1st timer not sure if SFH in hot market is ok

[Chris O.]

Been trying for over a year to lock down my first place. Made a few offers that lost out. I'm in a very hot market (Vancouver Island) where sub 5 cap rates are the norm. The 1% rule does not exist, 0.5% is a possibility. 

I've found a small rancher, 30 years old, in good condition. About 1300sq ft on a decent size lot in a nice town. $425-$430K CDN should nab it. I can get $2K/M rent for sure, maybe $2.1k. It's a small town where the local wages don't support the prices (not uncommon today). 

I'd have to HELOC the DP as my investments are all locked up in stock/RRSP's. After accounting for everything but not maintenance or vacancy- I'm about $50 negative a month in cash flow (but accounts for me paying $350/m in interest on my DP).

Without having the DP in cash, I'm behind the eight ball on every property in terms of having to make cash flow. At 3% annual increase in property tax and insurance, but 0% increase in rent and appreciation, I'd take home $42K after closing costs in 10years. Maintenance and vacancy will eat into that but hopefully offset by increases in rent/appreciation (even 1% a year). 4% cap on this deal.

I am too nervous trying to get my first house to look anywhere but local - I'd like to be able to go there to address anything that needs to be fixed/done. 

Is this just too hot of a market and I should just stop looking until a down turn? I missed out a few things I could have bought last year that have gone up since, I'm sure that's fueling me here to pull the trigger.