Can I use my IRA to pay off a $45,000 second mortgage on an investment condo? Would a 401K loan be better?

I know IRA money can be used for investments other than stocks or bonds, but I want to make sure the money is transferred and used within legal rules for IRAs.

The 401K option is okay but, even though interest would be paid back to my own account, I dislike taking out $50,000 after the market has already tanked (and while I'm still contributing and getting matching funds).

Either way, I would reduce my negative cash flow while I continue to attempt to sell the Las Vegas condo or rent it out.

Perhaps borrowing money from a parent at 3% or less interest (to keep up with inflation) is the best option: the $45,000 second mortgage at 9.124% interest can be paid off and my tax refund in the next month can pay off about $8,000 back to the parent (all without touching my 401K or IRA).

You can invest IRA funds in real estate utilizing a self-directed IRA. Check out Equity Trust Co. at www.trustetc.com
You can not self deal which means you can not purchase property with IRA funds that you currently own.
Therefore, your only option here is to use the 401k borrowing provisions. I do not suggest doing that just to cover a current mortgage.
I do teach how to utilize this strategy in circumstances that benefit you and not hinder your 401k.
Contact me for more info if you like.

no but if you do you have to pay penalty on it

As the previous poster said...You use IRA money to purchase an asset from yourself. So that's not an option. The 401k loan is also not a good option in this case because you are not purchasing the property...therefore the loan can only be over a period of 5 years. Thus you'd be in a larger negative cash flow situation then you are now. Only way you could get that to work is if you sold it and then repurchased it...in which case excise taxes come into play. Only way to extend the 401k loan out beyond 5 years is on the purchase of a home. And to add to the indignity of that...it's exactly as you might think. The longer the loan term the more negative damage that you do to your 401k.