Cashing in retirement for 2nd house

[Michael Freeman]

Looking or some wisdom on if this is a good call. We have a manufactured home that will rent for $2200-2400 monthly with a monthly payment of $1150. Our renters just moved out and we finished a repaint of everything, new carpet, lots of TLC planning on selling it so we can have equity to buy a new home in a new city we just moved to last year. We cannot pull equity out of it because is is manufactured and we are no longer living in it. 

A fried suggested cashing in retirements (my wife and I have 2 small ones) to get a down payment for a house to live in and keeping the rental which is producing cash and is 15 years away from being paid off if we don't increase principle pay down (which we intend to do). If we do list the house is is going on for $290,00 and we owe $150,000. 

Is this totally crazy or does it have a shred of viability? 

Long term our hope would be to pay off the rental and every 5 years add one, slowing increasing passive income. I know I have a ton to learn but this is a bit time sensitive as we are deciding to put our house on the market or get new renters. 

Thank you in advance for any input. 

-Mike

[Nathan Williams]

I definitely would NOT do this.

The tax penalty is too high and not worth the risk of trying to out earn in in your real estate investment venture... especially considering where real estate market cycle is right now.  

Have you looked into borrowing against your 401K instead?