To get decent bandwidth, you'd have to get a T1, or at least have FIOS at a minimum to attempt hosting at your home. If your hosting other peoples websites I would discourage it. Its just not a secure environment, too man liabilities, performance issues, and risks.
Colocation might be a bit of a leap, just starting out. Quite honestly, I'd start off with a good vps, or reseller account somewhere and grow your business, while capitalizing on the resources of a good datacenter/hosting provider. Maybe start out with a managed vps as some have said, or even a managed server (if you can afford it). I'd make sure its managed, so you don't have to worry about the technical things, and can focus on growing your business.