physical security is a big benefit of doing a wiring closet, basements are usually easy to pull wire from throughout the house too.. Mine's in a purpose built lil room behind lock and key, quiet and secure.. almost never need to go down there, I can manage everything from my office.
most rackmount equipment is not made to be silent by any means; putting it some place you can isolate the noise is a great idea in a residential setting.. Dont know if you've ever heard the noise a 1U multi-cpu server can make, the fans run at like 18k RPM and make a great amount of rukus.
I dont need density, I have ample rack space so I buy 4U server cases and put desktop quiet fans in them so I can avoid that.. but the switches and routers, rack fans and other network gear stil makes a decent amount of noise.. Its all high frequency noise luckily, so a few layers of 5/8" sheetrock, fiberglass insulation and a solid core door can be enough to silence it... as long as your prepared to provide ample airflow for cooling behind a closed door.
I got my racks used off craigslist for $100 for the pair, if your willing to pick them up onsite you can get used ones for very little because they cost so much to haul off.