For a hosting start up I would suggest getting a massive server and paying for it by an equipment lease. Personally I manage two racks full of servers and if I had a magic wand it would be awesome just to have one or two big servers. (64 gigs of ram, lots of 2.5 drives, 4 or 6 processors)
Right now co-location providers are desperate because Amazon and others are taking away a lot of their business so you can get a good price.
I have a friend (manages his own servers) who has a hosting business and he brings in enough to be happy, about $10k a month. He hosts ASP and .NET sites with no marketing budget he just posts to various forums and website hosting comparison sites.
I really like Supermicro servers and Dell Servers.... Supermicro makes some really big servers that you can add your own components to and I find them very reliable. For a friend some years ago I put together a $24k server and they paid for it with a business lease through Bank of America.
I used to own the domain ehosting.com and tried doing hosting but it just isn't my thing. Getting everything to work for a people was far more work then I expected. If I were to try again I would just offer virtualized servers and not have any hand in customers setups.
Having a specialty in hosting I believe is important. For example for $14.95 a month from GoDaddy I have an account with unlimited space and unlimited domains. I have hosted about 30 domains and 24 gigs of files all for $14.95. I also have a virtualized server from GoDaddy for $39.95 a month which I use a coupon code and save about 20% off a month.