As Duffy says, you need to start with something good. There's that old adage about the thing that can't be polished after all.
I completely disagree with this. In fact I
strenuously disagree with this. I've fixed up numerous <$150 Samicks, Squiers, Johnson, Fullerton, Turser, even a Behringer. With a good fret leveling, nut, and possible shim, I can make these guitars play great. Each and every one of them. The key is to find a neck profile you like because unless you wanna carve your own profile, you are stuck with what you got. Everything else is just hardware. Hardware that can easily be swapped out as needed or as budget allows. And as far as pickups go, a load of hype. A pure, unaldulterated, utter load of hype. The amp makes 100x more difference in tone than anything on the guitar. The only thing you need a guitar to do is play well.
I'm a habitual pick-up swapper. I know that seems to be a paradox giving my above statement. But I like to tinker. And it does give my opinion on this matter some degree of substance. I've used a LOT of different pickups. Active vs passive, yes there's a noticeable difference. Magnet types? I'm not really convinced that the magnet type matters more than the number of windings or what you do with the signal at the amp. The best sounding strat PUPs I ever had (IMHO, and a couple other long time musicians I know) were stock cermaics from '94 MiM Squier Series.
I also love to get the cheapest, beat to hell guitars and make them play great. The only ones I haven't been able to get the way I want them are:
1. The one I built myself from scratch. The truss rod won't adjust properly and the frets are ground to hell and back. But that's because I also built the truss rod from scratch and didn't cut my fret slots deep enough.
2. An old Harmony guitar from the 70s. It's just an utter dog. But I still feel like the failure there is mine, and the bridge. The bridge is not adjustable for height or intonation.
Fact is, any guitar that comes off an assembly line has the baseline quality you need to make it play great. Go to your local Samick dealer (if you can find one). You can get a brand spanking new Samick tele for like $100. If you don't mod it, it will have a LIFETIME warranty. Try out some AXLs (if you can find them). Try out the cheapest beat up affinties hanging at Guitar Center. You can ALWAYS get them to knock 25-30 bucks off of those beaters because everybody and their brother has played the crap out of them. And guess what. They are GREAT guitars once you put a fret leveling and set-up on them. Even the cheapo bridges and tuners stay in tune these days (unlike those on that Harmony).
Even the Behringer. Even the Behringer plays great.
Just because you take a $100 tele and spend $500 in parts doesn't make it worth $600 if you choose to sell it on, it's still a $100 guitar and you will never recoup the cost of your upgrades.
On this, however, I agree wholeheartedly.