Bimmers.com also has a classified section.
I bought one a few months ago for $2000. It has an oil leak, needed new brake lines and has some rust but it's a strong driver and still pretty presentable.
http://forums.pelicanparts.com/showthread.php?threadid=121719
www.Traderonline.com is also a good classifieds site. Living in CA you should be able to find a nice car for $3500.