Based on the photos of the home, I had thought it was a pretty easy rehab with simply replacing the water heater, paint, and some other cosmetic updates here are there.

I've had people ask me why their units are only renting for $350 so I take a photo of the funhouse floors and rusty water heater in the kitchen and send it on. 

Last year, I had to replace most of the roof (flat roof) and the ceiling as water had been trickling in over the last 5 years since it was built. 

What about water/sewer, trash, lawn care, other shared utilities, pest control, and admin/professional fees?

How would you guys go about making the tenants in a multi-family pay utilities which they all have separate water meters as of right now the recent owner paid all utilities for them. 

The realtor states that most of units rent for $700 a month plus water, "which is a stretch for the current tenants who pay $590/month plus water" but they were told rent would increase after the properties were sold.

Rental real estate is generally not SE income.I may be biased, but IMO the surest way to mitigate your tax liability and navigate the waters so to speak is to retain a tax professional as an external partner on your team.

Sounds like 5% Maintenance would put you under water, is that a fair statement?

right, cant hurt to cast your line into the water. 

Side note: Some friends in San Antonio recently shared a story of a guest who let water overflow from a toilet and ruined the flooring.