Why's the rent so low for a nice house in a good neighborhood? How many bedrooms? Have you looked on Craigslist to see what houses that size are renting for in that area?
Also, the old appraisal is meaningless. Your bank will do a new one and will not loan you more than their stated percentage (on an investment property it's usually 75% or max 80%) of the appraised value. Is there an easy way for you to check recent sale prices of comparable houses? Even just looking at current asking prices on comparables can give you a ballpark idea. If the comparables are way lower than $120k and the Craigslist rents are way higher than $800, in other words if this is at or extremely close to the 1% rule, then it's worth considering. Otherwise you're just betting on fast appreciation, since that's the only other way you could make money off it.