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

Are you kidding?

So

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.

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, oh, sorry, no fraud.

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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?

It's cracking.

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 better for worse.

Yeah, diving into the business space.

Was that a quick transition or or did you feel kind of lost after you retired from skateboarding?

Well,

my transition started.

I was still a skateboarder.

Like my first business was a craft brewery.

And I did it while kind of 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.

And so, yeah, I probably had a year or so of like, who am I?

Felt lost.

Who am I?

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 34.

Wow.

Almost 30 years.

Yeah.

That's crazy.

And you started making money off it like 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 the hand-me-down stuff.

Yeah.

And so I was making a little bit of money there.

I wasn't officially getting paid till I was about 19.

Okay.

And how insane is the money at the pro skateboarding level if you win competitions?

Is it really skateboard?

Nothing?

Nothing.

No, there's like a handful of guys.

Like, you know, Naja makes good money.

Um, Paul Rodriguez, like some of the, you know, household names, Sheckler, Rob Dierdick.

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, hunter 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 but i don't know if i were to like average it out 60k a year damn so you were doing it straight out of passion then 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 a financial standpoint so i was making i don't know 150 or so and then i had a couple years at a shoe that did really well so kind of some standout years, but like nothing like out of this world, not like other pro sports.

Got it.

But back then, 150 is a good amount.

I mean, it was crazy for me.

Yeah.

Yeah.

Especially in your 20s.

Totally.

What ages did you peak in terms of skill?

Oh, gosh.

Skill, I peaked probably

27.

Okay, I was 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.

I started figuring out how to, like 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 skills 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 Deardick more than anything.

Rob Deardick.

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 like he was like a unicorn in a sense.

Like he kind of became the kind of Kelly Slater type.

Rog Dierdick felt like he was more like creating his own path that could be duplicated.

And so I was paying attention to him more than anything.

I pay attention to him right now.

Yeah, me too.

His work ethic,

the time efficiency, it's nuts.

It's nuts.

I mean, I don't live as calculated, but it is a little inspiring to see someone live.

I don't know if anybody lives as calculated.

It's too robotic for me.

I like some sort of nuance.

Yeah.

I mean,

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 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 you have any bad injuries when you were skating you know what not a lot actually not as many i mean you would think like i'd have like 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 you some people are getting hurt all the time like shecklers hurt all the time uh i think it's more a different like like for me i felt very calculated with how i skated right where there's other skaters are like i'm just going for this it's make or break right uh well it's you know risk reward

yeah there's some crazy tricks so you aren't attempting any any ridiculous stunts or anything depends who you ask

you know like you might think so but i don't know 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 into 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 me a full year of like figuring out like you know some of the deeper stuff yeah you know it's like if i'm not a skater what am i and yeah you see it with a lot of pro athletes you see

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.

But eventually you got the fund going.

Now you're managing $200 million.

Is that accurate?

Yeah, a little bit more.

Maybe about $250, but

in six years.

Yeah, it's been, I mean, it's been, yeah, it's been, we've been going for it.

You know.

And to be able to get to that number, obviously you 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's our, yeah, that number is our, like, our overall average return for our equity funds.

We have a debt fund as well.

So on the equity side, that's it.

And it's been, look, I have great people around me.

That's what it comes.

I mean, you know this.

Right.

You know, you surround yourself with great people and you know, 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, the like 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 ever started a business, I'm typically looking at who's going to be the COO.

That's usually like right off the bat.

This last business, it was making them a partner right away.

I am not a analytical person.

Like I'm, it's just not my gift.

So CFO or CIO was right away.

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 was, you know, to give you more context, I came from, like we built a craft brewer,

Very different than, you know, building an equity firm or selling a security.

Right.

But at the end of the day, business is business, right?

Like, it's like you have one path that brings in your revenue.

You have your expenses and you have 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, you know, there was probably a good year of like having to educate myself.

Right.

You know, you did you have to get any licensing or anything?

No.

Oh, wow.

Uh-uh.

Interesting.

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.

That's, you need it for that.

That's not what I did.

Yeah.

I started the company.

I have my, you know, interest in the business, and then I have a, you know, I make an income as well.

Right.

So I don't get paid to raise capital.

