New to house hacking, tough market

[Matthew Wadsworth]

I think this is the right forum to post. I apologize if not. This post turned into a wall of text, I apologize for that too

So, I'm debating whether my wife and I should pull the trigger on a duplex in the Boston area. I took a new job here and we are currently in temporary housing. If we don't buy a place, we're going to end up renting and that stinks. I see owner occupying a rental property as a great alternative to subsidize our lifestyle, but I'm having trouble with the numbers here.

The housing market here has on a strong climb since '08 and we are quickly being priced out of anything within a reasonable commute. Owner occupying a duplex will provide us the benefits of ownership, the headaches of land lording, and also monthly checks written by someone besides an employer. Not a bad trade-off. However, the best deals I can find around here are  barely 4% capitalization rate. I interpret this as the market being squeezed into speculative pricing. So, here we are looking at picking up something that I had dreamed would be a home run investment, and it turns out not to be much of a winner.

Pros:

•  We are leveraging our credit to finance an investment. The overall returns won't be great, but we will generate positive cash flow. For this experiment I assume we pay the market rent for the unit we live in.
•  We gain a great chance to learn 'handy' skills. We're motivated learners and see this as a great opportunity. I hope our positive attitude sticks and we don't get tired of swinging hammers...
•  I see working around the house as an opportunity to monetize our free time while we are learning. That's like a double win.
• The rents will provide a low returning investment, and if the home valuations continue to rise, we may be able to capitalize on that in the future for better returns. 

Cons:

• There is an opportunity cost on the down payment being drawn from potential equities investments which could provide ~7% returns.
• I don't know who would buy the duplex from us in the future since it's at the bottom of acceptable cap rates. Unless there are very efficient updates to the units which could pull in a higher rent, or rental prices pick up.
• I don't feel confident with real estate yet. I've self-educated myself on the topic, but I'm still very unsure of the industry. So, not having a bigger buffer in terms of cash flow/returns worries me.

We're going at this alone and don't have any real estate gurus talk to, so if anyone cares to chime in, or even double check my numbers I would really appreciate it. Thanks for reading my wall of text!

Numbers:

$670k purchase price

1.19% property tax

1.5% annual maintenance (house built in 1920).

.11% insurance

6% vacancy rate

$4k total expected rent

These numbers provide me 3.93% cap rate. That's rough..