I thought the Roth IRA acted as both a savings account and a retirement account.

With so many baby boomers needing a place to live, and I want to cash flow when I retire in 5 years needing extra income over SS, I am looking at a house in Denver suburbs that I can rent 2 rooms, and use 2 rooms for my self with one for office (as I work from home).

I have read books about rental investment and they ALL talk about financial freedom / early retirement.

Work has been really stressful over the years and I would happily "retire" from my dayjob but my family says retiring at 30-35 is nonsense. 

And I'm 10 years from retirement at minimum, so I have to take making a living into account as well.

Of course you will be fixing up the house a number of times over that time period but the house will likely appreciate a lot over 20 - 30 years and then you will have an asset that you can sell and use to retire.  

This may seem like a hassle, but if you are going to move or use money in retirement accounts, HSAs, FSAs, 529s, etc. it is always better to ensure that you are doing something that is allowed and that you are doing it the right way so you do not get kicked in the checkbook by the IRS.Always be cautious,Allen Fletcher

Do you have to be active, retired, in some way associated like via spouse in order to bid and buy?

I have about $125k in my 401k from my job in which I do not plan on waiting until I'm 59 to withdraw or to retire.

Not sure if you are based in the US. 401K is a US specific retirement savings program with tax benefits.