For me it's worth it, because REI is just one avenue of my family's income.

Once you have that rolling and you understand the game you can then invest your W2 income into additional properties. 

They want to buy the home from me but are running into issues with debt to income ratio, so not eligible for FHA. 

.: Quote from @Wale Lawal: @Alex Rivera Jr.Investing in long-term rentals, like single-family homes (SFH) or multi-family homes (MFH), can be a smart way to build wealth and earn passive income.

I do not want spend my W2 income to cover house mortgages, to not have pressure if things like layoffs will happen, so my plan is to buy house in a good neighborhood that may have appreciation and some minimal cash flow after all expenses (management, maintenance and vacation).

Currently, I find myself in the 37% tax bracket due to W2 income and I'm eager to explore avenues to shelter taxes through real estate investments.

Will this area see a huge increase in value and rental income?

Losses are going to offset future income.

I'm of course bias, but I chose Reno because of it's proximity to CA, no state income tax, stable job growth, population growth, land constraints (constricted supply), proximity to Lake Tahoe, etc. 

Since the basement would be used more so for us living in the unit and not rental income, do the same code/zoning requirements apply?