The last time we looked at colocated servers, we decided it was too pricey for what it was. It cost about the same as getting Business-Level Cable Modem service to one of our homes and keeping our servers there.
Besides, backups are a BIG problem with co-located servers. Unless you pay for them to back up your servers, there's no good way to do backups. Nobody will change a tape for you, you can't easily get access to your servers, and it's too inconvenient, anyway. Same problem with server maintenance.
If you want relative cheap, look for a shared server. At least, the owner will (presumably) do hardware maintenance. And see if you will be able to get backups, if those are important to you.