I live in a townhouse and the neighbours could hear when I was recording. What I did was build a small room that was big enough to hold a guitar amp and player, had a double glass door and wired for mic and headphones. The walls and roof are isolated and heavily insulated. Works really well. I can hear the amp at high volume (nearly blew my wife away when she opened the door while I was playing). I insulated the floor joist spaces, covered with dense mdf board, created about 3 inches of air space and then insulated the roof of the room and covered with drywall. I can sit at my board and play the guitar while recording from the room. It's too small to contain a drum kit, but I have drum surrounds for that and the neighbours don't complain. I usually only record one or two players at a time. All this cost me about $300.00 and 20 hrs of work (over the course of 2 weeks).