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Typically forumites will say timing belt, water pump, and possibly timing belt pulley; plus whatever parts are needed to fix the starting & ignition system, which could be difficult and expensive to troubleshoot and repair.
The BMW E30 - 3 Series Restoration Bible by Andrew Everett has great chapters on what-to-look-for and should-I-buy-it in addition to great material to supplement the Bentley manual and the 101 Projects book by Wayne Dempsey. Highly recommended - see if your library can provide it, if you can't pick it up from amazon or something.
"suspiciously cheap" is a relative term but imo in that condition I'd say it'd have to be a negative number to qualify: anything above $100 is a fair price; anything over $500 and you'll find much better for not much more.
As a first-car project I think you need to decide if you want the car to get you anywhere, anytime soon. This one could take months or years before it starts and runs reliably depending how much free time and parts money you've got. My first car (also bought at 17) went 200 meters under its own power, pushed 200 meters home, and that was it.
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