If you can afford the M3, go for it. You will be happier on the long run. The difference is Night and DAY.
What to look for? Do a search on Google for BMW recalls/problems. You'll see a few gotcha's that hopefully the original owner already took care of.
I'm on my second beemer, my first was a 93 318is and I currently own a 94 325ic. The 93 I paid $2500.00 and the 94 I paid $3500.00. So if you have 5 to 8 grand to spend, you should be good to go!
Last thing... my personal opinion. Get a 5 speed manual, not an Auto. My 325 is an Auto... I really, I really miss the 5 speed in my 318.