Can you run and successfully scale a real estate business from anywhere? It’s possible, and our guest will show you how. Sam Wilson talks to Melanie McDaniel, founder of Freestyle Capital Group as she talks about how she scaled her business while living a nomadic lifestyle. Melanie looks back to how she got started with real estate, her pivoting towards syndication and her strategies towards scaling in different markets. Learn more about scaling your business and the strategies you can use by tuning in.

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Grow And Scale Your Real Estate Business Anywhere With Melanie McDaniel

Melanie McDaniel is the Founder of Freestyle Capital Group. It is a boutique private equity firm that partners with passive investors to invest in private equity real estate transactions across a variety of recession-resistant asset classes. She offers a boutique experience to our investors and aims to have a personal relationship with each investor friend.

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Melanie, welcome to the show.

Thank you. I’m happy to be here.

The pleasure is mine. The same three questions I ask everyone who comes on this show are where did you start, where are you now and how did you get there? Before you answer that, why don’t you tell our readers a little bit about your nomadic existence and then work backward?

If you hear my story from the beginning, even as a small child, you’ll know that I love to travel. I had a W-2. I was a park ranger and I saved up my leave to travel. It was always a stressful thing to plan a trip. You have many days off. You’ve got to travel one day. You got to go be a tourist, travel home and then you go to work. I did that forever but I love to travel so much that I wanted to travel longer periods of time.

The longest I ever got to travel in my whole life until I became nomadic was three weeks. I got a taste of slowmading, slow travel and I decided I wanted to figure out a way to live and have a lifestyle where I can go for a month at a time, anywhere in the world. That’s how I ended up in the nomad life. I’ve sold everything. I’m a minimalist. I have my car in case I get stuck in the US as I did. I started 2020 in Thailand before COVID hit and my plan was to be abroad mostly. At the moment, I’m in Austin, Texas but I’m headed to Mexico.

Let’s rewind the tape then and go from park ranger to real estate syndicator and investor. What was that journey like?

I was raised, go to school, get good grades, go to college and get a job. When I got done with high school, I joined the military because I didn’t know what I wanted to be when I grew up. I figured with the military, I get money for school. I served my country. I travel because you’re going to hear this theme, Melanie and traveling. I knew that if I joined the military, specifically the Navy, which I ended up joining, I would travel. I got lucky. My first duty station was in Italy. I didn’t know what I wanted to be when I grew up still. When I was getting out of the Navy, I decided to study tourism. I have a Bachelor’s degree in Travel Administration so the theme continues.

I was working in tourism. I was a deckhand or copilot, whatever you want to call it, on a tourist submarine in Waikiki and I wasn’t doing that for too long before I realized I needed to do a real job. My dad was putting pressure on me to get a job with a pension. I ended up becoming a park ranger. My dad’s wife at the time was a park ranger. She worked at Rocky Mountain National Park. I was going to school in Denver and I got to see her do that a lot. I’m like, “I can do that while I figure stuff out.” That “do it for a short period of time” turned into nine years. It was in year seven that I read Rich Dad Poor Dad.

In 2015 somehow, that book got in my hands. I don’t even know how. I’m just happy it did. I read that and it changed the trajectory of my whole life. It took me two years to shift the mindset from a W-2 pension career. I had fourteen years in with my military time and the time I spent as a park ranger. I was on a great path to retire, be normal and be mediocre. From the book, I realized real estate was the answer. Cashflowing assets appreciate over time.

I decided to do the stepping stone of being a real estate agent because I figured I needed to get into the space, learn real estate and do transactions. I didn’t know what I wanted to do, except that I wanted to scale. I knew that because of BiggerPockets. I probably listened to many hours while I was on patrol of BiggerPockets. I didn’t want to be a real estate agent forever. I gave myself three years and that was the max.

I did that and everything worked out fine. The first six months were horrible. I hardly made any money but then it started hitting. I was servicing mostly investors because I had all this knowledge to help them. I built a team because I had too many clients and then my team started to feed me so I could free up my time. I invested my time and money in learning how to buy apartments because by that time, I figured out that’s the route I wanted to go is the economies of scale. In two and a half years of being a real estate agent, I was done with that and moved on to the next thing, which is what I do now. Being part of a GP team that syndicates large assets, multifamily, I do a couple of others as well now and that was a journey as well. I’m more on the capital side rather than acquisitions or operations.

