So if something unexpected is uncovered during due diligence I can't get the deposit back. 

I think that's a flawed reason to sell and NOT in the investors best interest.

From what I've uncovered after speaking with some local lenders it's possible to obtain residential mortgages through an LLC, however lenders won't consider it unless you've been able to demonstrate positive income (by means of tax filings x 2 years) sufficient to cover the added expense of the new property. 

Well, what I have been trying to explain, is that mortgage appraisal is flawed and yet, appraisers have been working in that flawed environment all this time.

I realize there will an unavoidable 10% penalty to take out the 401K, but I'm curious about the potential income tax avoidance.Can any of you see major flaws in either path? 

@Caleb HeimsothLove Ramsey’s attitude but his math is flawed.

The homes are in move-in ready condition i.e. no rehab required or no major issues uncovered in the inspection report?

It also gives us a chance to recognize the flaw and adapt our thinking to not sabotage our goals.

People don't like to be jerked around so I've used the pass/fail inspection a few times to let the sellers know that I'm familiar with the rehab needed and unless something major was uncovered like a collapsed sewer line, I'd close at the price I told them.

Should I just find something that'll work to get my feet wet or keep digging to try to uncover a great deal?