I think it all depends on your situation and your plans for the future. I am preparing to do this myself and have been researching it quite a bit.
You can build a server to be what you want it to be. As strong as you like and can afford.
You can also recoup some of the costs by selling your extra server space. If you plan to do this you should be looking to buy the largest and fastest HDs you can afford as well as ome extra ram.
You also have to check with the datacenter you'll be racked in to ensure they have a service to replace components if you need it. Some charge a pretty high hourly fee for such things.
If you choose to upgrade to a new server in a year or two, you can always use the server exclusively for hosting.
But there are pitfalls. You own the server, so if it goes down, there isnt really anyone to call - its your responsibility to fix it. You cant be just "moved" to another server since you only own one. You have to completely manage and monitor the server (unless you have a management company do that for you, another expense)
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