Let me see if I get these timelines down based on your story. In 2015, you read Rich Dad Poor Dad. In 2017, you started doing the real estate agent thing and in 2019 and a half roughly, you said, “We’re done with the real estate agent thing. Now we’re doing only syndications, multifamily assets and other asset classes you’re getting into.

We have one life to live. You are in the driver’s seat. If you take responsibility for that, you can make your life whatever you want.

It was pretty much right at the beginning of 2020. December 2019 is when I left where I was being an agent and moved to Thailand.

I love the courage involved in your story. There’s a component there that you may find natural that others probably find attractive when they go, “She thought it,” and said, “That’s a good idea. I think I’ll go do that.” What are some keys you would say that helped you just do?

It was not easy at all. I would say going from a park ranger with that mentality to an entrepreneur and taking a chance was the hardest thing I’ve ever done in my life. I’ve been through law enforcement academies and boot camp. I eventually did a lot of stuff in my life, quitting my job, taking the plunge and doing something new with the scariest thing I’ve ever done in my life. In those two years, from 2015 to 2017, was a lot of education and mindset work. What I would listen to was YouTube compilations of motivational speeches. You think of Jim Rohn, Tony Robbins, Gary Vee and all those guys. They’re set to music. I would listen to that and it helped me up or whatever. I read books.

It was about education. The objective stuff that you’ll learn about real estate but also the mindset work was a huge piece as well. It’s shifting the mindset from being an employee to being an entrepreneur but also learning that we have one life to live. I am in the driver’s seat and if you take responsibility for that, you can make your life whatever you want. The two books that changed my life are Rich Dad Poor Dad which I already mentioned but this book called The Power of Now by Eckhart Tolle was the mindset shift book I needed that gave me permission to not be a victim, to grab the wheel of my own life and do whatever it took to have success.

What were some of the things may be that your fellow employees, perhaps in the park ranger space. What were some of the looks you got? What were some of the thoughts or maybe even comments that you had to rebuff their objections?

It was already tough being a female in the space of law enforcement with a bunch of alpha males, “Melanie marches to the beat of her own drum,” was one that I heard. “Melanie, you go off and be a real estate mogul or whatever.” They thought my head was in the clouds for sure because I would always walk around. I’m happy. I’m like, “You choose to be happy now. It’s up to you.” They hated it because they’re all miserable. They don’t see a way out. They’re on this path and everybody is on their own journey.

I was probably a little bit too pushy of my ways because I wanted to free people but it’s not my job. It’s their job. It’s their path. It’s their time, not mine and it was okay. I was on constant defense for my thinking. I had a coffee with one of my park ranger buddies in Boise over the summer of 2021 and he’s about to retire. He’s like, “I get what you are talking about now.” He has all these dreams to start his own business or whatever. He’s like, “I’m so proud of you.” I’m like, “You are such a jerk.” He was one of my supervisors as well. He gave me a hard time but it doesn’t matter. It’s our journey. You have to deflect what people say or think.

You hit the key point there because we’re all going to have the naysayers. It doesn’t matter what business you’re in. If people don’t understand it, they’re going to look at it sideways and go, “You’re doing what? How are you going to do that again?” All we hear is, “You can’t do that.” Overcoming that by not doing it to prove them wrong to say that, “No, this is a path I’ve carved out. This is how I’m going to do it.”

 

Proving them wrong could be a good piece of fuel. One of the hardest people on me and one of the hardest things to get over was my dad. My dad told me that I was stupid for quitting my job and don’t call me for money. I’m like, “Thanks for your confidence, dad.” I love my dad and I didn’t hold it against him. I’d already done a lot of mindset work until that point. I realized he was fearful for me because he couldn’t do what I was doing. He’s placing his limitations on me but it’s not a reflection of me. I had to place that in a compartment, forgive him, use it as fuel and now everything’s fine. He can sleep at night but it’s not his fault. He only knows what he knows and he reacts from that space. Who am I to judge him for having that? He cared so much about his daughter. He was truly fearful for what I was doing. I never held that against him but I used it as fuel.

