Market uncertainty and capital gains

[Michael Burgoy]

My wife have been living in one of our rehabbed homes in SoCal for about 8 months now as our primarily house. The house has about $450k in equity and with how crazy peaked out the market is right now we are thinking the smart move is to sell ASAP, cash out and rent during the correction. My question is how does the capital gains work on something like this? We have about $200k in rehab and accusation costs and have lived in the house for 8 months as our primary. I've heard the capital gains are prorated during the 1st 24 months. 

On a 2nd note, our original plan was to live in this house for at least 24 months (avoid capital gains) and pull a large line of credit to leverage the equity so we can strike when the market crashes to buy more foreclosures. The house is located in Irvine, CA and currently around 1m value, curious to hear what you guy's would do in this situation?