You'd totally have to renovate the metal one. People on here have done it. You need to add windows, ventilation, and stuff.
I've been helping friends look for sheds for coops this spring, and $500 is actually a great price for a nearly-new sturdy wood-framed shed. You couldn't build it yourself for much less.
We built ours for a bit less because we put it INSIDE an existing garage and only had to frame in two walls. Plus we gathered building materials from construction sites (scraps of plywood, 2x4s, erc) and portland's big-trash-pickup week. and the Habitat for Humanity Re-Store is a great resource for old windows and stuff cheap.
Good luck!