David...First-off, beware of the Google search engine's strong like for the magazine site and these forums! This makes our comments more available to family members and spouses, too. Enough said.
As for sensible return on investment with a Honda XR650R motorcycle purchase and restoration, it all begins with the value you place on the motorcycle. For my purposes, the XR650R is the best enduro dirt machine built to date, yet the XR650R is not "for everyone". Looking for a tight-cornering, flickable motocross bike that is a featherweight with an engine built to its limits? Get a CRF450R (or a CRF450X for the desert). Want an enduro bike that has more torque and thunder across its entire power band, from idle to its advertised redline? Get an XR650R in top shape—or rebuildable. Want a bike to scale the Erzberg 'Iron Giant' or tackle 'King of the Motos'? The XR650R's weight and galloping strides would beat the bike and rider to death on this kind of gradient and rough rock. Get a KTM or Beta two-stroke. Want to win the Baja 1000 or 2000 without a whimper, astride the ultimate desert scrambler? Get an XR650R. For flat-out desert and reasonable single-track, if you like to wrestle with a big thumper, my pick is the XR650R. And I take the point about "wrestling" seriously, challenges like sand traps and rock fields. I'm back at the gym with earnest, following a strict resistance exercise and cardio protocol to be in the best possible shape for riding this beast at fast-paced, remote desert.
I combed the Western U.S. for months, trying to find the right "buy" on an XR650R. Given the wild card of a used bike's condition, especially a dirt bike, I was ultimately grateful to find my bike. It was listed for $2000 on Craigslist, the best price to date locally. I drove over 80 miles to look at it, and the bike would not start. The story was good, and I took a credible owner's word that the cycle likely had a fuel system problem. I offered $1700 and loaded the bike on my trailer. After giving myself the equivalent of a heart stress test trying to kick start the bike, followed by a week of basic tuning and a range of fuel system and Baja Design kit repairs, I did the leak down test that pointed to the top engine damage. After carefully considering the real worth of a restored bike with a fresh top-end, several diplomatic exchanges with the previous owner led to a renegotiation of the price to $1050. He refunded the difference.
This was a unique situation and one that depended upon ethical guys putting our heads together. The owner had been willing to buy the bike back and even reimburse me for parts purchased to that point. We deliberated about the "real value" of the bike with the engine needing a top-end rebuild. I encouraged him to price a top-end rebuild at a Honda dealership. Since I prefer to do this work myself, we reached a more than reasonable solution.
Footnote: The cycle had less than 1000 original miles, according to the previous owner. Dirt bikes have no odometer (beyond the constantly resettable trip odometer), so I took this at face value. There were no indications of abuse or immediate repair needs beyond the upper engine, which was the victim of poor air filtration. It is a known fact that bad filtration can quickly wipe out 4-stroke intake valves and damage exposed Nikasil cylinders. The drive chain and sprockets appeared original and showed negligible wear. For this machine, ridden in Texas brush country, chain and sprocket wear would occur by 1,000-1,500 miles of desert pounding. The engine's torque is simply amazing, very capable of wearing and peening over the crowns of sprocket teeth...To be clear, I wanted a Honda XR650R, and this one seemed otherwise "right"! I was very familiar with the machine at this point.
So, obviously, we need to begin by placing an intrinsic value on the XR650R motorcycle, whether the bike meets our needs or not. I, for example, wanted to experience some of the magic that Johnny Campbell, Steve Hengeveld, Andy Grider, Mouse McCoy and others knew from their Baja victories and groundbreaking accomplishments. There were rumors that these top riders were highly reluctant to move to the CRF450 models that Honda abruptly thrust onto the scene. Realistically, Honda was forced to come up with a bike more competitive at motocross courses. Desert enduro racing is only one aspect of dirt competition. The XR650R is a "Big Red Pig" for good reason: It has features like a dry sump oil system, liquid cooling, stout brakes, a tough frame plus more wheel and tire mass. It's abrupt replacement, the CRF450, by every dirt magazine account, has required factory improvements every year since its introduction. You can count the "upgrades" to the Honda XR650R, over its entire 2000-2007 (some include 2008, too) build period, on one hand.