I raise capital for the firm, but I don't get paid to do it.

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 the stuff we develop so we have two strategies 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 and 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.

And so they sit vacant.

And so we have learned how to find basically a vacant asset in an area that has high 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, CubeSmart or a life storage.

So that's our storage.

And then a multifamily, 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 governments 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?

That's a good question.

It depends on your point of view.

Like,

you know,

to simplify it, there's...

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, you know, your entitlements and permits.

In California, it's close to three years.

Damn.

Right.

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.

And today we have a 2 million unit shortage.

Wow.

So it's, 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, it's severely unbalanced.

Yeah, what a deficit.

That's probably why real estate prices are so high out there, especially L.A.

Exactly.

Man, I can't buy sh ⁇ out there.

Yeah.

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 L.A.

Yeah.

And it wasn't even peak la 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 out how to how to solve that man

are you interested in coming on the digital social hour podcast as a guest 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 that you know the state's taking it one way and we'll see if it works we'll see have you been tali your whole life Born and raised.

Okay.

Yeah.

No plans on leaving?

Well, I recently ran for city council.

Oh, nice.

And I got elected last year.

So I have three more years on my term.

So definitely not in the next three.

My goal is so that I never have to leave.

Yeah, 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.

A little.

I mean, think about.

Think about when you say California these days.

Like you're rolling the dice on how somebody's going to respond to that, right?

If you would have asked somebody, what, 20 years ago, California's a place to be.

It was, in my perspective, and I would say the majority of people throughout the nation, California was the best state we had.

That's where everything was happening.

California, New York.

Now,

I mean, we have more people leaving than we have staying.

So it's like, to me, that's showing that we've, our states dropped the ball.

Yeah.

Now Vegas is eating at it a little bit.

Miami.

I mean, look at the Carolinas are crushing.

Carolinas, Nashville.

Nashville.

You You know, like when you have like Alabama crushing, you're like, what is going on?

You know, Cali's got the weather, though.

That's one thing that'll never go away.

Yeah, that's right.

The weather out there is beautiful.

That's right.

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.

Okay.

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.

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, right?

Finding the property is not the challenge.

It's the city.

And because of that, it makes it really hard to like 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.

It's just because they're the most, 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,

like state of the economy, and then you have them regionally.

So there's counties and then there's cities.

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.

Simple enough.

People overcomplicate things, I think.

I think so, too.

I think so, too.

On the storage side, why do you like storage so much?

Is it good monthly income with people renting out the storage?

Yeah, storage cash flows.

But the reason why I've always liked it is because how it performs during recessions.

Look,

We kind of experienced this over the last, what, 20, 20, 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 right and what happens is those that don't have assets that can withstand that you're you're stressing out in survival mode you're you're panicking trying to not lose everything you have and it takes you off or out of the game 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.

So I was really attracted to it for that reason.

And then, yeah, I mean, they're cash machines.

Yeah.

They do well.

And that's an important mindset, I think, to have in real estate because every 10, 20 years, there's a big recession in real estate, right?

The 08 one wiped out.

It usually happens sooner than that.

It's usually every 10.

Damn.

Yeah.

Yeah, the 08 one, I remember just being a kid and seeing my friends' families like losing their jobs.

And it was pretty dramatic, honestly.

Yeah, I was saying it was brutal.

Yep.

people forget quick how bad that was dude i 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 you know everybody that i looked up to even like looking at my parents and everybody's losing money in like significant amounts i remember my father-in-law who wasn't my father-in-law at this time goes i just lost 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 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 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.

Yep.

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 got to hear why.

No.

So 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 think this was it, but I'm at dinner with my family and my wallet 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 Miami, flight to Europe, flight, right?

And every single credit card is like flashing fraud.

Just $1,000 a year, $1,500 a year, $1,000 a year, right?

So I call all my credit cards.

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, 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 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, are you telling me I'm a liar?

Like, are you kidding?

So

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 they give you that money back if the merchant says no then they call you and go oh sorry no fraud wow yeah so you get no protection it's your your actual cash is at risk yeah with debit with credit it's credit so there's there's protection there uh 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 you know drawer at home i'm not using it this happened to me this morning my 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 Ramsey, but there's a part of him that, like, I go, yeah, that's actually good.

