Digital Social Hour - How I Built a $250M Fund: My Step-by-Step Strategy I Mikey Taylor DSH #499

Starting point is 00:00:00 Are you kidding? So I call, I call them up. And basically what I found out was they don't look for fraud. That's not what they do. They just call the vendor or the merchant and ask if they will refund them the money, right? Hey, we think there's fraud. Will you refund this? If they say yes, well, then they give you that money back. If the merchant says no, then they call you and go, sorry, no fraud. Wherever you guys are watching this show, I would truly appreciate it if you follow or subscribe. It helps a lot with the algorithm.

Starting point is 00:00:32 It helps us get bigger and better guests, and it helps us grow the team. Truly means a lot. Thank you guys for supporting, and here's the episode. All right, guys, Mikey Taylor in the building, former pro skateboarder, now managing a $200 million real estate fund. What's up, my man? What's going on? What's cracking?

Starting point is 00:00:47 What a journey. It's been a crazy journey. Yeah, you don't see many ex-pro skateboarders take the journey you have, I think. No, no. Diving into the business space. Was that a quick transition, or did you feel kind of lost after you retired from skateboarding? Well, my transition started, I was still a skateboarder. My first business was a craft brewery.

Starting point is 00:01:09 And I did it while I was heading towards the tail end of my career. So I had maybe four years of doing both. And then we sold the brewery and my skate career ended almost at the same time. Then I got hit with the purpose issue. You know, like building a business was it was amazing but i was still holding my identity in skateboarding so yeah i probably had a year or so of like who am i felt lost all night and everything you hear about yeah because your whole life was skateboarding prior to that that's it yeah from the second i was a kid until

Starting point is 00:01:40 34 wow so almost 30 years yeah that crazy. And you started making money off it at an early age, teenage years, right? Kind of. I started getting free product. I had companies sending me free skateboards and shoes, but they weren't paying me. But I was selling some of the stuff to the other skaters, like the hand-me-down stuff.

Starting point is 00:02:01 And so I was making a little bit of money there. I wasn't officially getting paid until I was about 19. Okay. And how insane is the money at the pro skateboarding level if you win competitions is it really small oh it's nothing nothing no there's like a handful of guys like you know nija makes good money um paul rodriguez like some of the you know household names sheckler rob dyrdek but like no most skaters don't make that much most skaters don't make over 100k interesting so it's similar to tennis very similar yeah because tennis the top like i think 100 players in the world make money but outside of that you're losing money 100 well it scares i don't think necessarily losing money because you don't have to go to tournaments right but i don't

Starting point is 00:02:38 know if i were like average it out 60k a year damn so you were doing it straight out of passion that money wasn't even i was making a little bit more i i was i was in kind of like what we refer to as like the golden era of skateboarding at least from a financial standpoint so i was making i don't know 150 or so and then i had a couple years i had a shoe that did really well so it's kind of some standout years but like nothing like out of this world not like other pro sports got Got it. But back then, 150 is a good amount. I mean, it was crazy for me. Yeah. Especially in your 20s.

Starting point is 00:03:09 Totally. What ages did you peak in terms of skill? Oh, gosh. Skill, I peaked probably 27. Okay, that's pretty young. Yeah, but I would say brand peaked at like 32, 33. Got it. My brand kept getting bigger, even though my talent, I think, peaked.

Starting point is 00:03:28 I started figuring out how to really market and how to build an audience. Right. And then I created more demand for myself, so I was selling way more product. But yeah, from like a skill standpoint, yeah, probably 27. Interesting. So were you studying like Tony Hawk a little bit, seeing what he was doing? No, I was following Rob Dyrdek more than anything yeah tony like tony was cool for us to watch because he was tapping into like you know uncharted territory but there was a part of it that felt

Starting point is 00:03:56 like he was like a unicorn in a sense like he he kind of became the kind of kelly slater type rob deardick felt like he was more creating his own path that could be duplicated. I was paying attention to him more than anything. I pay attention to him right now. His work ethic, the way he plans. It's crazy, the time efficiency, it's nuts. I don't live as calculated,

Starting point is 00:04:19 but it is a little inspiring to see someone live as calculated. I don't know if anybody lives as calculated. It's too robotic for me. I like some sort of nuance yeah i mean he's a he's a like skaters are like kind of by nature obsessive like you know we get into something it's all we can pay attention to right i mean he follows that mold yeah you're a skater you need to be very detail oriented because one slip up and you're injured right right do you have any bad injuries when you were skating you know what not a lot actually not as many.

