I bought this Raleigh off of Kijiji (similar to Craiglist) for 40 bucks:



I swapped the handlebar, seat, and tires and added a rack & kickstand:



The original plan was to turn it into a dedicated winter bike with studded tires, IGH, and drum brakes. Figuring in for parts, stuff I could do, and stuff I would have to let a shop do, I could easily have gotten into the $600-$700 range. Once I figured that out I started saving my pennies for a new bike with all the features I wanted.

So instead I bought some slicks and fenders, added a bell and some lights, upgraded the rack, and started using it as a back-up commuter:



The cassette was really worn, so I decided to upgrade the wheels to a decent aluminum set, and replaced the worn BB and crankset. I now use it as my fair-weather recreational family hauler. I put the fenders on my daughter's bike (since her bike will see rain) and added a double-leg kickstand, some quality brake pads, and the seat for my son:



I could sink a bunch more money into it, but seeing as how it started life as a Big Box Store bike, I don't think it's worth it. One day I will either buy a bike like the OP's and upgrade it in a like fashion, or buy a nice new frameset from Soma or Surly and build that up as my family hauler. At that time the Raleigh will be relegated to the parts bin, or donated to someone who needs some basic, reliable transportation.