what are your requirements? I run a VM from my laptop and I had no need to purchase a server. I did however built a server for a client which cost just a little over 3k.

I can't really recommend any hardware solution since I don't know your requirements, but for software...there are many solutions. You can try hyper-v, but windows licenses can be pricey for a test site. I've have ran CentOS+Xen and have nothing but good things to say. I think even xen runs better than hyper-v imo. Hyper-v is very manageable, but has too much overhead. If you're ok with the command line, then go with centos + xen.