They approached me with the deal because they couldn't get the math right nor a bank to finance the project the way they had structured it with the seller. 

The IRS allows "any reasonable method" - county allocation certainly being one of them, if not the most common one. 

Entity structuring help.

They approached me with the deal because they couldn't get the math right nor a bank to finance the project the way they had structured it with the seller.

I plan to use the BRRRR method utilizing private money and then refinancing into a traditional loan to pull the cash back out.

We started the build last November and structured it as a turn-key property where we signed an offer to purchase with our builder. 

There are some alternative structures using LLCs within tax-advantaged account that that give you total control of your assets and keep costs down. 

How do I ensure that the deal is structured in a way where I can get them their capital back after the financing period, and is this something that's typically done? 

This is a way to structure the sale so that your father gets cash at closing and he can defer the capital gains tax and depreciation recapture for 30 years.

When my current lease is up I plan to rent-to-own it, that way I can structure the deal to minimize (or hopefully eliminate) any expenses during the lease term, get the loan paid down some more (extra 30k in equity, assuming 2 year lease) and avoid sales commissions.