Learning Real Estate Math

[Jessica Martinez]

Ok, I am sitting here analyzing a deal - building my real estate math muscles!  I just started learning about real estate a month ago, so if my question seems ridiculous - ok, I'm good with that!  I am working on understanding the 70% rule.  I am using the data I found for a property flipped in my neighborhood that sold a month and a half ago.  Here's the deal: (Help me understand the numbers)

All data I compiled was collected through my local cities' website and zillow.

According to the city, the townhouse (3bd, 2ba, 1,200sqft) was originally purchased in mid June 2020 for $125,553 by an investor. 

They sold the property in mid October, 2020 for $195,000.

So I know they're ARV was $195,000. I double backed to see how they came up with this number and went back to the city website and found an exact home (3bd, 2ba 1,200 sqft) on the same road (was about 14 townhouse doors down) sold for $195,000 6 days before by another flipper. Another comp. (according to the city website, using suggestions from zillow) was a (3bd, 2ba 1,216sq ft an extra 2 doors down) that sold for $184,900 at the end of April. There was another slight comp. for a 3bd 3ba 1,540sq ft even a few more doors down that sold at $204,900 at the end of April. So I know they picked the $195,000 because it was proven and accurate/realistic for the neighborhood.

Using ARV $195,000 * .70 = $136,500. Now I know they bought it at $125,553 at the end of June, 2020 (so 136,500 - 125,553 = $10,947 assumed renovation cost)

70% Rule:  $195,000 * .70 - $10,947 = $125,553 purchase price.

What I would love to understand is... what is the $58,500 (or 70%)?  Is this the projected profit? 

I'm not really understanding what the 70% is when it comes to the final deal.  Is the 70% the profit built into the deal before rehab?  Does it contain the holding costs?  Let's say the costs outside of rehab are around $8,000 that still leaves $50,000 built into the deal.  Is that the projected profit from the deal?