Then they sometimes get more educated and sometimes realize that they have made a mistake. 

The longer you keep it the less ROI/IRRInteresting - I'd have thought that holding it essentially forever and having the tenants pay off your mortgage and then getting a pop at that point would give you the best ROI - similarly to how people tend to long term hold SFRs.I realize additional capex expenses come into play down the line but don't you just have to properly budget for them? 

Realizing your family wants you to succeed but they are taking a risk. 

Some interesting comments made so far, most are...The first thing you need to realize is the bank orders the appraisal and it is their appraisal for their own purpose, not yours.

Now that I have done a bit of research I realize that I should've done a lease as well.

@Joe Villeneuve just to follow up with the comment about it being a dead end, I come to realize a lot of people seem to think that way because of after buying the magic number of 10 properties traditionally it seems like a dead end but at that point shouldn’t you be looking at portfolio/commercial loans to keep pushing ahead?

I realize this post comes off as me asking for something without offering anything in return.

While you live in the bay area, you realize west coast is more so appreciation over cash flow; so you're considering out of state... including and St.

I realize there will an unavoidable 10% penalty to take out the 401K, but I'm curious about the potential income tax avoidance.Can any of you see major flaws in either path? 

A lot of out of town buyers don't realize that majority of multifamily of 2-4 units was built a long time ago and are in older neighborhoods.Over the past year or 2 there has been a spike in multifamily demand and appreciation which is a major factor in the available inventory for multifam.