It's all about if it will generate passive income or ordinary active income. 

(The custodian must make something on it besides the small fee they charge, but the return on your money will most likely be more than what you would get with mutual funds.)CAVEAT: If you do not make the payments, the loan balance is treated like ordinary income when it is reported to the IRS.

The difference in tax implications with just one year of productive use to reach cap gain status vs ordinary income will blow your mind. 

I know the price he just double checks that it’s not too out of the ordinary a job.

Passive gains could be coming from other passive investments especially coming from sale of other assets (which are overripe - you should have sold earlier so you don't have such a large capital gain and depreciation recapture in the first place).In summary Passive Losses cannot offset Ordinary Income (401k withdrawals) unless you are implementing REP statusThat said I normally with do a cost seg with @Yonah Weiss

Letting them do this can set a precedent, next purchase may well be patio furniture! 

Just keep in mind real estate loss can be used to offset your ordinary income.  

After running the comps it didn't make financial sense so instead we poured a large patio.

If you can find deals that generate strong returns, paying the 10% penalty and ordinary income will be a no-brainer decision because you can make the taxes back in a short period of time. 

You should also change your lease so it complies with general Landlord-Tenant law and makes you responsible for ordinary maintenance.