Such as Absentee owned and more than 50% equity. 

My question was if I could attain an equity line on the newly purchased property if I have no equity in it yet since I did a 3 year interest only with a ballon payment on the backend with no money down.

., we both win as I get a new house with a cherry tenant, and they get the equity position and the beautiful home.  

Say I want to partner with someone to buy a multi for $400k and after all expenses there's $800 pm positive cash flow.  

Main reason is we would like to buy a house given the growing family but need to make sure we have enough equity in it from the rehab to resell again within a year (or just over) should we have to move (which is a real possibility).

Personally I would take the position that the full redemption payment (i.e., 120%) are the gross proceeds and the basis is whatever you paid for the tax deed, making the 20% profit a capital gain.  

They will or should be 1st lien position.

Should be able to make 40-60k+One of the guys that works for me bought one for 36,000 put about 10 into it, bunch of sweat equity himself and friends the first month before he moved is young family in.

Thats a big task and in my opinion a little too big of a project that I wanted to undertake for my first property.I have been looking for more good deals in the area but I keep getting agents showing me properties that are already at the max for the neighborhood in terms of appreciation and I wanted to find something that was below marked value that I could put some sweat equity and decent rehab into.

My predicament comes from the situation of living in one of if not the most overpriced real estate markets in the world right now.My goal in joining this forum and building relationships with the people on this site is to navigate this difficult real estate market in order to advance my financial situation to better the life of my family.I understand allot to starting in this game is taking action and not sitting back on the fence but I find myself in an area that doesn't allow for an ideal return on equity as far as real estate investing for flipping/renting for positive cashflow.I look forward to having productive conversations with the fine people here on biggerpockets forum in hopes of helping other people succeed while succeeding myself in the ever changing world of real estate.Cheers,Matt Bouwman