If on the other hand, case 2, you have some strict rules regarding how you can or cann't participate in the management of the property.

Anyone have any thoughts to give a newbie like myself a helping hand?

A good PM will navigate the local rules of getting them out legally if that’s what needs to be done, or whip them into shape, all without you needing to pay a for attorneys and taking the headache out of your hands.

I challenge you to find and post a single reputable reference that does not show San Diego to have historically produced outstanding returns for a modest length hold.  

The buying investor expects Class B results, but they get Class C results because the Location Class is more important than the Building Class.3) Best is if you can invest locally, so you can be more hands-on.

On the other hand, insurance and mortgage interest are very high...interest is 50% of rental income.

Your profiles says you are doing buy and holds. 

Read as many RE books as you can get your hands on.

You've already got one bird in the hand, so to speak. 

However, I never recommend holding appreciating assets, such as real estate, in a S-corp as it causes problems down the line.