You are "able" to do anything you want with your 401(k), but you do have to adhere to the rules outlined by the tax code. 

Another downside is you loose on the advantages, of the Federal Tax Code, by not closing in the name of a LLC.

After running the numbers I don't understand how other developers near 90004 zip code can pull off similar projects.

Well... if you're strictly looking for "less expensive" (lower point of entry?)

The building code uses the window as an exception to the bath, but in reality it is a flawed requirement.  

I suspect what they are getting is a list of code violations.. 

They send me a copy of the DL and I send them the lockbox code.

There are some very strict parameters for how you identify your replacements and how they're valued  that could invalidate your entire exchange.You mentioned purchasing 4 replacement properties. 

Electric code doesn’t require it. 

Greater consumer protection has been achieved by Property Code Section 5.061, the SAFE Act, and Dodd-Frank, but these measures have also had the effect of raising closing costs, particularly if an RMLO intermediary agent is involved.