Shoot it and modify it over time to fit my needs.
Just to let you know what you're getting into:
Modifying a 1911 does not generally involve "drop in" parts. Most parts have to be fit. There's a lot of hand fitting that goes into a custom 1911. That's why they cost what they do. To say you are going to modify it over time means that you are okay with learning how to do a little basic gunsmithing, and probably purchasing some tools. Some things are easy to replace, but for others, a skilled hand and some knowledge may be prerequisites.
So, let's play this out. You buy a cheap 1911, spend a lot of time and money over the course of some time-frame, putting higher end custom parts into the gun, and when you are done, you have a $400 gun with at least another $400 worth of parts, and if you decide to sell it ever, you will probably get $400 for it.
I'm not trying to dissuade you at all from your plan, but I do want you to have an idea of what you will be getting into. If you're okay with that, then I say go for it, it would be a great learning experience, and you will know what to look for if and when you purchase another 1911. On the other hand, if you don't want to get that involved, either time-wise or money-wise into one pistol, you can see how it might be advantageous to buy a more expensive (ie better built) 1911. Also, don't forget about the used market. You can pick up some top notch gently used semi customs in the kilobuck range, if you are patient.
Good luck whatever you decide to do.
ETA: if you decide to buy cheap and modify, get
Kuhnhausen's book.
Another edit: have you considered buying a slide and frame from Caspian or STI and building from the ground up?
Jason