CF vs 50% vs 2%

[Brice Noonan]

OK, again (if you didn't read my 1st post) I live in a nice college town with high occupancy rates, good rental rates, inexpensive properties, etc.
I have been wanting to get this going for years, been reading/studying on & off all this time and am now getting things going.
After lurking on this forum for some time, I realize that my reading has focused on motivational books with little substance and I am now struggling to come to grips with the cold calculations of the REI experienced here on BP. So can someone run through what I consider an average purchase here in the area and tell me why what looks to be great CF is mediocre when viewed through the lens of these 'rules'?
(NOTE: I am not interested in purchasing trashy places cheap ($20-40k) for higher CF. Just not my thing. I know it works well, just not much of it around here in rentable areas and I'm not in to it.)

OK. Lets consider a hypothetical 3/2, recent (<10 years old) SFH is about $80k.
Lets assume, for the sake of argument, I pay this.

Cost: $80,000
Down: $16,000
Closing: $2,000
Rate: 5%
Mortgage (incl Tax): $430
Say I even go with a PM: $120/mo
Insurance: ~$500

Rent: $1100

Gross income: $13,200
Expenses: $7,100

This looks like solid CF to me.
But compared to the 2% rule, it seems borderline (1.3%)
Doesn't meet the 1/3 rule.
Not sure which end of the 50% rule PM fees are taken out of, but with Insurance CF from this metric is thin too.

What am I missing? Why am I excited about properties that it seems the most experienced of you would avoid?

Thanks for your help.

B