically headquartered in Arlington, Virginia, but same difference) is democratizing the arcane and often frustrating process by which commercial real estate developers find and close on financing.

Sara Gilgore’s article in the Washington Business Journal lays it out nicely, but it’s worth taking a closer look at how RealAtom (and the competitors that are sure to come out of the woodwork soon) actually works. If you’re looking for a commercial real estate loan, you’ll find this fascinating.

What Does RealAtom Do?

RealAtom is a next-generation platform that connects CRE developers seeking financing for planned development projects or property purchases with deep-pocketed lenders and investors seeking “solid returns.” (RealAtom’s words.) RealAtom’s lenders include:

    • High net worth individuals
    • Commercial banks
    • Pension funds and other money managers
    • Hedge funds
    • Insurance companies
    • “Alternative lenders,” including fintech companies that build diversified baskets of alternative investments—more on that below.

According to RealAtom’s co-founders, the company had more than 200 lenders in its database after just five months in business. Not bad.

How It Works

Property developers use RealAtom to produce project-specific loan requests. The platform’s lenders then review these requests and pursue those that fit their objectives and risk tolerance.

Loan types include permanent, bridge, and mezzanine. RealAtom operates from coast to coast, meaning there’s no geographic restrictions to hamper lender-borrower connections. The company employs experienced advisers who walk borrowers through the process, making it a great option for novice developers and high net worth individuals trying their hand at real estate lending for the first time.

Plus, the platform’s turnkey nature doesn’t preclude customization. As in traditional transactions, the ultimate terms of any given deal on RealAtom are between the borrower and lender.

Why It Matters

This model isn’t exactly novel—companies like SelectQuote have applied it to individual insurance for years, with impressive results. And firms like Quicken Loans, whose Rocket Mortgage product threatens to disrupt residential real estate lending, are making their presence felt too. But RealAtom is one of the first companies to successfully translate this concept to the ultra-complex world of commercial real estate financing. That’s no small feat.

Companies like RealAtom sell more than speed and efficiency. By streamlining the underwriting process and connecting motivated developers with willing lenders, RealAtom actually reduces transaction costs.

With a ready-made onboarding platform—what RealAtom calls “an entire marketing department”—lenders can devote fewer resources to sourcing and evaluating new deals. Meanwhile, developers gain access to a vast pool of funds that in the past they would’ve had to amass drop by time-consuming drop. With less friction and waste, both sides can focus on doing what they do best—and, if all goes well, earn a tidy profit along the way.

More Opportunity for Real Estate Investors

RealAtom is far from the only ambitious startup setting out to democratize the real estate business.

Whereas RealAtom focuses on simplifying financing for existing CRE investors looking to purchase or develop properties the old-fashioned way, a host of other small companies are doing their part to open up the CRE market to investors who’d otherwise lack the financial resources and wherewithal to take advantage.

Companies like Fundrise and RealtyMogul apply the equity crowdfunding model to real estate projects, giving risk-tolerant investors access to broad, geographically diversified portfolios of commercial and residential properties with low investment minimums. Many of these platforms limit participation to accredited investors—individuals with annual incomes reliably north of $200,000 or assets in excess of $1 million—but some are more lenient.

Before making any investment decision, speak with a financial adviser to determine your risk tolerance and long-term objectives. Like any asset class, commercial real estate carries considerable risks, and equity crowdfunding instruments present special challenges that you need to acknowledge and understand before proceeding.

If you do decide that commercial real estate is a suitable investment, you won’t want for access. There’s never been an easier time to gain exposure to the CRE market—whether you’re old-fashioned, cutting-edge, or somewhere right in the middle.