Question: A friend and I are kicking around the idea of starting a freelance website very similar to upwork odesk etc.

Only difference is ours would be completely free and ad supported, hopefully before we get too big we could generate enough revenue to justify paying for better hosting than what we are currently thinking of, which is hosting it from our houses and using an email relay.

I have seen the complaints about upwork and read a couple articles about how much other freelance IT sites charge a lot in commissions.

The price for us to run the site will be fairly minimal, we are thinking about $20 a month for the email relay, $1 for the first year for the domain provided we can find a good one no one else is squatting. The price of internet to our homes provided we don't get blacklisted or DDOSed. I have a couple good servers sitting around collecting dust. Figure have everyone use paypal to take care of payment or what ever method they agree on to keep that part out of my hands.

It should take about 3 months from start to finish before going live. So the only ture investment is out time.

My though are, and correct me if im wrong please. I should have no problem getting IT people to sign up, being in the freelance IT world for about 15 years Im pretty sure of the demand.

How to get the people that will actually pay the IT people to go and use the site? Besides SEOing the crap out of the site is there any other things I might think about before setting out on the endeavor?

Keep in mind Im not looking for ideas of how to get anyone to my website, but how did upwork, odesk etc, build the trust and relationship with paying clients to stop by their website in the first place?

Yes before anyone asks we are a little crazy.

Answer: 
From what I saw recently on French site launching their own up work like and from what I have to for my own business. It is a lot of communication/marketing and SEO strategy. I also recommend to have a look in any meetup locally that could help your promotion. . 
If you have access to some it already it is a good start as the customer can already have access to services. 
2 things : you should really handle the paiement as it is what will help you build the trust because you will manage the disputes. 
The other thing is that you should find a way to differentiate (apart from the free which is not enough I think).
Hope it will helps and good luck.
The prices you quoted to run the website may well be just for the hosting and to keep the site live, but what are the marketing costs going to be? You have the classic chicken and egg dilemma here. As a freelancer I'm not going to register if there are no jobs. How do you attract good jobs? Through selling a good pool of freelancers willing to do the work.

Your marketing efforts on this will be huge, not to mention expensive. Adwords, Facebook, Twitter and LinkedIn will all cost lots of money to gain any real traction. I don't think SEO alone will put you in front of the audiences you need.

Maybe lots of cold calling and cold emailing to companies to list jobs would do the trick. Who would do that? Whether it's you or someone else that will cost you as well.

I wish you success, but if you haven't thought about a marketing budget for this then your chances of succeeding are slim. It's like building a new flashy shop giving away free jeans and placing it somewhere between New Zealand and Hawaii. Nobody knows it's there or how to get to it.