I'd think about it and not be automatically dissuaded by conventional wisdom. Could go either way.
How to Cash Out 401K Early (without penalty)
Slightly random thoughts:
Computations of present vs. future value are inherently uncertain--anyone know what tax rates are in 2047? Also, few calculations take into account the potential reinvestment of the money earned from the real estate
What other access to money do you have?
People on this board seem to think nothing of paying 4 points to a hard money lender, but shy away from a similar fee called a tax penalty. Both are simply fees to access money.
If its a good enough investment it may be worth it. Pretty high bar to clear though...
What is your tolerance for risk? It may or may not be smart, but it is definitely risky.
Is this your only retirement vehicle? I can consider being a little more aggressive with a 401K as I have a defined benefit vested pension as well.
Personally I wouldn't do it for a flip, but would consider it for a dividend producing (i.e rental income) property I would hold.
I also wouldn't cash the whole thing out.
Leave enough in there to reaccumulate.
Starting t age 55 you won't have to pay a penalty for early withdrawal, though its still a big tax hit
I haven't done a cash out--yet--though I've used a 401K loan a number of times and it has worked out extremely well. 5 year amortization, but you are paying yourself and if you ever stop, you won't be penalized or taxed on what you paid back. So, pay back half of a 50K loan and your tax liability is on 25K plus the 2.5K penalty.
Your gross income for the year will be affected by the withdrawal, so be prepared for a higher bracket.
Not an accountant, not a lawyer.