On the flip side, I would encourage investors to invest because it makes sense as a solid investment and NOT for any proposed tax benefits.

not sure why no one else proposed this. 

There are advantages and disadvantages to both strategies when deciding whether to invest in-state or out-of-state.In-State Investing:Knowledge: You probably know more about the rules, legislation, and local market in your own state of Houston, Texas.Network: It's possible that you already know contractors, real estate agents, and other people in your community.The Ease of Management: Especially when dealing with daily problems, managing properties in your neighbourhood may be more convenient.Out-of-State Investing:diversity: If your local market is competitive, investing in a different state may offer greater prospects and diversity.Affordability: As you pointed out, certain states could have more reasonably priced real estate, which might enhance cash flow.Market Dynamics: There are markets with varying development potential and economic trends that you may access.Taking Out-of-State Investing Into Account:Investigate the target market in-depth, paying particular attention to employment growth, economic data, and local real estate market patterns.Establishing Networks: Establish a local network of contractors, property managers, and real estate experts.

The problem with the reverse method you propose is I would have a payment for the 401k loan around $300/month and then the holding costs of the mortgage until the refinance so roughly $400-500 for a total of say $800 To me it seems like the more cost effective route to use the bloc to purchase and 401k loan for rehab.

Adding closet organization and cosmetic improvements are likely to add another $5k.Thanks, ParrisHow big is the proposed kitchen?

If the legislation changes we can connect and I can point you in the right direction (to the developers that will have interest in paying you a sizeable lease for the land to develop a project).

In my opinion, this option surpasses the two you've proposed.

Probably less or no regulation in a place like that, but always good to check with the city and also good search for the city to see if there are any proposed regulations or dissention in the city. 

Since I live in a fast selling market I will most likely not have 30+ day for the board to review my proposal. 

It has been lucrative over the warmer months (April - September) and has allowed me to make upgrades to my building, however, I don't believe STR's in Anchorage will make sense once the city passes its new regulations.https://mustreadalaska.com/public-hearing-new-short-term-rental-licensing-fees-and-fines-proposed-for-anchorage/?