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).

Obviously, all this income will funnel down to you on your tax return, but you should have go into your LLC if you have it titled that way

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

Someone I know owns section 8 properties, he doesn’t have any issues and the rent gets deposited directly to his account.

I have done my research online and it doesn't seem like the strongest market (population is stagnant, crime rate is not the best, job industry isn't very strong) but I know personal accounts are important as well. 

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?

It's wise to take into account market research and any upgrades or additional benefits for the tenant.Determining when to raise the rent is influenced by various factors such as lease renewal dates, local market conditions, tenant satisfaction, and lease agreements.

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. 

This will cover the mortgage payments. all of the additional expenses I will cover out of pocket (escrow account).

. $499k value property with $70k per month income?