The "penalty" is just that the money no longer in your 401k obviously isn't working for you.401k liquidation without a qualifying reason.

I liquidated all my out of state stuff as it just wasn’t scaleable.

Although I may not have invested the total equity position, it more accurately represents the amount of liquidity that could be freed up and used to generate a return elsewhere. 

This person ended up being an investor that has had all his properties for about 20 years and is looking to liquidate.

What would be the highest return available that provided the least amount of risk with the most liquidity? 

I can leverage the property against loans for multiple rental properties, thus taking advantage of the money I have without liquidating it.

I would add that the advantage of REITs is that they're very liquid and you do not need a lot of money to invest.I hold a small REIT position because it pays a healthy dividend and I had some IRA money that wasn't enough to directly invest in real estate.

I just don't have enough of the liquid cash. 

I have 740+ credit score, ample liquid assets, and have W2 employment. 

I really wanted a small piece of advice, I have roughly 90k in liquid left, I found a property for 45k, tenants already in place paying $800 a month ( its a 3bd so theres plenty of room to increase that after expiration of lease.)