we do the same thing Jay but we look at this as return on entitlement spend and return on land purchase. we separate the two measurements. for return on entitlement spend its the total value of the land gain proven through either an appraisal pre and post entitlement from an institutional level appraiser by Berkadia or sale price divided by all of the soft costs needed to get the site to the finish line. we look for sites that are at least a 5x and typically focus more on single parcel sites that aren't assemblages and do it by going vertical not horizontal. as many have said there is much more risk in this strategy that you are doing that led to a lot of bankruptcies. also focusing on the luxury in my opinion isn't a scalable strategy. 

So, not really passive.Investing in rReal estate offers a lot more control than investing in stocks, but it also requires an investment of time to do well.

Since you can't control the sale price, you basically have a $4k cushion to your reno costs, or otherwise you lose money compared to the as-is scenario.

I wasn't skeptical at first because I control who I decide to rent my property to. 

It's a good idea to spend a couple of hundred dollars to meet with a real estate attorney or foreclosure attorney and go over what you can and what you can't do in the state you want to buy foreclosures in.For clarity, there are stages to foreclosure.

That's unusual and it would be very difficult to find a passive investment like that.Also direct control means I know exactly what's going on.

A) it controls my cost.

Your strategy takes advantage of your employment cash flow and ability to control discretionary spending.  

CONTROL is what matters.

If not, you have to fix it by abatment or LBP hazard control methods.