That’s a great way to compartmentalize that and I think that’s probably helpful for some of our readers because these are softer but harder in sense skills to master because rejection, objection, do what it is we’re doing and being able to see it from their perspective, say, “That’s your fear talking. We’re going to stick that over here. Thank you but I’m carrying on.” The transition here into what it is you’re doing now. I know you said you’re on the capital raise side of things. How did you develop your thesis? How did you find your first partners? Walk us through that side of the business development.

I started as being an apartment buyer. I did acquisitions-type stuff. I talked to brokers and bought my first 24 units. It was a joint venture, it’s not syndication. I went through that whole process of due diligence and some asset management but it didn’t take me too long to figure out that I hated most of the jobs that I was doing. I then have to raise money. That was the last job and I’m like, “That could be fun,” but I hated calling brokers. Whenever I come against friction and I don’t want to make that call, I have to sit back and listen to myself, “Melanie, why do you not want to call this broker now? Is it because you’re lazy? I don’t think so. Is it because it’s not your gift, your skill or it doesn’t interest you? That is probably the fact.”

I decided when I look for partners, I’m going to look for the people who do the things I don’t love to do like the underwriters, acquisitions people, operators and asset managers. I want to talk to people. I love going to conferences, Meetups, REIAs or whatever. I want to meet people and that’s my skill. I stay in my lane. It took me a while to figure that out. I did Michael Blank’s coaching program that helped me get my first 24 units but it was at a conference in the summer of 2019. I was still an agent and doing these apartment conferences.

For some reason, at that point, I got clarity in this idea that I could just be a capital partner. I don’t have to do all those other things. It was relieving and clarifying because now I had a direction and I went all-in on that. I was still an agent and it was another six months before I left the agent world. I went full-time, moved to Thailand, built out my business, my platform, my website, my lead magnet, my newsletter, my funnel and everything. I built out the business. I started talking to investors. It launched in February of 2020. I came back to the US to go to the Best Ever Conference and after that, COVID happened. I lost six months there because I didn’t know if real estate or multifamily were the best investment anymore. Some people had been in the business a lot longer. We’re buying deals and good for them because that turned out to be probably a good idea but I didn’t know.

The key is having clarity on what you want to do and then going all-in once you have that clarity.

I was sitting on the sidelines. My newsletter said, “I hope you’re safe. I’m sitting on the sidelines. More to come next month.” That was my newsletter for six months. In July 2020, when some of my operators that I wanted to raise capital for started doing deals but they weren’t calling me for capital. I was like, “I got something wrong here. They’re not calling me.” This could answer one of your questions like what are the hangups. One of the fail points is I assumed. I picked my three favorite groups and they were going to call me but no, you need to network and 30 to 40 operators then pick your favorite ones because even when they send you a deal, it may not work for you.

It took me another six months from July to December 2020. I started getting deals but nothing passed the sniff test. There’s nothing I like. I wasn’t going to raise capital. It took me until July 2021 to do my first deal. I was working my butt off and I do this full-time. This was not the Melanie who has a W-2 and does this in her free time. This is Melanie around the clock who is doing real estate and it still took me quite some time because COVID took the wind out of the sales. When I did one, I immediately did a 2nd and a 3rd. I’ve done three since July 2021, which is the Law of the First Deal. When you get one, it happens after that. The key is having clarity on what you want to do and then going all-in once you have the clarity. It is the first piece in order to run in the direction. You have to be clear on the direction you’re running.

That’s a good point talking about maybe knowing more than 2 or 3 operators. Not all operators are created equal. Not everybody is a team that you’re going to jive with and going to have the same investment philosophy. How do you make sure that many operators at the scale line up and with what it is that you want to present to your investors as the team to partner with?

Simple conversations with parameters and what the investment parameters are because I get plenty of deals across my desk and don’t fit my parameters. I still do the 1980s newer class B, X, Y and Z market. It’s important to have those conversations upfront and to build real relationships with these people so you know what theirs are and you know what yours are. The relationship piece is first and then when they’re comfortable with you, they’ll send you underwriting. That’s the second piece. You can love them all day but when you see they’re underwriting, you’re like, “No.” You got all those time-building relationships and they send you the underwriter. You’re like, “This is this isn’t going to work. I’m sorry.”