The XR650R is so versatile that a cult has developed around the supermotard conversions. A search online reveals a strong following for these street and dirt/asphalt racing thumpers. Building a road bike from an XR650R chassis and powertrain provides an incredible power-to-weight ratio. Our youngest son had a Yamaha YZF-R6 that I rode on rural, deserted highways at speeds I won't disclose. While the XR650R has an incredibly strong engine for tractor-like pulling, it is not the refinement, handling and massive peak horsepower found on tap with a YZF-R6 or its equivalent Honda, Suzuki or Kawasaki. I have followed Moto GP and Superbike racing (attended at Laguna Seca) with great interest over the years, and the XR650R supermotards are for a unique kind of riding and racing, yet another market for an XR650R.
So, begin by valuing your bike and its intended, purpose built design. For the all-out North American "off-highway" version (uncorked, please!), the question is whether you justify putting money into a motorcycle that with reasonable tuning, a camshaft upgrade and a piston/rings change can dominate a Baja race or BITD race like "Vegas to Reno". I know a local, unsponsored rider from Yerington, Nevada, who has run this Nevada race many times on his XR650R. He much prefers it to the CRF450 class bikes.
My research prior to purchasing an XR650R began with watching the uncut "Dust to Glory" DVD a dozen times over several years. I fast-forwarded through all of the 4-wheeled vehicle action and focused on the XR650R riders. Then I combed the internet forums and every other kind of information base to get into the "Honda XR650R culture". I watched "Long Way Round" and "Long Way Down" several times each and became thoroughly convinced that an adventure-touring monster that weighs twice as much as a Honda XR650R is not for my kind of desert riding. I talked the ears off two business friends, one at Oregon and the other at Northern California, who each ride street legal XR650R conversions. One rides every kind of Oregon trail, and he previously owned a Honda XR600R. The other rides on lengthy dual-sport trips with fellow XR650R owners in a loosely organized group. They ride both mountain and desert environments on paved highways, dirt single-track and two-track roads. Each commutes to work on his XR650R when practical. I knew that a dual-sport, street legal XR650R conversion would meet my goals.
I turned my attention to the price of admission for being an XR650R owner. I concluded that the best used XR650R with a dual-sport conversion would be in the $2500-$4000 range, depending upon upgrades, apparent condition and the usual crystal ball guessing involved when purchasing any pre-owned motorcycle. After going through the top end of these engines as we're doing, I will emphasize that buying the bike in this condition and renegotiating the price was actually a good thing. Given the mounting age of these motorcycles and injecting some sound reasoning, I now believe that the majority of these used bikes could be within a hare's breath of needing a top end rebuild. An objective purchase should be governed by this consideration. Assume that if the used engine does not need a top end rebuild immediately, it will in due time.
Note: My son Jacob's acquisition of a 2003 XR400R with a documented 134 miles on it could be substantiated by its showroom condition. It was a most unusual find. In all of my months of searching, there was one XR650R for sale online with that kind of history, allegedly less than 6 total hours of documented riding and sporting a Baja Designs conversion. The asking price for that cycle was $6500. I'm certain it sold to someone bent on owning one of these iconic motorcycles, likely selling for this price or close.
Now, you also need to consider the condition of your motorcycle. You are knowledgeable about motorcycles and can assess, at least as an experienced rider, whether the cycle needs a lot more work to be reliable and functional. If you can make an objective assessment and put into perspective what it will actually cost to complete the project, you can make an informed decision about your return on investment—and how far to commit here.
In the U.S., a dual-sport equivalent in good condition with a fresh top-end (receipted proof), good rubber and operating properly (clutch, brakes, suspension, etc.) is worth a minimum of $3000-$3600, depending upon add-ons. Often, a well equipped cycle will bring up to $4500. Make a sound assessment of your motorcycle and go from there. You've invested now and neared the point where you can operate the machine.
As for riding gear, you obviously went with top equipment, and great if you did. (I'm not trying to alienate your wife here!) Safety is always a priority with motorcycling, you cannot overdo it. If you buy cheaper equipment, it will not last and could even fail when you most need it. You have family responsibilities and need to be present and intact.