The 2,000-hour commercial pilot was performing initial hover test flights in a homebuilt helicopter he had recently acquired for parts. The pilot reported that approximately 30-minutes into the first test flight, the liquid cooled engine began to overheat. The pilot added that he elected to land and shut the engine down to investigate. He observed water leaking from a hose clamp on the engine cooling system. He tightened the clamp and waited for the engine to cool down. After checking for leaks, the pilot elected to continue with the test flight. After another 20-minutes of additional hovering, the pilot proceeded to stay in a traffic pattern to perform takeoffs and landings. While in the traffic pattern at his 200 acres ranch, the pilot neglected to monitor the engine instruments and while on the fifth approach, while the helicopter was at about 300 feet agl, the engine lost power. The pilot initiated an autorotation; however the helicopter was unable to clear a tree line, and the main rotor blades collided with a tree. The helicopter impacted the ground hard, coming to rest against a tree. At the time of the accident, the pilot estimated that the winds were from 150 degrees at 10 knots. The reason for the loss of engine power could not be determined.