I have a lot of $200K buildings that would cost $500K+ to rebuild if they were destroyed.  

They want me to buy and lease to them for a year to rebuild credit and sell back to them.  

If you're paying about $300K for the properties, spending $250K to rebuild one of them and $30 to renovate the other, you're into this investment for about $600K.If the small house rents for $1100/month and the vacation place rents for $800/week half the year and $1650/week half the year (the middle of your assumptions), and assuming the vacation place is rented full time with an expense ratio of 50%, then your NOI for the two properties together is around $38,500.That puts your cash-on-cash return at about 6%.And that's assuming best case numbers.

I'm a contractor by trade so I will be doing the rebuild myself.

I am working on my credit, but that will take a while to rebuild.

It's silly to have to pay for full replacement cost on older buildings where you would not rebuild in a catastrophic loss but there are scenarios that have to be factored in as well.

Updating projects include:2 x new kitchens2 new sets of appliances including plumbing for dishwashers (didn't have dishwashers)Building out washer/dryer laundry rooms off the kitchen, so tenants will have separate systemsAll basement windows will be replaced with glass block that can open (for venting)I'm tearing out all the gross drywall and crap in basement and starting freshUpdating bathroomsInstalling Glass Block in the bathroom windowsFixing a few windowsPaint the whole damn thing inside and outRipping off (and capping) the unused crumbling chimneyWater managementGutters installed with drain pipes so I get the water away from the perimeterRipping out the carpet and refinishing the original hardwood - everywhere (if it's salvable)I am rebuilding a stairway making it saferA few other projectsTotal price after all Rehab/Fees is approximately $210,000I don't know what my rentals will be, I am going to begin marketing it @ $1,500.00/unit I believe I will be able to lease there, or at the lowest $1,300.00/unit (as is market values on craigslist and other sources)The neighborhood is considered the good part of the rough area, lower owner-occupant, lot's of section 8 in surrounding areas.  

Once people are settled elsewhere, there is little incentive for them to return to the devastated area, which can take several years to rebuild or may never fully recover.

If no response, have the monuments (iron posts surveyors use) marked, then demo and rebuild fence on your dime in 1 day.

So, yes - there will always be a preference to minimize the "out of pocket" one puts into a deal.Remember also that with the exception the very long-term experienced investors, cash reserves tend to be a VERY dear commodity, especially post-2008.By using private lenders, you help them (re)build their retirement accounts or personal reserves.