A friend suggested that, if my father were to sell me the property well below market price, we would reap the greatest tax benefit because he would minimize his capital gains taxes now and later taxes as he passes on his wealth to his loved ones. 

For example, if you had two jobs that gave you a 401k benefit, between the both you couldn't exceed the $19k employee contribution. 

You have to look at the cost and benefit to see if it is worth spending the money.As other have said look at other rentals in your area.

It is close to  University sonwe benefit from parent visits as well as graduation and football games.

Appreciation can benefit you in the long run. 

You get to use that deferred tax to purchase real estate that benefits you. 

EVERYTHING you can do open market, you can do with REO and the intangible benefit of the bank being emotionless (Doesn't think their piece of crap $250M property is wroth $500M) in the deal.  

Should I be using personal property bank account or the holding LLC bank account for these generic expenses for most tax benefit and least risk of audit?

I have a strong W2 income but few investments that will benefit our family when retirement happens; let's call that 10-15 years down the road. 

Totally agree with @Steven Wilson , get a property management company run your rental. and just another advantage, a property management company has the benefit of being viewed and treated as a professional entity.