So a friend of mine asked me to suggest some audio gear for his new house.
Run away! Run awaaayyyy!!!

If this were a matter of helping him purchase a used car, yeah, I'd say you're on your own buddy and good luck, but audio is a different matter. He might really appreciate your expertise and the quality of sound that you'll introduce him to. There's good potential in a budget of that size.
For amps, try scoring a used Virtue. Power at a pittance with excellent sound. If he's not too concerned about the "looks" - a used diy gainclone is also a top pick for next to nothing.