While I agree with what has been said, I think we are missing the point of the question.... I will assume you have a basic knowledge of lighting and photography overall. If not, you need to start there. Assuming that, I would tell you the following as to how I would start a home studio, as follows:
1- Lighting. I would look into a two light setup as a starting point. (Remember...I am assuming you have a basic knowledge of lighting). With a 2 light setup you'll have something that gives you a level of flexibility. If possible, look into a pair of softboxes and reflector with barn door options. With that, you'll have a good start.
In terms of dollars, obviously, budget is always a question. Like anything else, lower costs will be, functionally, good but there are higher end units that offer certain benefits that are worth looking into. Lower end units like Alien Bees and White Lightning are excellent but limited to a certain extent particularly when you are working with modifiers like softboxes ect. Higher end gear like Elinchrom provide more power, consistent output control, more consistent color temp throughout the power range etc.. The price, however, is significantly higher.
Like the lights, there are choices with modifiers. Particularly the softboxes. If you go with the manufacturer's gear (AB, WL or Elinchrom, etc.) then you are limited to that manufacturer's lights. If you go with Chimera, for example, as your softbox manufacturer, you can cahnge a ring and the softbox will work on different lights. This is key if you mix lighting and/or upgrade later.
Remember the stands. You need enough height to get the front of your modifier above the subject. Keep it in mind. If you get good lights, don't skimp on stands. Remember they hold the weight of your lights.
1A. Reflectors. I suggest pop-open styled reflectors. Get the combo (5 in 1) style. These are great b/c they will work on-site as well. If you can splurge on stands for these... do it. If not, a chair and some books works too.
2. Background. You want some ability to vary your background. I would suggest seamless paper, if possible. You get nice solid backgrounds, you can roll it under your model's feet.... well worth it. A roll of paper runs about $70 delivered to your door for an 107" wide roll. It'll last you a couple of shoots b/c you loose a couple of feet each time (if it's under foot traffic). The other background to consider would be some sort of rod to hold fabric and/or muslins. Muslins are a good investment and with some patience you would be amazed what you can find on eBay for $40 to $60. Look into Amvona.com and the sales they place on eBay. This is important b/c you want some level of variety beyond the wall of the room.
3. Paint. Usually overlooked. If your room is painted a mustard yellow, you'll have a problem with color temperature in your photos. I suggest a neutral tone for the walls. White is great b/c you can use the wall as a reflector. If you don't want the reflection you can drop a black reflector in the way. It's not pricey but it not free either.
4. Lenses. Yes a f/2.8 mid range zoom for $1,000 to $1,500 sounds good but it's not a critical need. With good lighting you will be shooting in the f/5.6 to f/11 range typically. I always suggest that you get the best glass you can afford. However, don't think it's a must if you already have decent, mid priced lenses. They'll work. The focal length you need to be at is about 50 to 100mm (on a cropped sensor ie. lens factor of 1.5 to 1.6 etc.) for your average work and 100mm to 200mm for tight shots. Don't use an 18mm lens for a headshot!
While this seems crazy and expensive.... it's not really that bad....
1. Lights... most costly. Anywhere between $1,000 to $3,000 over all for decent to high end.
1a. Reflectors. about $100 for two.
2. Rod to hold paper and/or muslins less than $30 at a home supply. Add a bit more for mounting hardware. I roll of balck paper, $70 and 1 Muslin $75 (being nice). $180 total....ballpark.
3. Paint... $50 for 2 gallons... worst case.
4. Lenses. Varies widely. A good mid range zoom $400. Good Mid to long zoom $400.
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