It sounds like I need to conver the account to an administrator that allows the money to be invested differently.I'm assuming there are no tax implications of using the money to invest in real estate, (unless it's a Roth), right?

If you are having to tap your retirement account to meet the absolute minimum down payment requirement, then you might be putting yourself at even more risk.With your 401k, you can roll it into an IRA but that comes with several conditions. 1) If your 401k is with your current employer, then your ability to roll it into an IRA is dependent on the administrator (probably your company's HR rep) to allow it.

No drugs, and 0 rejection.

Figure out who the interested parties are; help them open an estate and get appointed as Administrator / Personal Representative / Executor; and then sign a purchase and sale agreement with them.Point being the decedent's estate owns the property and that's who you will need to deal with if you want to buy it.

Again, where is the legal or tax advantage for entering into this transaction structure, which will complicate your tax returns and add to administrative overhead?"

- Tenant not paying gas and electric bill- Tenant on drugs- Tenant paying late rentWhat did I do?

You do not live in fear of having a fire any more than you do now.They will fight, they will move in girl/boy friends, do drugs, drink, not pay, make noise, not clean up, etc. or they may be perfect angles. 

Our short-term goal is to replace the income she earns working as a Property Administrator for a large/national commercial real estate services firm. 

You xan pay the loan off in full anyvtime and you can take loans for the full amount every year, though details will vary based upon your 401k plan administrator.  

This includes moving in their new biker boyfriend and his party-animal buddies, getting involved in drink or drugs, packing up and moving to California to live their dream of being an actress, or a hundred other things.