 

What are some things that come to mind, maybe some examples that you saw in underwriting that you go, “Ooh.” Maybe not names of properties, projects or partners but there are some ideas that you saw that triggered that response.

For the four things, I look at the jockey. The operator themselves and experience sometimes are when I throw out pretty quick. If it’s their first deal, I’m probably not your girl to raise money. The second thing is the market. I get deals in markets I don’t love or in markets I’ll consider but in an area I don’t love. The market can kill a deal pretty quickly and then the deal itself. Aggressive underwriting is a big no for me. Compressing cap rates are too high of rent assumptions or not enough expense ratio. All the stuff that are aggressive pieces of the underwriting.

The fourth one is I throw a lot of deals out. Everything else could be great but if their structure of the deal is not aligned with my investors, meaning they get paid acquisition fee, asset management fee, refi fee, dispo fee, fee on their grandma’s birthday or whatever. If they’re getting fees, getting paid a lot of money and my investors are left holding the bag of the risk, it’s a hard note for me. I want to see alignment. I’m okay with GPs getting paid how I get paid too but I want them to have their asset management fee.

I want them to hit some hurdles, potentially a waterfall or hurdle with my investors and then let’s all share in the profits at the end and we can talk about the distribution fee. An asset management fee is reasonable as well. I’ve seen construction management fees from up to 10%. That’s a lot. I may not like one fee but if they’re conservative or fair on another fee, every deal is different but those are the things that will kill a relationship for me.

That’s a very valid point and those are hard things to dissect. Even if you’re looking at the offering memorandums, you’re looking through all the documents at times, getting those hard facts on a deal. What are exactly the fees? How does this spell out to me and my investors? That’s a great point. The more fees you see, the less aligned potentially.

Sometimes the fees are hidden in the PPM and not like in the OM and they don’t highlight the fees. A lot of passive investors aren’t savvy enough. They haven’t looked at enough deals to find those things themselves. That’s what I do. I’m here for my investors first. When an operator brings something to me, I’m skeptical. “You’re my enemy. Let me look at this.” I protect my ducklings and then I’m like, “We can be partners now.” Everybody’s happy. At the end of the day, I don’t want to do any bad deals. I will do no deals forever instead of one bad deal. It’s super important that I am that extra layer of protection for my investors. That’s how I feel because they’re not always sophisticated enough to dig through a PPM and they don’t even look for those.

Don’t sit on the sidelines, reading your books and your podcast by yourself. Go out and be among people doing stuff.

They don’t want to. That’s the beauty of being on the capital raise side of the general partnership is that you’re doing for your investors what many of them don’t have in the day. They don’t have the space in their day to do it, to dig through this, to analyze, to vet and to throw it out. That’s one of the things I think that the role that you’re holding is very important because you have the filter for a lot of the people that come to you to harness your expertise. Talk to us about the capital raise side. What was that like raising capital yourself without a track record? How did you overcome that hurdle?

You said I have a big social media presence. It’s not that I brought in a bunch of strangers to my world but the people who I already knew could see my activity, expertise or whatever I was doing online. A lot of my investors are people already in the real estate space. They already understand real estate. I didn’t have to pull them out of the stock market and invest in real estate. They were already real estate people. A lot of them were past clients when I was a real estate agent and I had a big Meetup when I was an agent. I worked mostly with investors.

Honestly, almost all of my capital comes from my past clients, that Meetup or someone I’ve met in the space at one of the virtual meet-ups. Honestly, COVID was a huge boost to my business because now I could go to meetups every day in every market. There were no boundaries and time limits. The conferences were half the price and I didn’t have to travel. I could attend so many more conferences. It was a blessing in disguise, the silver lining of COVID for sure.

I’ve heard that quite a bit and I hope some of that sticks around because certainly, the capability to attend meetups in any market has widened a lot of people’s nets on that front or at least widened their reach to get outside of their local Wednesday morning coffee meet-up with 30 other investors and suddenly, you can meet those. You can now meet with 30 other investors 7 times a day in 7 different cities.

