Richard McGirr is the co-founder of Property Llama and Property Llama Capital, an income focused fund of funds sponsor that helps accredited investors turn underperforming real estate equity into passively managed, cash flowing investments. He also hosts Unlimited Capital on the Best Ever CRE network, where he covers capital raising, fund operations, and the business of building investment platforms.
A lifelong entrepreneur, Richard started his first company in college and later spent eight years in China building a software engineering services firm to more than 85 employees. Wanting assets that worked for him instead of headcount, he moved into single family rentals and eventually partnered with Chris Lopez to launch Property Llama. Today his firm invests exclusively in debt funds, using a fund of funds structure to convert idle equity into contractual monthly income.
Richard McGirr joins John to explain why so many long-term single family landlords are sitting on millions in equity while earning almost nothing in cash flow. Using data from roughly 6,000 rentals inside the Property Llama platform, where the average return is negative 1% cash on cash, Richard breaks down how a decade of appreciation and debt paydown quietly eroded return on equity.
From there, the conversation turns to debt funds. Richard explains how hard money lending to flippers works, why six month loan terms and LTV cushions change the risk profile, and where the real danger sits. He also walks through the fund of funds structure behind Property Llama Capital, the fee discount he negotiated by committing scale, and the operational audit he runs on any lender before placing a dollar with them.
Make sure to download our free guide, 7 Questions Every Passive Investor Should Ask, here.
Key Takeaways
-
Re-underwrite your rentals at today’s values, not your purchase price
-
Track return on equity, not just cash flow, as debt gets paid down
-
Debt funds pay contractual cash flow from day one, backed by an LTV cushion
-
Shorter loan terms shrink the window for things to go wrong
-
Fraud, not default, is the risk that wipes out lenders
-
Diversify across a loan pool instead of funding one deal at a time
Topics
From Software Founder to Real Estate Investor
-
Built a software engineering services firm in China to over 85 employees
-
Left a headcount driven business in search of cash flowing assets
-
Partnered with Chris Lopez by adding value to an already established operator
Why the Average Single Family Rental Returns Negative 1%
-
Roughly 6,000 rentals in the Property Llama system average negative 1% cash on cash
-
Rents are flat or falling while insurance, vacancy, and CapEx climb
-
Richard’s own Colorado Springs rent fell about 30% after a supply wave
The Return on Equity Problem
-
The education industry teaches investors how to buy, not how to reassess what they own
-
A property bought at a 7 cap can become a 3.5 cap when values outpace rents
-
80% LTV becomes 20% LTV, and returns slide from the high teens into single digits
The Equity Rich, Income Poor Landlord
-
Typical client holds 3 to 8 rentals with several million in equity near retirement
-
Most target $10,000 to $20,000 a month and sit closer to $3,000
-
Cash out refinances no longer close the gap at current rates
Debt Funds 101
-
A pool of performing loans secured by title on real property
-
Hard money lenders fund flippers who need high LTV and five day closings
-
Fully loaded returns run 15% to 18% including origination
Why Hard Money Risk Is Structurally Lower
-
Six month terms limit what can go wrong versus a ten year horizon
-
A 25% LTV cushion rarely erodes inside six months
-
Single family homes are the easiest real estate asset to liquidate
Fund Investing vs. Lending on Your Own
-
Private lending demands underwriting, fast closings, draw management, and workouts
-
A single Denver flip loan can require $1.3 million of capital
-
$100,000 into a fund buys a slice of 50 loans instead of one
Lending Is a Real Operating Business
-
Lenders run origination, marketing, servicing, and accounting departments
-
On a 50 loan book, roughly 8% pays off every month and must be replaced
-
Richard’s largest lender partner employs 40 people
Building the Fund of Funds Model
-
Property Llama Capital launched asset light and headcount light by design
-
Raising capital for another sponsor’s deal without a license is a serious violation
-
Committing $5 million earned a 30% fee discount, split evenly with LPs
How Richard Audits a Lender
-
Request written credit box, servicing, and draw processes
-
Sample 20% of the loan tape and match a document to every step
-
Verify title at the county and confirm payoff wires in the bank account
📢 Announcement: Learn about our Apartment Investing Mastermind here.
Round of Insights
Failure that set Richard up for success: Launching his first fund with his partner Chris after an earlier partnership ended, assuming they could raise what they had raised before. The raise collapsed and the business nearly folded. Bringing in consultant Lauren Brychell of Equity Elevated exposed how large the sales and marketing gap actually was.
Digital or mobile resource: Claude Code.
Book recommendation: $100M Offers, $100M Leads, and $100M Money Models by Alex Hormozi.
Daily habit: Working from home, which he considers a genuine performance advantage.
#1 insight for investing in debt funds: Fraud is the number one risk, whether committed by the borrower or against the lender. It is catchable with proper due diligence, and it is the scenario that wipes you out. Most other bad outcomes cost you 10% to 20%, not everything.
Favorite place to grab a bite in Denver, CO: Torchy’s Tacos.
Next Steps
-
Learn more about Property Llama Capital here: capital.propertyllama.com
-
Connect with Richard McGirr on LinkedIn
-
Listen to Unlimited Capital every Monday on the Best Ever CRE network
-
Run your portfolio through Property Llama and re-underwrite at today’s values
-
Calculate return on equity across every property you own, not just cash on cash
-
Compare your current monthly income against the goal you actually set
-
Audit any debt fund’s written processes, loan tape, and title records before investing
Thank you for joining us for another great episode! If you’re enjoying the show, please LEAVE A RATING OR REVIEW, and be sure to hit that subscribe button so you don’t miss an episode.