Depends on what part of Harry Potter you want to recreate. And which characters you like the most. I'd say, focus on a location that you like, whether it's Hogwarts of Diagon Alley or Hogsmeade or some other place, and choose some characters that you really like and make houses that suit them. Although, since you can have four houses, that lends itself very well to making the four Hogwarts houses and have the town around them be like the school grounds with the Forbidden Forest and stuff, so you could go with that if it appeals to you.