Oops! I was about to say, "Do not do it!", before I realised that you had posted an update. I guess it's too late.
Asking out your neighbour is like asking out your co-worker. You're free to do it, but the ramifications aren't very pretty in the event that things don't go well. Neighbourhood entails reputation too. Just be willing to move out in the event that things don't work out. If reputation doesn't matter to you, then it's all good. If things do work out, then it's all good too. I would say congrats in that event!