Getting started with first STR

[David Wilmer]

Hi! Recently joined BP and this is my first post... Looking to get into the STR business with a main goal to maximize cash flow and hopefully grow a little over the next few years. I have a couple of initial questions...

I've been reading about LLCs and wondering if/when it makes sense to set one up. Should I set it up before purchasing the first property? If I wait, and maybe own 2 properties, is there an additional effort to get those initial 2 under the LLC? Additional helpful information is I live in Illinois but I'm looking to purchase in Wisconsin. I've been reading about "conducting business in a different state than you reside" and that requiring additional/different setup for the LLC. Is that worth it for a single property?

Another question is a bit different. In terms of financing the first purchase, I have been debating tapping into some old 401(k) accounts from previous W-2s (companies I no longer work for but still have the investment account and haven't technically rolled it into a traditional IRA). Obviously, I'll take a 10% hit by withdrawing those funds (and can borrow money for less than 10%) but if my goal is to maximize cash flow I want to minimize loan payments, so I think I am ok taking the inital 10% hit to have the cash to invest into the property and only have 1 small mortgage rather than 2 loans. My question is really if this is a decent strategy or if am I missing something that would not make this beneficial. For example, if I withdraw is it treated as income and not only do I take a 10% penalty, I also have to pay income tax?

Thanks!