Rear fender rust

I was doing some regular Saturday cleaning my Tacoma, and was pretty disturbed by what I found There is some paint chips above both of my fender flares, I took them off.. Thinking that they hadn't been cleaned in years.. I plan on fixing it tonight if anyone could tell me what I should do.. (how much paint I should get, how many cotes, what kind of sand paper..ect) i'd really appreciate it
Here are some pictures:

 

Install bigger fender flares to cover it up ; )

 

If you managed to rust out the body on a tacoma I can almost guarantee your frame is about to break in half. I'd check that first.

 

OP: I had the same problem as you on my '96, because the chrome fender liners captured moisture and held it against the body. I ended up putting a wire brush attachment on a drill running it down. My body was rusted all the way through in places and ended up looking like lattice work when I was done. Long story short, I painted the area to death and put on mt bushwacker fender flares.

 

That's exactly what I was going to say. Sand it seal it up with something good either do the Bedliner fender flares and boot stripe. Or Find a 01-04 flares to put on it.

 

there aint nothin some WD cant fix.... just sayin..

 

There is also a website that sells small amounts of automotive touch up. That wont blend perfectly but it would look better than the Rust.

 

If you managed to rust out the body on a tacoma I can almost guarantee your frame is about to break in half. I'd check that first.
Actually just welded a big peace of steel on it! When I can afford some Bushwakers i'm going to buy some.. If I sand it down to bare metal, what kind of sand paper should I use? Thanks for responding guys! I've been worried all day