One of my friends has free hosting running on their server and on same server, they also have paid hosting. They have been cruising well for past four months now. But is this a good strategy to have free and paid on same server?

Well it could turn into a problem.

The main problem I see, is how well behaved the free users are going to be, given how there’s probably no way to hold them accountable for any trouble they cause.

The reality is that the free service will attract a lot of users, and may not leave much room for paying customers. It really depends on how our friend limits the free hosting accounts and their specs.