Starting point is 00:04:45 I mean, you would think I'd have broken legs and ankles. Like, I broke my hand one time. Basically, that was it. That's probably normal if you're a pro skateboarder. You know, it depends. Some people are getting hurt all the time. Like, Sheckler's hurt all the time. I think it's more a different, like, for me, I felt very calculated with how I skated.

Starting point is 00:05:03 Right? Where there's other skaters that are like, I'm just going for this. It's make or break. Well, it's risk-reward. Yeah, there's some crazy tricks. So you aren't attempting any ridiculous stunts or anything? Depends who you ask. You might think so, but I don't know.

Starting point is 00:05:19 The stuff I did, I felt like it was more tame. Okay. So after you sold that company and retired, what was that next step? Did you get in the real estate from there? Yeah, it took me probably about a year though. We sold our business at the end of 15 and then I had two other partners. So we kind of all went different directions. One of my partners stayed in alcohol. My other partner went into kind of built a clothing business. And then I eventually started my private equity firm but yeah it probably took

Starting point is 00:05:45 me a full year of like figuring out like you know some of the deeper stuff yeah you know like if i'm not a skater what am i and yeah you see it with a lot of pro athletes you see it yeah with a lot of business owners that have the same business for 10 20 years when they sell it they feel kind of lost right you know right so you had to go through that i bet you did um but eventually you got the fund going. Now you're managing $200 million. Is that accurate? Yeah, a little bit more.

Starting point is 00:06:08 Maybe about $250 million. Wow, in six years. Yeah, we've been going for it. And to be able to get to that number, obviously you've got to be producing good results. I saw one of your posts averaging 21.3% IRR on one of the funds, which is incredible in real estate. That number is our overall average return

Starting point is 00:06:32 for our equity funds. We have a debt fund as well. On the equity side, that's it. Look, I have great people around me. You know this. You surround yourself with great people and you put yourself in a position where great things can happen.

Starting point is 00:06:44 You're just facilitating. You found the experts in real estate and you put yourself in a position where great things can happen. Yeah, and you're just facilitating, right? So you found the experts in real estate and you had access to people with money and you kind of connected the dots? Yeah, so basically, to really go more niche on it, I am not an operator. I never have been, I never will be. So anytime I've ever started a business,

Starting point is 00:07:01 I'm typically looking at who's going to be the COO. That's usually right off the bat. This last business, it was making them a partner right away. I am not a analytical person. Like I, it's just not my gift. So CFO or CIO was right away. Or there were, there were key people that I brought in to form the company. And then we started hiring from that point on. But yeah, it yeah it was you know to give you more context i i came from like we built a craft brewery very different than you know building a equity firm or selling a security right but at the end of the day business is business right like it's like you you have one path that brings in your revenue you have your expenses and you have

Starting point is 00:07:42 your leftover right you just might have to learn the maybe nuances of the industry. But at the end of the day, it is what it is. So it didn't take me long to figure out how fund management worked. But there was probably a good year of having to educate myself. Did you have to get any licensing or anything? No. Oh, wow. Interesting.

Starting point is 00:08:04 Yeah, the licensing is more for, like if you're selling real estate, if you're raising money and you want to get paid to raise money, that's a licensed activity. You need it for that. That's not what I did. I started the company. I have my interest in the business, and then I make an income as well. So I don't get paid to raise capital. I raise capital for the firm, but I don't get paid to do

Starting point is 00:08:29 it. Got it. That makes sense. And we were talking before this about the strategy, which I thought was interesting. Most funds, they just buy and hold, right? Just properties. But you're building from ground zero. Yeah. A lot of this stuff we develop. So we have two strategies. We have our strategy for multifamily and then we have our strategy for multifamily, and then we have our strategy for storage. Storage, we buy vacant big box retail. So Walmart, a Kmart, a Bed Bath & Beyond, these huge footprints go out of business, right? And these days, it's hard to fill that type of space with a new operator, right? Like how many companies will take that space these days? Like how many Amazons can you have, right so they sit vacant and so we have learned how to find basically a vacant asset in an area that has high

Starting point is 00:09:12 demand and repurpose it into storage so basically when you drive up it looks like you're driving into a kmart and it's a you know cube smart or a life storage right so that's our storage and then a multi-family we try to buy distressed assets in california scrape them build apartments and how difficult is it on the building side because i've heard horror stories getting permission from the local government and all that is that an annoying process for you depends where you're investing california it's probably the hardest state to invest in wow yeah how come. How come? That's a good question. It depends on your point of view.

