@James RobertSo basically, its just betting whether the property will appreciate more or less than what you can do/invest with the cash proceeds?

To find competitive pricing, look into the rental prices of nearby multifamily properties that are comparable to yours.Take into account all of the running costs, such as insurance, maintenance, taxes on the property, utilities (if not individually metered), and, if necessary, property management fees.Take into account the principle and interest payments associated with your mortgage.

This can definitely help as far as making the right adjustments to your strategy (since it sounds like you had 4 qualified leads and you don't want to lose out on another, that feedback is crucial; they completed the applications but didn't proceed past that point - sounds like it could be a deposit issue). 

I see that you required contractor to have General Liability and workers comp insurance.

., tax implications, insurance, etc.)? 

Also, during those 2-3 years you may have to bear to obtain possession, the borrower will probably ignore court orders to pay insurance and property taxes, leaving you out of pocket for those costs.  

The Bank also communicates with the title company to order chain of title and require lender/title insurance. 

Insurance is NOT all the same.  

@Willam KuczmeraIf you decide to proceed with the distribution, the following IRS web page is a good resource for the rules and tax consequences. https://www.irs.gov/retirement-plans/plan-participant-employee/401k-resource-guide-plan-participants-general-distribution-rules

In my experience, generally the party paying for the title insurance gets to choose the title/closing agent, unless there a reason for the other party to object.