I paid ?900 for my 1983 cabriolet 1.8 GTI.
It has hardly any rust, the hood is in great nick, and mechanically it is just fine.
I figure I got a bargain.
It all depends on who is selling the car. Practical Classics magazine prices a condition 3 (I.e requiring a complete rebuild) at ?100, but I have seen cars for restoration in the classifieds of the same mag for ?800.
I don't think you neccessarily need to spend over 1K, so long as you are prepared to go and see plenty of cars before you come across 'the right one'.
I would also consult your local Ads paper (e.g. Loot ot Admag), these tend to have some very cheap cars that are not advertised elsewhere, and they are assured of being local.