Confusion over using 401(k) money

[Account Closed]

I've been reading a lot about using a self-directed 401(k) to help with funds for a buy & hold rental property. There are a few things I'm a little confused about. 

1.) Everything I'm reading says you can use a "self-directed" 401(k), which I'm assuming is NOT a 401(k) account from a current W2 employer?

2.) If so, can you roll over those employer 401(k) funds to a self-directed 401(k) and

3.) Most importantly - How exactly do those funds help finance a rental property? Are you using it for a down payment? Is it a loan you have to pay back or are you "rolling" it over into another investment account (real estate) to avoid tax penalties?

Much appreciation in your responses.

[Justin Windham]

@Account Closed mentioned. In this situation, the 401k would supply the downpayment and the non-recourse lender would finance the rest of the purchase. The 401k would then make the loan payments and cover any investment related expenses.

The other way a 401k can assist in a property purchase is by you taking a participant loan from your plan. You may borrow 50% of the plan assets up to $50,000. When you borrow these funds from the plan, they are yours until you pay them back via payments at least quarterly. This can assist you in purchasing a property outside of the retirement account. That is, you (or your chosen entity) would own the property, not the 401k. You would receive the profits and you would not get the tax benefits of the 401k, though you could likely take deductions for expenses, depreciation, and the like.