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What are the best cars for racing?

Japanise turbo cars are you best option, but you can also use cars like the BMW M3. Old M3s are non-turbo and you really need a turbo to extract the most power without the extra weight. Supercharging is not as good. 

Japanise turbo cars range from the Toyota, Nissan S-chassis and Skylines, the RX-7, WRX, and Evos. Other cars like the MR2, RX2-5, 300ZX, etc great at cornering. They can be, but with great skill. 

If by street racing you mean rally, then you SHOULD get an 4WD car (note didn't say AWD) like a GT-R, or at least a car with a less efficient system Subaru WRX or Evo with it's their AWD systems. If it's rough roads and/or uneven surfaces this it is a better option, but only SLIGHTLY if it's paved (tarmac) flat roads. On uneven loose surfaces the front wheels are (a lot) more often used to pull the cars 'out' of a corner then on tarmac. Personal preference, but evos are not as good as WRXs. There's not many other 4WD/AWDs you can consider in that budget. 

Types of Sports Cars

Since the invention of the automobile, there has been car racing of all sorts. Racing varies from country to country around the globe, but the need for speed is the same. Several types of racing exist that are vastly different from one another in the cars, the rules, and the form of the race. Drag racing, Rally racing and Seat racing.

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Retrieved on 20/5/2012 from: http://www.carracingzone.com/