It's currently going through a revitalization that has prices rising quickly. 

Since this is for a BRRRR (i.e. short-term debt), the slightly higher interest rate is only a marginal consideration.

Lastly, even if you do have $200k liquid, why put a big chunk down when you can move in for considerably less?

You are considered in the "biz" and will most likely have the opportunity to bump into other RE professionals than in another field.It's a good consideration.

And if the sponsor is experienced they should have a considerable past track record that you can look at to see how they typically underwrite deals and further mitigate this risk.One downside of individual deals is that they typically have a lot more risk because of owning just a single property versus a similar deal (that is diversified across multiple properties, often geographies, areas of the country, vintage years and sometimes even strategies and asset classes).

Even if the Corona Virus pandemic were to be cured tomorrow, there has been considerable destruction of wealth in a short time period.

I do plan to move to another 2 unit or a single at some point and since rates are super low now, I'm wondering if it's best that I just refi now before rates inevitably rise? 

Note: One other consideration is that the neighborhood has a bunch of similar 3/2s going up right next door (they're a bit nicer) and those are listed and selling quickly at about $180-190K each.

Are there any withholding tax considerations?

Here are the general considerations regarding 401k loans.401k Participant LoansIf your 401k plan allows for 401k participant loans, the maximum loan amount is equal to 50% of the balance up to $50k.