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Setting tile yields will display the food, production, gold, culture, science and faith yields of all tiles.
This can help a lot in checking for a good location.
You are better off looking for a suitable location yourself rather than following what the advisor says is a good spot. There are several things that influence how you want to place a city for example:
Avoid bad terrain where possible;
Snow and Ice make for terrible terrain being the worst terrain to settle near in the game snow has no output and cannot support a farm, ice can't be worked and blocks all but submarines so can block otherwise viable trade routes.
Desert is a bad place to build a city. Desert hills and flood plains still provide resources but too much open desert is just starving your growth.
If you start in a desert you'll need to rush the Petra to make those desert tiles count as plains.
Morocco is able to settle the desert effectively however due to their Kasbah improvement.
You may still find that building with some desert is beneficial for access to luxuries but if in doubt aim to have the desert luxuries 4 or 5 tiles from a city and build further from the desert. (cities work a 3 tile radius but borders can grow to a 5 tile radius)
Mountains are a bit of a mixed bag, having a mountain by your allows you to build an observatory, macchu pichu and neuschwanstein and provides some defence, having a few mountains creating a wall or pass to one side of the city gives a strong defensive position however having too many mountains will inhibit growth as they cannot be worked.
Tundra only provides 1 food so while it isn't as inhibiting as settling in the middle of a desert or snow it still isn't good. If you do want some resources in tundra try to settle with access to a few deer.
Too much water will leave you with low production, if there are enough sea resources within 3 tiles you can offset the poor output of standard ocean tiles but as a general rule try to build coastal cities on bays if a suitable location exists or a more or less flat coast if not.
As for where it is good to settle;
Early game building on a hill is an advantage as it gives the city +1 production and a defense bonus, cities on flat land can build a windmill for a higher production bonus but early game the hill is far more attractive.
Luxuries are important for expansion, a new city at prince or higher will create 4 unhappiness when you settle so settling near 2 different new luxuries will provide enough happiness to grow. A city with access to either ivory or horses can also build the circus for +2 local happiness which is helpful for early expansion.
Strategic Resources can likewise be a good reason for settling a city location although what you need will in part depend on civilization choice.
Balance of terrain is also important, hills are the primary source of production especially if they contain a mined resource, food resources like fish or wheat can create a large amount of food in 1 tile to offset the lack of food on mined hills.
Settling on a river will improve caravan trade value and allow you to build the garden, watermill and hydro plant. You can also build farms on hills and tundra adjacent to rivers or lakes.
At the end of the day the best thing to do for now is place a city where you think it will be a good location. If the city doesn't grow you don't have access to enough food, if everything builds too slow you haven't provided enough production. You'll learn through trial and error.
Dont try to find a location with all the beneficial terrain, use the best spot that suits your situation
Wow, thanks a ton for this great answer. I haven't even yet thought twice about settlement locations; just picked what the settlers themselves suggest within 6-8 tiles of existing towns. This gives me a lot to think about and look forward to trying :)
A follow up question, what is the ideal number of cities to build? I notice that too many become tiresome to manage and also inhibit building wonders. Too few and my population stagnates :(
How far apart do you typically space the cities?
I have won on deity with 1 city and I've also won on deity with over 20 cities between ones I have built and annexed so don't worry too much about whether you are hitting an optimal number.
If you want to maximise policy gains play tall. Any cities you conquer from the enemy can be puppeted so that they produce culture without increasing policy and if they aren't wanted can then be sold to the AI.
When playing tall you will generally want to try to have all cities with the full 3 tile radius available. For inland cities ideally they want to be as near to each other as possible without inhibiting growth.
In a perfect world that would mean there are 6 tiles between each city but in the interest of optimising placement you will realistically be looking at placing cities with 5-10 tiles between them but aiming for 6-8 where possible.
The reason for this is maintenance and troops movement. Naturally the closer cities are the easier they are to defend but roads are where you will really feel the impact of spreading your cities too far apart, you pay maintence for roads you build even if they are outside your territory so if you have to build a 20 tile road to connect 2 cities it isn't going to be worth connecting them due to the maintenance cost.
If cities are on the coast however a harbour costs the same regardless of distance so you can spread them as far apart as you like.
You can mix and match the 2 so if the capital is inland on 1 island and has a road to a city with a harbour you can build a city on another island with a harbour and connect that to an inland city by road to connect all 4 cities. (Its gone 1am so forgive me if that example was hard to follow)
For a wide empire you will likely be building 2 types of city, production cities and resource cities.
A production city will be large enough to work a good number of tiles and will be responsible for the bulk of your activity.
A resource city will be placed where it can obtain luxuries and strategic resources and may be stagnated to keep the population low. Start of by building your core production cities then expand out when happiness allows.
When playing wide people generally overlap city radius and stagnate a large number of cities. A city can only work as many tiles as it has population so if you are going to prevent growth you don't need access to as many tiles.
You'll find wide play effective for domination as the abundance of resources you'll connect allow you to churn out your more powerful troops.
Personally I prefer to play tall although if an enemy civ starts to snowball I may switch to wide and go on a full offensive. Always be prepared to adapt if your initial plan doesn't pan out, if you want to go diplomacy but an AI starts capturing city states you are going to want to either change victory focus or start a war to liberate those city states so you can ally them for votes.
After one or two full games you might have learnt enough and can disable advisors and all other tip mechanisms and start playing by yourself. You can get also much better result by micromanaging your scouts and worksers.
One thing to consider is the variety of bonsus' you can get from natural wonders. Sure at glance their outputs are what's important. That's true. However, in the late game with certain techs, buildings, policies and religious tenants they can generate tourism! Tourism is what you need to win a cultural victory. So If you're looking to win a cultural victory then I 100% recommend. If it's just flat desert around it with nothing else it will take a LOT of effort to build that city up. Probably will require buildings like Granarys and hospitals or even caravans bringing food to keep it around.
If its on a river, by a lake or an ocean that's fine as you can use that for food outputs.
Certain civs like Spain are pretty good with natural wonders too, they get the bonsus' doubled.
The desirability of natural wonders varies from one to another. Fountain of Youth for example is desirable to have within your cultural borders both for the happiness and the healing promotion but doesn't need to be worked so can still apply its bonus 4-5 tiles from a city.
King solomons mine on the other hand gives a big production boost for a new city so is great within the workable area.
With Natural Heritage sites all natural wonders produce an additional 5 culture as well.
As spain you want to actively look for any high yield natural wonders and check the surrounding area for a good city location. The double yield from natural wonders applies to the natural heritage sites bonus as well so Mt. Sinai for example can produce 16 faith + 10 culture for Spain.
If you have "Brave New Worlds" expansion (I think) you can set up a trade route from another city and set it generate Food in the exchange.
Even so, I wouldn't build a city in the desert without some strategic advantage (e.g., block the AI's growth).
If there are a few useful luxuries/resources in a desert but not enough workeable terrain to properly grow you can put a city there and stagnate it at the level of local happiness you put there.
As you said it can be useful to place cities to block passage.
You can also use deserts for faith but for somebody who has so far been following the advisor its best to stick with the good terrain where possible and look at ways to use unfavourable terrain after getting the hang of city placement in general.