Starting point is 00:09:46 Like, you know, to simplify it, there's policies that our state operates on that are heavily regulated. And that takes time to get anything through it. So, you know, somewhere in Texas might take you six months to get through your entitlements and permits. In California, it's close to three years. Damn. Right?

Starting point is 00:10:12 So that's a big one. And then two, our state has, we have done a very bad job building, right? Like we built a bunch up to the financial crisis, financial crisis hits, and then we basically like stepped off the gas. So over the last 10 years, we've only averaged about 100,000 new residential units each year.

Starting point is 00:10:32 And today we have a 2 million unit shortage. So it's, look, our state is not in a healthy place as it pertains to the amount of people looking for somewhere to live. It's severely unbalanced. Yeah, what a deficit. That's probably why real estate prices are so high out there. Exactly.

Starting point is 00:10:48 Especially LA. Exactly. Man, I can't buy shit out there. Yeah, that's right. I used to live in an apartment out there, and I'm paying the same price for a house out here, a five-bedroom house as a two-bedroom apartment in LA. Yeah. And it wasn't even peak LA.

Starting point is 00:11:00 It was Woodland Hills. Yeah, that's right. It's crazy. That's great. It's nuts, man. It really is nuts. Yeah, they got to figure Hills. Yeah, that's right. It's crazy. That's great. It's nuts, man. It really is nuts. Yeah, they got to figure out how to solve that, man. Are you interested in coming on the Digital Social Hour podcast as a guest?

Starting point is 00:11:12 We'll click the application link below in the description of this video. We are always looking for cool stories, cool entrepreneurs to talk to about business and life. Click the application link below, and here's the episode, guys. Well, the state's taking it one way, and here's the episode, guys. So definitely not in the next three. My goal is so that I never have to leave. So hopefully that comes true. I'd love to see it, man, because they've really peaked, and I feel like they've gone a little downhill.

Starting point is 00:11:52 A little. I mean, think about when you say California these days. You're rolling the dice on how somebody's going to respond to that. If you were to ask somebody, what, 20 years ago, California's the place to be. It was was in my perspective and i would say the majority of people throughout the nation california was the best state we had right that's where everything was happening california new york now i mean we have

Starting point is 00:12:16 more people leaving than we have staying so it's like to me that's showing that we our states drop the ball yeah now vegas is eating at it a little bit. Miami. Look at the Carolinas are crushing. Carolinas. Nashville. When you have Alabama crushing, you're like, what is going on? Cali's got the weather, though.

Starting point is 00:12:35 That's one thing that'll never go away. Weather out there is beautiful. In terms of buying any particular cities or areas you're focusing on for real estate? On our storage stuff, it's all over the place. It's because we look for, okay, so there's more to it, right? Like you have big box retail that is vacant everywhere, right? Cities don't like storage though.

Starting point is 00:12:58 So it's very difficult to find the asset that the city will allow you to do this in, right? Anytime I talk about this on social media, my DMs are flooded with, I have this property, I have this property. Finding the property is not the challenge, it's the city. And because of that, it makes it really hard to hone in on one area where multifamily, it's really easy to do so. So right now our next storage property is in Indianapolis, Indiana. On the multifamily side, it's Ventura, Ventura County, and San Diego. Those are like the two main focuses. And it's just because they're the most,

Starting point is 00:13:32 they're two of the most undersupplied cities in the entire nation. Got it. So that's where we're going. And how are you identifying that they're undersupplied? So a couple ways. One, you typically have a state of the economy. And then you have them regionally. So there's counties and then there's cities.

