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I usually decline being awarded villages to increase my chances on getting a town (probably captured by myself).
At first, it really sucks to watch your personal village get burned down, but in due time it jumps back up and gets working as it had before. It may not make a lot of money, but that's what villages are: just a pinch of extra cash to pay the bills with. You can't expect to get rich unless you have a town of some sort.
I still remember how protective I was with my first village, often setting up camp nearby to watch over it, and feeling disppointed when it got blazed behind my back. But after awhile, you just kinda stop caring that much, because it's just gonna happen no matter what. Cycle of life, I suppose.
in real life there would be no one left in calradia if things went like they do
I treat villages as a quick means to replenish troops and get early warnings of where enemy lords are. They start to raid it and I get a message saying such so I know which region of the map a particular lord is at the time. All I get is money from them as you don't pay anything for garrisons at them theres no point in not accepting them.
As marshall I've been able to protect large amounts of my own villages because. When I have 1 or two villages I can protect them alone myself. I use them to lure lords in so I can fight without having to venture into enemy territory where I am more likely to be ganged up on. Once I have defeated a few lords then I start moving into their territory looking for more fights while gathering up an army and getting the other lords in my faction to join me on and siege towns. Enemy AI seem to hate when you siege towns and will abandon raids to go after you.
But saying that all my villages, 7 or so of them are usually at around average prosperity, which is a decent 700 denar (I think). And when they are attached to my castles/towns, then it increases the prosperity of those aswell.
The way how I increase is by... Building a mill. Build a watchtower and messenger post meaning that you can respond to attacks quicker and village has more time before it is classed as looted.
Keep the area free of bandits. Make sure the farmers can get to the associated town.
Do quests for the villages.
So depensing on your village positions, and the factions strenght villages are a hit and miss. If the faction you are with is weak and loosing battles, investing time/money into villages is probably not worth it. If your faction is going well, it is probably worthwhile.