Can't help with finding somewhere - ideally you need a quick househunting visit and ask in a few bars - there will be LOADS of places, but often unadvertised.
As for price, it is an interesting area, touristy of course but fundamentally pretty poor. Given that nice houses in my area (Axarquía region of Málaga province) rent for €300-375pm my guess would be that prices would be similar around Orgiva / Lanjaron / the villages. Well under your budget.
If you can't fit in an extra visit for looking, you could stay a few nights in a small hotel while looking round - I'm sure you'd find somewhere within a few days.