That way you actually own the property and can take full advantage of the tax benefits.- Tom

Another partner is a lawyer, and the fourth partner is doing our taxes and bookkeeping while I'm on the marketing/ deal analysis end.

Essentially your cost of money for the down payment is the after tax cost of debt...your home equity line interest rate after taxes versus the interest you are earning on your savings...I am guessing the cost of the equity line interest is more than what you are earning in the savings account...either way, I also suggest hiring a professional property manager to start with.  

Patrick, If your 401k owns multifamily real estate and receives rental income - this income will be sheltered from taxes. 401k is tax exempt entity and does not pay taxes on passive income.

Factoring in taxes, renovations, etc...Also...

While a similar concept, syndications add the tax benefits of being a partial property owner as well as offers a lower fee structure.

., there are PROs and CONs though.Low-to-Zero taxes and unpredictability being amongst them.

@Adrian N.There are no tax implications of moving funds from a prior company 401(k) plan to an IRA. 

Obtain professional legal, tax and lending advice always.  

It might help to show them on paper how much more they can make and  spread out their income and have less possible income tax liability in the life of the loan.