Deegan and @Arda Bircan There are technically 7 Tests for Material Participation (but 3 that are most common) -> the individual 500 hour mark, that the activity of the individual is substantially all, and that the individual participates more than 100 hours + no-one else spends more time than them.Litmus Test: Are your hours integral to the operationsThe hours that qualify must be substantially all hours and have a legitimate impact on the rental activities.Activities that generally count: showing the property for rent, taking tenant applications & screening tenants, preparing & negotiating leases, cleaning & preparing the units for rent, repairs, and improvements, managing the construction, purchasing supplies & materials, inspecting the property, responding to tenant complaints & inquiries, collecting & depositing rents, evicting tenants, writing & placing advertisements, and working on your websiteActivities that don't count: education & research, investor-type activities, and travel time..

One that helps lease creations, screening (background checks, etc), and possibly even the advertising on different platforms like compass. 

Look into their marketing efforts, tenant screening processes, and response times.Service Audit: Conduct an audit of the services provided by Ace Management and Reality to ensure they are actively marketing your properties and maintaining tenant relations effectively.4.

Don't let things like that go unchallenged or you may find yourself in a pickle down the road.Biggerpockets sells a Lease Agreement Package under "TOOLS" at the top of your screen. $100 for a lease and several other documents, written by investors and attorney approved for your state.

And you ran an eviction screen on them with no records found. 

I have screen shots, emails and receipts where I can prove everything I'm saying.

California isn't the only State you can invest :) This investment doesn’t meet “The 1% Rule” if you search BP forums (using the magnifying glass feature, top right of your screen) you’ll get a lot of feedback on if this is a good investment or not.

You need to have standard screening criteria and apply it consistently.

Also, any general advice on finding a well-qualified renter or screening tenants would be appreciated.

Go to BUILD YOUR TEAM at the top of your screen, and you can search for other MEMBERS or LOCAL MEETUPS.