I love your tenacity, your willingness to keep pushing forward, keep risking and getting it done. Congrats on getting what’d you say three deals done since July 2021. That’s a long time for a lot of people and a lot of slogging it out. It speaks to your discipline and commitment to what it is that you’re doing. Kudos to you on that front. Lastly, the nomadic lifestyle. How do you make it all work doing this as a nomad?

This is why I love capital raising because I can do it on a Zoom call or virtually. The only time I need to be in geography is if I have a deal, I would like to at least go to the property. Honestly, if I was in Portugal and I had a capital-raising partner and they could go do it might be half, that would be okay too. I’ve been to every property that I’ve raised capital for and I’d like to keep that going. With all my travels, I get to meet a lot of my investors and operators in person. If I know that I’m passing through a town and someone I know is there, I’ll make an effort to see them. I don’t think this virtual 2D world can replace a real connection with real people, breaking bread and having a drink or whatever. I try to do that.

I travel. It was supposed to be mostly international but I do think it’s good to be back here in the US between international trips. That will be my new cadence as COVID lifts and I can travel internationally more. I’ll spend some time here. I don’t have roots anywhere here but I have been liking Austin quite a bit. We’ll see, maybe after Mexico I’ll come back here and see how it feels to be sticky.

Melanie, I’ve enjoyed this. Thank you so much for your time. Let’s jump into the final few questions. If you could help our readers avoid one mistake in real estate, what would it be and how would you avoid it?

I would say don’t drag your feet. Get out there and network. Networking is one of the biggest tools. The quote of, “Your network is your net worth,” is a little cliche and it may not be necessarily your net worth but it might be your speed as well. To shorten timelines, you’ve got to get around somebody that’s done it before you. Either network your butt off, join a coaching program or hire a coach. I don’t recommend doing the coaching program or a coach until you have a bit more clarity. I would attend Meetups, locals and find some people to mentor you that are at least 1 or 2 steps ahead of you but don’t sit on the sidelines, reading your book, listening to podcast by yourself. Go out and be among people doing stuff.

Question number two for you is when it comes to investing in the world, what’s one thing you’re doing right now to make the world a better place?

I am helping a small piece of the world one child at a time in Kenya. I have and have been since 2010 supporting a child at a school called Miracle House. One day, I am going to get to their school, see the kiddos and go on a safari but I support my third child now. They keep growing up. That’s my little giveback.

Good for you for doing that. Kenya is easy to get into. What’s the capital of Kenya?

It’s Nairobi. I have an aunt and uncle moving there and I’m thinking I’ll go visit them, stay with them in Nairobi and then launch from there. 2022 is the year for Kenya.

 

We’ll add a bucket list item to that, close the deal while you’re in Kenya and then you can truly be the intercontinental real estate investor. Melanie, if our readers want to get in touch with you, what is the best way to do that?

My website FreestyleCapitalGroup.com will lead you to all of my social media channels and my email if you download the lead magnet. We’d haven’t talked about this but I my lead magnet is a free download in exchange for your email. It’s how to pave your path to financial freedom, where you’re starting and going. It helps you back into your individual journey for passive income, which leads to financial freedom. That is the little guide that they can download and then they’ll end up in my world because that’s how we do things.

Melanie, thank you for your time. I do appreciate it.

It’s my pleasure.

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Thanks for reading. If you can do me a favor, subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts or whatever platform it is you use to read. If you can do that for us, that would be a fantastic help to the show. It helps us both attract new readers as well as rank higher on those directories. I appreciate you reading. Thanks so much. I hope to catch you on the next episode.

Important Links:

• Freestyle Capital Group
• Rich Dad Poor Dad
• BiggerPockets
• The Power of Now
• Miracle House.
• Apple Podcasts – How to Scale Commercial Real Estate
• Spotify – How to Scale Commercial Real Estate
• Google Podcasts – How to Scale Commercial Real Estate
• @FreestyleCapitalGroup – Instagram
• @FreestyleInvest – Twitter
• https://www.Facebook.com/FreestyleCapitalGroup
• Your Passport to Financial Freedom – YouTube

About Melanie McDaniel

Melanie is the founder of Freestyle Capital Group, a boutique private equity firm that partners with passive investors to invest in private equity real estate transactions across a variety of recession-resistant asset classes. Melanie offers a boutique experience to her investors and aims to have a personal relationship with each investor-friend.