Hi! That's not too bad for investment. Here is a basic idea / draft to start with:
Software: You need to decide which platform to go with - Mac or Windows. If you go down the Windows path, there are different options:
1. Audio sequencer - This might be Sonar Producer (I use this and it's superb); Cubase, Nuendo, ProTools (M-powered), Logic, etc. Most of these come with built-in plugins that are high quality. For example, Sonar has Lexicon Reverb built in.
2. You would need some VST instruments and a soft sampler - Gigasampler, Halion, Kontakt - these are all good options. There are lots of samples available in these formats.
3. Reason - I highly recommend this if you are doing any kind of beat-based music / electronic / dance / techno, but even in genres like rock and pop, you can infuse certain sounds from here. In any case, it's a very flexible software and fantastic for jotting down ideas.
4. Guitar amp simulators (unless you have lots of hardware to do this job, which would cost a bomb) - Guitar Rig, Amplitube, etc.
Okay, now let's get to the hardware part:
1. Mic (s) - You need some serious mics. At least one good mic for vocals (I use the Rode K2 - which is a tube-based mic and sounds really good on almost everything); you need something for drums (kick, cymbals, etc.) - unless you are using something like BFD 2.0 (Drum synthesizer, which is seriously worth considering), and you can use MIDI triggers on drums to trigger the samples, which would eliminate the need for miking drums. If you start with one or two good mics, you can build on this later.
2. Mic preamp - Try and get something with tubes. The Aphex tubessence 107 is a good contender. Doesn't cost a lot and sounds really nice.
3. Audio interface with MIDI I/O - This is the way you go in and out of your computer. You need a good one. There are plenty of options out there: MOTU 828, M-Audio Delta series, M-powered ProTools or Protools LE (Digi 002/003). I personally use RME Multiface II, and that is fantastic. Since you are planning on recording a band, you will need at least 8 inputs. Most of these have them. You need to at least be able to record 24 bit / 96 Khz. Again, there are interfaces, and there are interfaces. RME scores very well, and I wouldn't change this for the world.
4. MIDI controller: This is a keyboard, but with a band you should be able to get this easily, if you don't have one. This is used for inputting MIDI data, but you don't need to use the sounds on the keyboard. You can even get one of the silent MIDI controllers, provided you have sounds on your computer, accessible via ASIO drivers.
5. Computer: The beast in your studio that controls everything. This is easy enough. Get lots of disk space, make sure you have at least 2 separate hard disks (one for backup of data), and as much memory as possible. Note that XP will not work any better with more than 3 GB RAM, whereas Vista can accommodate upto 8 GB, I believe.
6. Headphones: You will need some good pairs (with sound isolation properties).
7. Monitor speakers: This is where you check what's in your recording and how you want to make it better. There are all kinds of options, but it depends what you want, what sort of music you are mixing, and what your budget is. M-Audio makes good, clear and accurate speakers on a budget. There are higher end speakers too. Choose from Event, M-Audio, Genelec, Dynaudio, Mackie, etc. There are too many. I personally use M-Audio (cheap) and Genelec (high end). Remember, with equipment, you can always build upon what you have once you get cracking.
8. Acoustic treatment: This is a real need, and if you are planning on doing anything more than demos, you need to look at this quite seriously. If you plan on recording a live band all simultaneously, you might need isolation booths. All this costs serious money, unless you're good at construction yourself, and then you still need to buy materials.
That's the basic gist, except cables to connect everything. You don't really need a mixer these days, because the software provides everything.
The point is, nowadays producing quality isn't so difficult, because nearly everyone has access to the same tools, due to technology advancing so fast. What really matters is the guy in the driver's seat, now (or the producer / arranger / engineer), and that's what will give you the edge.
(You can listen to a couple of my songs on the forum at the following links - just so you can get an idea of what is possible. These songs were produced using the software, hardware I mentioned above and in my signature. Here are the links below):
Since you touched me Spending my time
All the best!