How do you make a good setting for a book?

I've lived in Toronto my whole life, aside from a few short vacations to the tropics. I don't want all my novels to take place in the same spot. I want them to take place in different locations. Would it be bad if I made up the descriptions of new places, even though I've never been there before? Could I make up my own small town that doesn't exist? Would it be possible to make a fake school or house in a real place?