I don't think Option 2 will save money in the long run, or in the short run.

I would recommend option 3: rehearse, rehearse, rehearse. Then rehearse some more. Then spend that 45 bucks an hour, nail a few good tracks and you end up with something you can be proud of.

Unless diy recording is something you want to do, not just as a means to an end (getting a demo).... then go for it! But the time, energy, and money you will need to invest to get something of halfway decent quality for your first demo shouldn't be underestimated.

If the demo is to be a tool then having someone else record you is the better option.
I like Marks suggestion as well. Nothing worse, on either side of the glass, then waiting for someone to get their act together.

If the demo is for vanity then option 2 is more suited to your situation.

Your demo if your calling card, so if your band sounds horrible, then you probably don't want to make a demo just yet.

I'm coming from a voice actor's background, but the rules are generally the same. When you're ready to do a demo, you'll know. A good way to help yourself though (aside from practice, practice, practice) is to listen to other bands' demos. Figure out what they're doing, and if it works for you, then adopt it into your own style.

Sorry I can't be of more help, but I'm not in a band. That said, these tricks have been helping me for years.

Have you ever considered removing your own or someone else's appendix? How about delivering a baby? 30 minutes or less or its free. What about fried chicken if you don't have the 11 secret herbs & spices?? Right. You probably won't care for the end results regardless of choices.

Now it's not impossible to record a reasonable demo for your band provided you have at least a half-dozen or so, microphones along with a marginal 8 input mixer and/or computer interface. That's still a heck of a lot more money than a demo session if you've got your shit together. But most lousy bands don't. They just want to go into the studio and think they'll be like the Beatles. The only Beatles you'll be like are cockroaches running across your kitchen floor. And your demo will sound just like that. That's regardless of whether you do it yourself or go elsewhere. If as a band, you can't get up and play it together and nail it? You're not ready to play in front of an audience. Not ready to go into the studio. Not ready to make a demo. If you're a good, competent & professional band, you'll all want to track together. As in "live in the studio". That's what real bands do.

I'm not trying to discourage you. It's not easy using a single microphone to obtain a professional sounding recording of a band. Just ask Rudy Van Gelder. He uses at least 2. I'll use at least six microphones & a DI to record a three-piece band, with a vocalist. And my sound without any equalization or dynamics range processing will blow your socks off. So sure, you can obtain good results if you don't screw with the sound. But the desire to play with all of the stuff usually makes for horrible sounding recordings. Still, you'd need at least $2000 worth of equipment. So what makes more sense? Practicing & rehearsing for free? Or wasting your money on equipment you don't know how to use or a guy staring at you waiting for you to learn and how to tune your guitar?? Sure, I like the convenience of drive-through recordings & hamburgers. Especially since I am a lousy cook when it comes to food. I am however an expert culinary genius when cooking tracks. The drive-through is all right but it gives me gas.

Gassed up & ready to record. That works since I have a Remote Truck.
Ms. Remy Ann David