http://www.ebay.co.uk/itm/Supermicro-6016T-MTLF-2-x-L5640-Six-Core-2-26Ghz-16GB-1TB-Rails-X8DTL-iF-/371445713011?hash=item567be3c873:g:qPcAAOSwnHZYeM52
£280, gives you 24 cores, 16Gb RAM, Raid card & a 1TB HDD to start.
With the remaining money, pick up an ATX case (1U chassis are bloody noisey) a couple of fans, and a couple of cheap WD Green drives.
I've made several similar, all I can say is, they work well, can be good to game on (with an overclock), great for rendering, and great for virtualisation. Do your research, and talk to others that have experience and you'll be fine!