If you can avoid vacancy/turnover loss, you will come out ok.

You make it  sound like I need to go and check out the food. 

And then when she went to sell them she would have taken a 30 to 40% loss..

Putting your other expenses, rent loss and capex at about $4500 on about $20K gross income.This seems tremendously low to me.  

There are extenuating circumstances where a person can have lost a job, had a loss of a business, medical issues, or divorce. 

I loss my job and now the property need a new broiler.

I mean if I say I am ready to refinance for 200K and bank take a loss of 20K as they will loose much more in foreclose sale anyway.Is it valid assumption?

Some of our tenants have compromised health, young children, assistance animals, or are gardeners who are growing organic food.  

In fact, I've been able to use losses (and these are true paper losses due to depreciation) from my investing to offset my day-job income. 25k per year every year after year 3 (it took a few houses to get to the 25k number loss).Bottom line is that if she were to cash that 401k money out and take the 200k and if she could qualify for the loans (that was one of the big caveats I put in my post), she would come out WAY AHEAD with real estate than with leaving that money in the 401k.

Tell your roomy that you can lose your lock in on any interest rate, that such is a real financial loss, being a CPA she should realize she needs to act or become responsible.....if you'd take it that far.