If you're building a home theater, I'd start with acoustic treatments. Get bass traps in the corners and panels on the first reflection points as well as the front and rear walls. The depth of the panels is slightly dependent upon your room size, but 4" should do it.
You'll also want to determine what height your riser should be (based on screen height and seating distance) and whether or not you want a stage.
You should also plan your lighting and electrical schemes so that you have sconces/cans/etc. where you want them and that you'll have enough cabling/outlets for all your needs.
I'd figure close to $1000 for room treatments and if you're a DIY'er you can do the stage for a couple of hundred. Depending on whether or not you want to go with graphic eye stuff, your electrical and lighting will probably cost a few hundred more.
That leaves you about $1000 to try and get carpet, paint and an equipment rack. It'll be tough, but it can be done.
What's your budget for equipment after you've finished building the room?
Or were you just talking about buying equipment for your living room and not actually building a home theater?