Any suggestions or ideas to convince the landlords for arbitration proposal?

This is why I am looking to propose a reasonable price, I just do not want to screw myself in under estimating rehab price.

Insight on Your Proposed PlanTitle Search and MemorandumTitle Search: Conducting a title search is a good idea regardless of the structure to ensure there are no outstanding liens, claims, or legal issues that could complicate your plans.Memorandum: Filing a memorandum or recording the contract with the county provides some protection by clouding the title and ensuring your equitable interest is recognized.

I then hired an architect (or at least I thought it was an architect) to use the CAD file from the surveyor to draw the proposed addition to the house by using the surveyor's site plan.

They mentioned that the total loan to value was somewhere around 90%+ with the current proposal of debt and preferred equity which means likely 100% LTV, or more, without the capital call. 

In the H.R. 3936, Built in America Act, it was proposed to extend the 100% bonus depreciation until January 1, 2027.

Your proposed structure where the partner provides 2/3 of the capital and you split profits 50/50 could work, but you may want to refine it.

I've posted on this subject quite a few times, feel free to check out my previous posts but your objective as a real estate investors should be to avoid claims and what you are proposing offers no greater protection than owning the real estate in an LLC in the state where the property is located or where you reside. 

The key is to show the long-term benefit, including both the steady income and the future sale profits.If you put together a clear proposal showing the return on investment (cash flow + equity appreciation), it could be a compelling case to bring in a new partner to buy out the current one.

Here’s the kicker; you and sis have to convince the three of you that the places you want to acquire meet that model, and let dad critique your proposals.