I live in Houston and am proud to say that Harris County has the 2nd highest MBZ population in the nation behind Orange County in California.

We have tons of good cars here. I just picked up a 1987 300SDL, 1-owner trade-in, from the dealership (we have three in Houston) for $5299. It needs a valve job, but is in spotless condition.

I have owned these cars since I was 17 in 1979 and started with my first '77 240D.

If you really want a 123 I would recommend trying to find a 300CD Turbo. The coupe will ultimately hold most of it's value over time and who knows, you may sell it (if you ever want to) for more than you paid, coupes tend to get that way with age.

A real sleeper right now though is the 1987 190D 2.5 Turbo. Here is one on Ebay right now...

http://cgi.ebay.com/ebaymotors/aw-cgi/eBayISAPI.dll?ViewItem&item=598158755

These are outstanding cars with airbag and ABS in most cases. Our 1987 non-turbo 190D gets around 40 mpg consistently. VERY fun car to drive. Everyone also thinks it is a lot newer than it is.

There are also several 1987 300Ds and TDs around but in your price range you have to watch them for abuse and make sure the trap-oxydizer retrofit was done correctly.

A good starting point would be to buddy up to a used, er, pre-owned MBZ salesman at a dealership and tell him you are looking for a good trade-in that they could wholesale to you for around $5K. It takes me about 1 - 2 months to find a car this way, but they come through with the good stuff every time.