In your case of a fourplex, option 2 should get you a better deal.I would also agree with Bill on how the number of units may not correlate with the value of the property unless it is a large multifamily complex, and sometimes a fourplex or several single family houses would give you better returns. 100% We always recommend conventional first until you can no longer qualify for those. 

So, if I withdraw $60K, about 75.24% of that should come from contributions (since that’s how my balance is structured).75.24% of $60K = $45,014 → Comes from contributions (no tax or penalty)22.38% of $60K = $13,428 → Comes from earnings (subject to taxes & penalty)Taxes & Penalty on the Earnings Portion ($13.4K)Federal Income Tax (24%) → $3,219Early Withdrawal Penalty (10%) → $1,342Total Tax & Penalty: $4,562Net Cash After Taxes and Penalty Fee: $55,437The DilemmaIf I leave the money in my Roth 401(k), continue contributing $525/month, and earn 8% annually, my balance could grow to:$229,865 in 10 years$606,905 in 20 yearsBut if I buy the property, it could generate $15.6K/year in pure cash flow, plus appreciation.

No only one exit in past 36 Im more interested in buy and hold.

To confirm, in a relatively stable market, an unlevered 1031 exchange of a million-dollar asset in a high-yield tertiary market—with no debt—would not realistically generate a 10% cash-on-cash return in year one?

(Michael's posts are a great resource for this, but still no substitute for working directly with a tax accountant that's well-versed in all the ins-and-outs of this.) 

My neighbor has listed his but also has had occupancy issues as an STR and said that most people looking for either rooms or cheap stays but I can't comment on that as I have no experience listing as an MTR.

No sooner had we even closed on the property than they found a tenant ready to move in.

Garage: Mix of attached/detached/no garageWhat we found in our urban core is smaller homes are selling at massive premiums and also the urban adjacent nature of it pushes prices as well.

Do current tenants have a say in deciding if the landlord will be allowed for this conversion or no? 

We offer refinances with no tenant required and no seasoning required.