Starting point is 00:13:53 We look at those basically studies that come out. Got it. And go, okay, Ventura County, 31,000 units short. San Diego, 108,000 units short. Oh, let's go look there you know simple enough people over complicate things i think i think so too i think so too on the storage side why do you like stores so much is it good uh monthly income with people renting out yes storage cash flows but the the reason why i've always liked it is because how it performs during recessions like that look

Starting point is 00:14:23 we kind of experienced this over the last, what, 2020, even though I don't even think that was a real recession. But everything's good until it's not, right? Everybody's making money, everybody feels good, and all of a sudden there's a downturn. And what happens is those that don't have assets that can withstand that, you're stressing out in survival mode. You're panicking, trying to not lose everything you have. And it takes you off or out of the game

Starting point is 00:14:51 to actually buy things at a discount, right? So what I've always liked about storage is through recessions, they perform incredible. And so I always wanted to be put in a position where when things get bad, I can buy. I don't want to be stuck scrambling during that time. I was really attracted to it for that reason. They're cash machines. They do well. That's an important mindset to have in real estate. Every 10, 20 years, there's a big recession in real estate. The 08 one.

Starting point is 00:15:19 It usually happens sooner than that. It's usually every 10. The 08 one, I remember just being a kid and seeing my friend's families like losing their jobs and it was pretty traumatic honestly it was brutal yeah people forget quick how bad that was dude that was terrible but you weren't even in real estate then right i owned uh my home okay at that point i had the majority of my money in stocks and bonds uh and i was terrified i was scared shitless yeah i mean everybody that i looked up to even like looking at my parents and everybody's losing money it like significant amounts i remember my father-in-law who wasn't my father-in-law at this time goes i just lost

Starting point is 00:15:56 half of my portfolio damn now he didn't sell it so it wasn't a realized loss right but i mean there was panic in the air and like dude i felt that like i i didn't know what i know today yeah so my first like thought was i need to sell before it gets worse thank god i didn't but uh that's that was the vibe yeah i think the people that sold they didn't have that safety net so they had to right and yeah they got wrecked right yeah that was a bad one that was terrible um one of your most interesting posts you don't use debit cards anymore hell no i gotta hear why no so the the thing that sucks i don't use debit cards that's the thing that kills me but i have a debit card in my wallet okay right this was probably two months ago i'm at dinner i i think this was it but i'm at dinner with my family and my wallet

Starting point is 00:16:44 falls out of my pocket and i have a daughter she's one and a half years old so she's on the ground playing right before i know it my credit cards are all over the place right about three hours later i get all these alerts on my phone phone just starts blowing up purchase you know flight to mi, flight to Europe, flight, right? And every single credit card is like flashing fraud. Just a thousand bucks a year, 1,500 a year, a thousand bucks a year, right? So I call all my credit cards.

Starting point is 00:17:12 I was like, hey man, I got a fraud. I have fraud. I have fraud. It happens in my debit card, right? So I call my bank. Hey, I have fraud. We run through all the charges. Long story short, all the credit card companies go,

Starting point is 00:17:23 don't even trip. We got you. Send me a new card. Done deal. My bank does the same except i get a letter i don't know a month later saying we've investigated the situation and we have found no fraud right and i'm like at first i was like what are you telling me i'm a liar like are you kidding so i call i call them up and basically what i found out was they don't look for fraud that's not what they do they just call the vendor or the merchant and ask if they will refund them the money right hey we we think there's fraud will you refund this if they say yes well then

Starting point is 00:17:58 they give you that money back if the merchant says no then they call you and go sorry no fraud wow yeah so you get no protection. Your actual cash is at risk. With debit, with credit, it's credit. So there's protection there. Now what I do is not only do I not use debit, that thing doesn't go anywhere near me at all. It's stuck in my drawer at home.

Starting point is 00:18:20 I'm not using it. This happened to me this morning. Someone got my ACH numbers, routing an account, and paid off all their credit cards 10 g's that's not good and i don't even know if i'll get that money back because it's in a checking account yeah that's not good so yeah i love credit cards plus you get all the points and stuff yeah you know what like there's a lot of stuff i disagree with with rams. But there's a part of him that I go, yeah, that's actually good. And I think that from a young age, there was a part that was instilled in me, which was don't ever go into bad debt.

