The NSW Waratahs had won their first three matches of the campaign and started well at Brisbane's Lang Park, taking an early lead through winger Triston Reilly.
However, momentum swung decisively in the Reds' favour following a 23rd-minute yellow card for Waratahs fullback Andrew Kellaway.
"We didn't capitalise on early opportunities," said McKellar, who took over at the Waratahs ahead of the new season.
"The first 20 minutes I thought we executed on what we trained on all week really well, but we didn't take advantage of it.
"And then, the yellow card, we fell off a cliff, and just some really soft moments and not good enough. It's as simple as that."
McKellar was particularly annoyed by the try that allowed the Reds to go into the half-time break with a 21-8 advantage.
A maul formed more than 20 metres from the Waratahs' line before driving home almost unopposed to allow Richie Asiata to touch down.
"That maul try was borderline embarrassing for all involved," said McKellar.
"We were pretty positive at half-time around if we just executed what we discussed and what we trained, then we felt we could get right back into the game.
"But again, just a couple of soft moments, and if you give the Reds soft moments, they'll take advantage of it, especially at home.
"We've got full confidence in the group that came here, trained really well, prepared well all week, and did some good things within patches. But patches don't beat quality teams."