The accountant said my business (real estate)and the number of properties I have is just growing too fast to be handled in the fashion I was and to protect myself in the potential case of an audit I needed to take that step going forward.

Be prepared for a time commitment.IRS Scrutiny and Audits: Brace yourself; the IRS might start paying more attention to you.

You don't want to make a big mistake and have to unwind it years later or worse face an audit.

- assuming 500hrs each, we have spent enough time this year to get to that but wondering if thats a red flag for IRS with high chance of getting audited (we travelled 7 times over the past year to work on the unit and spend at least a week each time excluding the time we spent managing the guests)- Lastly, our understanding is that each can take 50% of the final offset to our W2 assuming we prove material participation eligibility. 

I pay a little extra for audit defense in case I’m ever audited.

That being said the IRS doesn't "check" but if your audited they could find out and get you in trouble. 

I have 9 rental properties and pay a tax attorney $800 per year to prepare the taxes, but every year it seems that I find a few mistakes like mortgage interest not deducted on one property and insurance not deducted on another.I had assumed that for $800, someone was spending 4 hours entering my information and going through things to make sure I was getting all the deductions I was entitled to as well as preparing things so as to minimize the chances of an audit. 

(And to the IRS, should you get audited, but that is a different conversation.)John Hyre is more than an attorney and an investor.

I suspect one could ask for audited financials for each project ? 

With a nationally recognized CPA firm, annual audits and a reputable fund administrator, you would meet the minimum requirements for many investors.A strong CFO will not only bring financing expertise, but also strong risk management through adequate internal controls.