As you may know, you can easily afford the costs of a dedicated server by just creating virtual machines on it for yourself and your friends. Just rent a few additional IPs (usually around 1€/IP), et voila! Everyone has his own server.
The easiest method to achieve this is using Proxmox – I’d prefer that over VMware, Xen etc.; A tutorial for setting it up on a existing debian installation can be found here:
Something you should know: If you don’t want to fight with the network configuration on both host machine and VMs, better create containers (CTs) instead of virtual machines (VMs). Although you then may be restricted to use Linux distributions and have less possible settings, it will surely save you a lot of stress, time and effort.
And – when creating containers, you’ll most likely do this with templates. Note that proxmox by default seems to only offer 32 bit (i386) templates of various Linux distributions, for whatever reason. Download the 64 bit (amd64) templates to /var/lib/vz/template/cache from http://download2.proxmox.com/appliances/system/ before you create your containers, so you can select the desired template in Proxmox.