Recording technology has come a long way in the past ten years. It's perfectly feasible to convert your spare bedroom, garage, or basement into a project studio and make money making music. I've put together a list of gear gathered from experience in advising many friends on what to buy to start recording.
This list is intentionally geared to use whatever computer/laptop you currently have. Of course having a dedicated studio computer is ideal, but who has an extra grand lying around to build one when they're starting out? If you've got a PC or Mac made in the last five years, you'll be good to go with this gear list.
The $1500 Recording Studio
1.) Focusrite Scarlett 18i8 ($350)
An interface is arguably the most important part of your home studio. This is the foundation your studio will stand on. The interface is where you'll plug in your microphones, speakers, and headphones; basically, it's what makes your computer able to record audio.
Starting out, this is the best interface for your money. I'll admit it, I'm a Focusrite fanboy. I've never worked with a piece of Focusrite gear that was poorly built or problematic. The preamps are clean, the construction is rugged, it has MIDI functionality, and the routing software makes sense. Four XLR input channels are a good start for anyone getting into recording; especially for live drums.
Link to buy: Sweetwater
2.) PreSonus Studio One Artist ($100)
Software is equally as important as your interface in the recording process. There are many options on the market, but Studio One is one of the cheapest, most intuitive, and easiest to learn. This is powerful and highly customizable software, far beyond its price point. I'm a ProTools guy myself, but if I had to build another studio from scratch I'd use Studio One. For the amount of tools, plug-ins, and virtual instruments you get, there isn't more bang for your buck out there. Plus, it's PC and Mac compatible, unlike Logic.
Link to buy: PreSonus Store
3.) Audix DP Quad Mic Kit ($600)
You'll need microphones to capture the sound of the many instruments your clients will be bringing into your recording space. These four mics are most of what you need to multitrack record a band. This set will handle any reasonably sized drum set. The overheads also double as small diaphragm condenser mics which are excellent for tracking acoustic guitars. The snare mic doubles as a guitar cabinet mic. The kick mic doubles as a bass cabinet mic. Seriously, this is the most cost-effective investment you can make into your mic locker.
Link to buy: Musician's Friend
4.) Blue Baby Bottle Large Diaphragm Condenser Mic ($240)
A solid vocal mic is the cornerstone of any good studio. As far as budget condenser mics go, Blue makes the best. This also comes with a pop filter and shockmount, which saves you a bit of money.
PS: Avoid trying to save money going to MXL route, I've had nothing but trouble with every MXL mic I've owned.
Link to buy: B&H Photo/Video/Audio
5.) Headphones ($30)
Don't be tempted to skim over this portion of the list just because you already have a nice set of Skullcandys or Beats lying around. You want to invest in a pair of studio headphones. Consumer headphones are built to make music sound good, this means certain frequencies are hyped to give them a certain "sound." You want a pair of headphones that won't lie to you about what you're hearing; we call this "flat frequency response" in the audio community. There are plenty of good options out there, I prefer Sennheiser. Linked below is a very cost effective pair I personally use for tracking and haven't had any trouble with whatsoever.
Link to buy: Sweetwater
6.) M-Audio AV42 Monitors ($150)
Yes, you need monitors AND headphones. Mixing on monitors will help your mixes substantially no matter how much or little you spend on them. Graham Cochrane with The Recording Revolution explains why here.
These M-Audio monitors are the best bang for your buck. They're portable, hardy, and fairly accurate.
It's also worth mentioning that you'll want something to keep the monitors from sitting directly on your desk, especially if it's wood. The rattle on your desk can sometimes create frequencies that aren't really in your mix. You can sit your monitors on washcloths or towels to fix this, however it looks janky. Auralex makes foam wedges called MoPads that your speakers sit on to keep your desk from rattling, however they cost $50 which would put this list over $1500. A worthy investment if you have the extra funds.
Link to buy: Sweetwater
7.) Cables/Mic Stands
I'm not including a price on this because you can put as much or little money into this as you want to. Better cables do give you better sound, but high end lines are not essential when you're starting out.
A word from the wise: Monoprice is your friend. Their cables are the best budget cables for the best prices I've found to date.
You'll definitely want four XLR microphone cables at least 20ft long. Having a couple 15ft 1/4in lines (instrument cables) lying around helps those forgetful guitarists who show up with everything but their cable bag.
As for stands, you'll want two boom stands for your overheads. The Audix drum mic kit listed above comes with a clip mount for your snare. Also invest in a short stand for guitar/bass cabinets and the kick drum mic.
Total=$1485 (before shipping and taxes)
I guarantee this list will get you everything you need for a good start in recording. You can start recording clients with this setup and upgrade gear steadily as you make money. Starting your own business for $1500 is an incredibly cheap investment; coupled with an entrepreneurial spirit, good networking practices, and late nights watching tutorials on YouTube, you can't fail.