You say funds can be withdrawn from a retirement account tax-free and penalties-free, are you talking about Qualified Rollover into another retirement plan or what?

Although the contributions to the plan from your side income may not be significant enough to invest in RE, the bulk of the funds could come from the rollover. 

You could therefore rollover the LLC holdings into your solo 401(k) and avoid the need to liquidate. 

They even read my mind by saying "your doing this because you want them to roll over their returns and the problem is when Johnny earns 2-10k in 6 months he's going to use that money on a Harley instead of doing the smart thing an reinvesting with you."

As Jeff mentioned if you are with the current employer you typically can't rollover those funds into self-directed IRA or 401k until you are either no longer employer or reach a retirement age.

Rollover this account into an IRA where I can control where that money is invested moving forward3.)

It is not a rollover in my example.

You don't have to do it all at once.Is this a roth 401 option with your current employer or an old job where you first need to do a rollover to a traditional Ira?

My roll-over would be up to 100K, which IF I leveraged it further, might be up to 200K.

But don't roll over and give away the interest!