There is no point putting it into the plan in the first place if your only intention is to pull it back out immediately in a loan.For someone who has had a 401k for some time and contributed over many years, this "hidden cost" of losing the deferral basis of the 401k funds is acceptable if the use of the borrowed funds will be of real benefit such as getting them started in real estate investing.  

If that happens you could easily have to fork out $5,000 to fix the place up (Speaking from experience here), plus you could lose that rental income during this period.

Be aware that you'll likely lose 2-3 of your renters along with your current rehabs over the first few months.  

It's possible to actually lose money with all the fees plus you time.

So there was really no reasoning with him, he seriously believes he doesn't have to pay taxes.My question is is there any way I can ensure to be in the first position to buy the tax certificate so I don't lose the property?

If so, figure on losing about 20%-30% through collections losses/leaks.  

I got a college degree in business that emphasis in real estate.  

Also, with spring coming, I may lose out on a longer term tenant.Opinions on whether I should take these tenants( assuming regular qualifications are met)? 

Doesn't sound like much $$ to lose, but I have heard that they spend the majority of the time "up-selling" you on the next big event or other "stuff."

It's all losing large amounts of money to be popular.