you can build a theater anywhere you want. the limitation is really about your budget.
the cheapest route is to find a home with a finished basement already and set up a simple projector/screen that fits the room size.
if you're handy, then an unfinished basement may be just as cheap, but you'll be able to make a better product in the end.
the easiest space to turn into a theater is a rectangle. room width/height will determine max screen size, and max screen size will determine how many seats you can effectively have. with 8ft ceilings, you can't really go much bigger than about 135" (unless you go scope), and that screen size will need about 12ft of width in the room. If you want a smaller screen, then you can absolutely do a it in a smaller room.
things to consider:
-room size. 12-13ft wide is a pretty good size. smaller is ok if you want a cozy theater, larger is awesome if you want more seating and space. figure roughly 10ft per row if you're doing nice reclining chairs
-windows. more windows = more light. so in this case less is better
-air ducts,etc. not only are these things that can make noise, they can always let it escape. if they run across the ceiling then you also have to figure out a design to cover them up
-access to a/v gear. with a simple system, you probably won't have a central room for all your gear wired up to the whole house. so consider where your gear will go, and try to make sure you have easy access to the back of it. i like the idea of building the rack into a wall, and having a 'media closet' on the other side of that wall
i can tell you, my room is 11'6" wide and my seats are currently placed about 10' back from the screen. the screen is roughly 133". i think if i had these dimensions with a closed room, and entrance from the front i could squeeze 3 chairs across, but with the rear entry set up i have, there's not enough room for more than 2.
before:
in progress: