So I joined a faction (specifically Sarranid) and now I own 3 castles and 1 village.

I've been trying to figure out how weekly pay works for these things (if you have some kind of comprehensive guide that I haven't been able to find, please link) and it's a little confusing.

Villages

As far as I can tell, villages can be raided by enemy lords or occupied by bandits, reducing its 'prosperity' to zilch (not that I could find an actual numerical value of this) quite easily. This means you need to babysit your villages to have them make any real profit.

No units can be stationed/garrisoned at villages (are there exceptions? some towns seem to be more fortifiedy than others).

It seems like prosperity can be aided by building things (especially the Mill) in a village. You can only build things if you actually own the village. It's possibly also aided by doing quests for the village elder (does this require you to own the village too?)

Castles

Castles can have stationed units, which I think only have half the weekly pay that units kept with you require... but this still offsets the income from them, requiring you to keep some kind of balance if you want profit from it.

By monitoring the 'Locations' that are linked to my character page in-game, I'm quite confident that the prosperity of a castle is entirely dependent on the village associated with it... but the village is separately owned- meaning even if you garrison the castle, you may not own the village which determines your income (facepalm @ whoever made this design choice).

Towns

I actually don't own a town yet! Emir Nuam took Dhirim, WHICH WAS RIGHTFULLY MINE! >:(

Troops get paid on a weekly basis and their wage depends on their class and rank and is displayed in the party screen. If they are stationed in a castle or village when it's time to pay them, their wage gets cut in half.

Fiefs revenue is based on their type and a number of other factors, but basically as long as village and paesants aren't constantly harassed by the war or bandits, the economy should prosper. Villages are the worse type of fief you can have, for a very simple reason: once they get raided they won't produce anything for the better part of a week, and when your faction is at war they get raided all the fucking time. They're the prime target of Lords who have just been defeated or exiled, simply because their forces are not strong enough to do anything else. Not only that, if enemy Lord holds a personal grudge against you, they'll be happy to cross half the map just to raze your village out of spite.
They're simply impossible to protect, unless you're willing to stick around them 24/7.

Bandit events aren't that bad imho, they don't happen all that often, and they are a great opportunity to increase your rep with the village (which affects the number and quality of volounteers you can recruit). No exceptions. Towns and castles can (and should) hold a garrison, villages can't. Financially speaking, village improvements are just not worth it. Not sure if doing quests can help them economically, but either way as soon as they get razed their prosperity drops to zero, so... It is, but it doesn't make that much difference. Gameplay wise, I think castles are meant to serve as a place to station your troops, rather than a source of income. Sure, they yeld about 1k per month, which is not bad at all, but that's really not enough to sustain an army of tier 4+ soldiers. Grats to Nuam then! :D Did you capture the city yourself? Fiefs are usually awarded to whoever has started the siege.

Thanks for the enlightening response, Avogadro6.

I've got a city now, and I'll be learning how profitable it is shortly.

Yeah, I accepted one village and I really wish I wouldn't have, some of these lords do nothing but pester my one lonely, distant village...

The exact for awarding fiefs (at least in M&B1) is [url=http://mountandblade.wikia.com/wiki/Fiefs#Faction_fiefs]here.

Very enlightening, helpo1, thanks.

Definitely going to shoot for towns and not even bother with villages/castles. The difference in monetary gain and required management is ridiculous.

Warband introduced a few more variables, e.g. vassals can support specific lords, controversy is also a factor, female characters are discriminated against, etc.

For all intents and purposes though, getting a fief is a relatively straightforward process. If you have conquered it and asked for it to be assigned to you, most lords will side with you (unless your rep with them is low or negative). The liege will weight the opinion of his vassals, but ultimately the final decision is up to him. He generally won't object, as long as you two are in friendly terms.

If you haven't conquered the fief, however, it all depends on how much support you can gather. You'll have a couple of days to persuade your liege and the other lords that you deserve the fief more than anyone else.
Notice that while obtaining the support of the king is all that matters in the end, the lords who disagree will be disappointed, and that might eventually lead to long lasting grudges and political instability. For the sake of the realm is always best to persuade as many lords as possible before ninjaing a fief.

Don't overshoot it. Had my ambitions shoot down because of tax inefficiency which kicks in after a certain amount of fiefs.

http://mountandblade.wikia.com/wiki/Taxes

All the more reason to focus only on towns. It takes a while for tax inefficency to really kick in and offset the benefits of conquering a new town. Worst case scenario, he'll just have to cut the expenses by disbanding/moving the castle garrisons and let the enemy conquer them. Or install the Diplomacy mod and relinquish some fiefs to the king.

True. In my case it was bad luck; playing the Ribhinn mod there are (at least yet) no diplomacy features & having been a tad too enthusiastic by conquering everything for my chars liege on top of breaking the others armies back so to speak bad enough that I could (had to to get out of the monthly drain) completely remove any units from 5 castles and 4 or 5 cities and they still did not managed to snag one.

At least that massive demilitarization got me back into the green :D

Could have pledged to somebody else of course but... nope. That thing was done.