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"Look for a suitable place to build. You are unable
to build close to a neighboring village. Choose carefully as the terrain should not be too
steep, consider you may want to build a larger settlement in future and it is a good idea
to start in an area with additional, adjacent flat land. Take account of your freshwater
source and the building materials you will need. On the shores of larger lakes and rivers,
reeds grow, these can be used as straw for building roofs"
There is a location right across the river that is perfect for your first house in the Medieval Dynasty. The location is next to the road, water, and is flat.
Also mind that even on the 2nd "Techlevel" you can have 8 buildings standing about. So things grow large quickly.
There's a lovely place across the river to the right, or on the same side as the main village a bit further to the west. However, Both plots of land don't really support more than 6-ish houses if you want to build somewhat pretty.
I myself didn't find a really nice spot yet though.
In this spot you got everything you need nearby. You got forest, you got animals to hunt, large body of water for fishing.. as well as a cave just south of you. That combined with the nearby villages will help a lot. Not at least getting new inhabitants to your settlement.
2. The terrain should be flat, unless you want to relocate your settlement later on.
3. What do you intend to do? Hunters should go south, because there is more game, there is a very flat spot for farming in the NW near Rolnica, for mining go near a mine (Branica/Baranica offers space, water and two settlements nearby
4. Settle somewhere near maple trees, makes woodchopping for your houses less tedious
Settlement places near Gotovia have two advantages: you don´t need to run that far every spring for paying your taxes and there are six traders in the vicinity, four in Gotovia, two in the settlement across the river (important, if you have already enough iron arrows to sell
1. Land - Lots of flat land for fields and buildings
2. Other Cities - You have to walk to them often to buy/sell/recruit/quest
3. Trees/Wood - your primary building resource
4. Water - you need to drink regulary
5. Clay / Iron / Rocks - needed for building later on. But your NPC can collect it too. For them the range is not too important as walking distance currently doesnt seem to matter.
..
100. Reed - is very easy to transport, for houses you can substitute it with wood. You can produce it yourself with a wheat/rye field.
You can delete fields with the hammer - toggle the mode to destroy via right click
Just collect a bunch of reed (200 or so) at the starting city and put it in the chest it doesnt go bad.
Wheat or rye fields produce straw too when you dredge the the grains.
You can also change the roof to be a pure wood roof when building houses.