Starting point is 00:18:54 Never. And I was so programmed that way that even my view of credit cards was, yeah, use credit cards because having credit is important. But don't go off and buy things you can't afford just to play the point game to buy other things, right? My perspective's changed a little bit. I still am on the point thing. I think if you're like, you can get points, great.

Starting point is 00:19:17 But I think for the majority of people, don't even play the game. Use credit, pay it off every month in full, no matter what no exceptions i think that's a fine strategy yeah i agree there's some things i agree with him like i've used credit in really stupid ways and definitely shouldn't do that again but also you know just using it in smart ways right because there's zero percent credit cards for a year right that you could get you could get you know what the where he's off is on the on the like good

Starting point is 00:19:43 debt that's where he's really off right like you know he'll you saw this video of him going viral somebody's like if i gave you a billion dollars for 10 years yeah at zero percent would you take it he said no he said no like that type of stuff it's like bro i understand like you got to like hold down the brand but like now you're kind of just playing yourself yeah you know of course you would take that you could put that in a four percent index or whatever yeah yep, any other investments you're doing outside of real estate? Um, my business, that's it. Like our business only invests in commercial basically, uh, or multifamily storage. We have a debt fund, but it's real estate. Uh, me personally, I, I still make investments. Um, I just don't run any of them.

Starting point is 00:20:27 You know, I invested in my partner that I started the brewery with, started a handful of alcohol brands. I invested in him. Invested in a fintech company not that long ago. But it's all passive now. Got it. So when you hear this advice of you need multiple alleys, like seven, average millionaire is seven, I think, investments. What do you think of that?

Starting point is 00:20:50 I think there's more to it, actually. I think the best way to do it is to have eight uncorrelated investments, right? This is the challenge. When you look at the broad idea of how you invest, right? It's stocks, bonds, maybe a public REIT, right? And the idea is, well, yeah, they're not correlated. When stocks are bad, bonds are good. But when 2008 hit, even 2020, what happened to all three sectors? They all got hit. So it's hard to find things that aren't correlated anymore. So that's more my focus. It's like, okay, if I'm owning private real estate, apartment buildings, storage units, those aren't correlated to the market. So that at least gives me two of those components. Then if I'm going to go on the debt side, private credit, that's a third. So I think

Starting point is 00:21:40 that's actually more valuable, having investments that don't pull the other down when things get bad. I think that's more important than having like eight streams of income. I love that. Have you always been this good at mitigating risk or in your earlier years were you more risky? No, I was actually, I became riskier actually.

Starting point is 00:21:58 Yeah, I think like, I think I'm naturally risk adverse. Like my dad never took like crazy risks. He was a lot more calculated. I was always of that vein. Um, especially like investing passively. Like I am totally good. Like you give me 10% good.

Starting point is 00:22:16 I don't need to like four X my money in six months. I just don't. Right. Uh, but where I am very comfortable taking risk is when I'm driving. Like if I'm starting a business, there's a lot of risk there. Right. Totally comfortable with that. Yeah where I am very comfortable taking risk is when I'm driving. Like if I'm starting a business, there's a lot of risk there. Totally comfortable with that. Yeah, I feel that because you're more so betting on yourself. That's right. Are you using any AI in your businesses right now?

Starting point is 00:22:35 A little bit. A little bit. We are bringing on this company now that's going to do all of our, basically when we have leads come in, right have your touch points of communication you have your emails your texts somebody's reaching out as a you know a setter calling them to get you on a meeting we now have or we're bringing on an ai uh tool that does all the text messaging and all the emails to everybody who opts in. Not like a automated post. It's like a full AI tool. So that's going to be the first real one that's integrated. And then we use it on newsletters or communications to investors.

Starting point is 00:23:18 We're using whatever. It's standard. But ChatGPT to help us clean up some of the language. Shout out to ChatGPT to help us clean up some of the language. Shout out to ChatGPT, man. I mean, dude, they did a good mainstream freaking approach for everybody to use. Dude, I saw some stats. They got 100 million users faster than Google,

Starting point is 00:23:37 Facebook, by like 20x. That was crazy. Yeah, it was nuts. All right, some of your most viewed clips are in regards to tax strategies. Saving money on taxes. You get a lot of hate in these comments, I notice. Why wouldn't you want to save on taxes?

