I would like to invest in some rental properties with the funds from my 401k. I do not want to "borrow" the funds, I want to invest the fund in real estate instead of the stock market. I read somewhere a while back that you can do that with an IRA account. Can any one point me in the right direction on this one?

No, the company that controls your money may invest in real estate, normally commercial buildings or in investment properties.
You can not take money out of your account and make investments that go to the account.

I found information on using IRA funds to purchase investment property, but nothing on 401k. Can I transfer money from my 401k to my IRA, or can that only happen when I leave my job?