Right.

And I think that, like, from a young age, there was a part that was instilled in me, which was, don't ever go into bad debt.

Like, never.

And I was so programmed that way that even my view of credit cards was, yeah, use credit cards because like having credit is important.

But like don't go off and like buy things you can't afford just to play the point game to like buy other things.

Right.

My perspective's changed a little bit.

Like I still am on the point thing.

Like I think if you're like, you know, you can get points, great.

But I think for the majority of people, don't even play the game.

Like 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 that where he's off is on the on the like good 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 yeah yeah like that type of stuff it's like bro i understand like you got to like hold down the brands 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 4% index or whatever.

Yep.

Yep.

Any other investments you're doing outside of real estate?

My business, that's it.

Like our business only invests in commercial, basically, or multifamily storage.

We have a debt fund, but it's real estate.

Me personally, I still make investments.

I just don't run any of them.

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?

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.

Like when you you look at

like

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.

Like when stocks are bad, bonds are good.

But, you know, when 2008 hit, even 2020, what happened to all three sectors?

Right.

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, you know, 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 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 were in your earlier years, were you more risky?

You'd say, No, I was actually, I became riskier, actually.

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,

especially like investing passively.

Like, I am totally good.

Like, you give me 10%,

good.

I don't need to like 4X my money in six months.

I just don't.

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.

Totally comfortable with that.

Yeah, I feel that.

Cause you're more so betting on yourself.

That's right.

Are you using any AI in your businesses right now?

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?

You have your touch points of communication.

You have your emails, your texts.

Somebody's reaching out as a, you know, a setter or calling them to get you on a meeting.

We now have, or we're bringing on an AI

tool that does all the text messaging and all the emails to everybody who opts in.

Not like 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 like newsletters or

communications to investors.

We're using like whatever, it's standard, but Chat GPT to help us clean up some of the language.

Shout out to ChatGPT, man.

I mean, dude, they did a good mainstream freaking approach approach for everybody to use.

Dude, I saw some stats.

It was like they got 100 billion, something crazy, 100 million users faster than Google, 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.

Yeah.

I wonder why.

Why wouldn't you want to save on taxes?

Well,

there's a handful of ways you could take this, right?

One, I think most people don't want to pay taxes.

I think that 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, 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.

And what are you going to do?

You're going to put money in the energy sector.

Yeah.

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.

So they create tax incentives for us, right?

This is a big one 17

in the Jobs Act, the 100% bonus depreciation, right?

You could purchase, 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 went through that exercise.

Yeah.

Yeah.

What'd you get?

I got a Tesla Model X.

Oh, those are 6,000 pounds?

Yeah.

I didn't know that at first, actually.

Yeah.

So that qualified.

I mean, you have to use it.

Like what you don't hear is like, oh, you could depreciate the whole thing year one and 100% of it, and boom, you're good.

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 are 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.

Yeah, which I think is going to pass in the House.

Then it goes to the Senate.

I think that's going to be back into play.

All right.

right.

I might have to get a car then.

Yeah.

Against the Hunter.

I'm in.

That's right.

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.

Yeah, so it's, it's,

it,

learning how to show loss when you're making money, that's the name of the game.

Right.

And it's, it's, it's easy for real estate investors to do it.

I mean, the fool's a real estate investor as well.

Right.

Right.

Uh, I, you know, I grew up, I had a friend who lived on my street who 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 paid taxes in probably 20 years as well.

You know, because he has so much loss that he's spinning off from these apartments, but it's not like loss that you're paying money for.

A lot of people refer to it as a paper loss.

It shows that you had this depreciation loss, but no money came out of your pocket.

So 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 Dew.

And he's a beast, man.

Yeah, that's another thing.

Like, don't do this alone.

Have a great CPA come in and help you.

I mean, there's so many ways.

Like, there's charitable ways.

I just learned a lot about this.

So hopefully next year we'll save the ton of money.

Here we go.

Here we go, man.

Mikey, it's been a pleasure.

Where can people find you and learn about what you're doing?

Uh,

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.

Thanks for having me.

Absolutely.

Thanks for watching.

See you next week.