32 unit deal, but not seeing it

[Jeff B.]

I have been looking at a 32 unit building. The area is currently supporting rents in the 500-600 range. The building is up for auction and in fair shape but will likely need 200k in rehab. The current owner bought it last year for 240k, so I would imagine they will want something close to that in the auction.

It is set up so the landlord pays heat and water, tennant pays electric. When I run my numbers, I'm estimating an all in cost of 450k. When I use the 2% rule, I come out with a max price of 800k (500*32*.02). So, I think I will be ok from that standpoint. However, when I start adding up all of the monthly expenses, I get scared. Some of my numbers are:

Mortgage 3832 (25%down, 10yr, 6.5%)
Cty Taxes 1666 (20k/12)
Insurance 833 (guessed 10k/12)
Gas/water 4000 (total guess)
Management 1280 (80% occupied * 10%)

So I end up with over 11k/mo in expenses. That tells me that this will likely not cash flow very well. I am a very green nube at this, but know enough to know when something doesn't look right. What am I missing in this equation?
Should I be looking at it from a different angle??

Thanks for any help you can provide!!!