What is the best practise/Approach for upgrade to AEM 6.5 from AEM 6.3 SP2

Solution:

The best approach for upgrade is in-place upgrade just like you said.

Please review the all the links of doc - > Upgrading to AEM 6.5
The main upgrade steps are mentioned here Performing an In-Place Upgrade

Note:
In addition to that its good to check the following document:
Post Upgrade Checks and Troubleshooting