My current WIP is set in Noble, Oklahoma, and since I am very familiar with this small town I am able to easily write about the sights and sounds of the town without much trouble or much research. Research for me basically falls to interviewing local police about procedures in various situations that might arise in my novel, sitting in the local coffee shop along the main drag with laptop open, listening to conversations and maybe digging into some town history. The thing to remember about using real locations in fictional stories is not to take it too seriously.
This process falls on a spectrum of total reality versus embellished reality. Either we can create a complete life accurate representation of a place, set a completely fictional town or county within a real place, or base our towns on real places without actually taking us to those places.
An example of total reality are the novels written by Kathy Reichs, the forensic anthropologist who sets all of her novels in Canadian cities. She describes these cities in a way that allows readers to experience the cities without ever actually traveling there.
An example of something in between are the novels written by William Faulkner. His novels are set in fictional Yoknapatawpha County which is located within a very real Mississippi. His characters are realistic people, but the county and towns in his novels and short stories are completely fictional. Another example of this is The Walking Dead which sets its story in Georgia. One can quickly find out through a Google search the location of the actual town of Woodbury, the maximum security prison only 16 miles to the northeast, but King County is completely fictional.
Of course the far end of the spectrum is where we create realistic locations that are completely fictional. We have to go no further than J.R.R. Tolkien for this, but the ability to create a detailed fictional place like Middle Earth, complete with cultures, languages, history and geography is not something that many writers wish to tackle today. Tolkien’s fictional world was so carefully created that it gave the reader a sense of depth that is not found in much fantasy writing today.
I will be using a real place for my novel that will eventually fade to a completely alien location. I want it to be real enough for the reader that they could go to Noble after reading it and use my novel as a tour guide. It’s a great little town, typical small town Oklahoma, and has the right feel and is isolated enough to serve the purposes of my plot.
Whatever your inclination, make sure that your setting is real enough for the reader that they will believe they are being transported there. If the setting is not believable, they will lose interest trying to fit your gaps together and then you will lose them.