Starting point is 00:24:00 There's a handful of ways you could take this. One, I think most people don't want to pay taxes. I think the overall census is taxation is robbery, right? But where I think the energy comes around is when it feels like wealthy people aren't paying taxes and those who aren't making money are, right? You look at like all the political figures, like there's so much narrative around, you know,

Starting point is 00:24:27 tax the rich because none of them are paying taxes. That's not true. But there's an element of it where if you're a business owner or you understand what the tax code is, well, you don't have to pay as much in taxes. And so I think there's just a huge education component that if people understood that the tax code is built for incentive, right? It's 95% incentive. It's only 5% there to raise revenue. And basically the goal of the tax code is to influence investor behavior, right? If I want investment going into the energy sector, I'm going to say, okay, tax help, tax cuts, tax incentive.

Starting point is 00:25:04 And what are you going to do? You're going to put money in the energy sector, right? So it's more a plan to grow the economy. And if you put your dollars where they want, you get to keep more of them, right? Real estate is one of those asset classes, right? The government doesn't own real estate. They're not in charge of building real estate, but they know that they need more of it.

Starting point is 00:25:20 So they create tax incentives for us, right? This is a big one 17 the uh in the jobs act the 100 bonus depreciation right you could purchase if the if the building qualifies you can purchase a building and basically depreciate the value of the asset in year one like that's massive wow that's a big write-off it's a huge one and they have that with cars right yep yep yep i just uh went through that exercise yeah yeah what'd you get i got a tesla model x oh those are six thousand pounds yeah i didn't know that at first actually yeah so that that qualified i mean you have to use it like the what you don't hear

Starting point is 00:25:57 is like oh you could appreciate the whole thing year one and a hundred percent of it boom you're good you you can only depreciate the percentage that you use it for business. And then there was a, what would you call it, phase-out stage that both asset classes were going through. So you can only depreciate like 80% of it. But Congress is voting today on basically bringing the 100% depreciation back for 24, 25, and 26. Let's go.

Starting point is 00:26:25 Yeah, which I think it's going to pass in the House. Then it goes to the Senate. I think that's going to be back into play. All right. I might have to get a car then. Yeah. If it gets to 100, I'm in. That's right.

Starting point is 00:26:33 That's right. You saw when Trump paid zero in taxes, people freaked out. Yep. He did it for like the past 10, 20 years or something crazy. Yep. Yeah, I saw that and I was like, wow, I'm doing something wrong because I'm literally paying more in taxes than Donald Trump. Learning how to show loss when you're making money,

Starting point is 00:26:53 that's the name of the game. It's easy for real estate investors to do it. The fool's a real estate investor as well. I grew up, I had a friend who lived on my street who uh invested in apartment buildings and now he's got thousands of doors no investors just him he's he's mega mega wealthy he's a paid taxes probably 20 years as well you know because he has so much loss that he's spitting off from these apartments but it's not like loss that you're paying money for right you but a lot of people refer to it as a paper loss it shows that you had this this depreciation loss but no money came out of your pocket so if your

Starting point is 00:27:30 money if your building's cash flowing but it's showing a loss that money's not taxable interesting right and then they just never sell it you just exchange them and then you die and you pass it down and you don't pay taxes yeah there's so many ways i literally just hired a tax advisor shout out to jim do and he's a beast man yeah that's another thing like don't pay taxes. Yeah. There's so many ways. I literally just hired a tax advisor. Shout out to Jim Dew. And he's a beast, man. Yeah, that's another thing. Like, don't do this alone. Yeah.

Starting point is 00:27:51 Have a great CPA come in and help you. I mean, there's so many ways. Like, there's charitable ways. Yeah. I just learned a lot about this. So hopefully next year we'll save the money. There we go. There we go, man. Mikey, it's been a pleasure.

Starting point is 00:28:00 Where can people find you and learn about what you're doing? My name on social media mikey taylor uh pick the platform i'm gonna come up at the top which is a cool thing perfect thanks for watching guys thanks for coming on mikey he's happy absolutely thanks for watching see you next week

Digital Social Hour - How I Built a $250M Fund: My Step-by-Step Strategy I Mikey Taylor DSH #499

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