What's your preference for naming side characters?

I prefer naming them actual names! It just would feel odd to have a character named "School" or something, despite the coolness of having that building labelled on the map. You can also always give the characters names that will be fitting for their building, like for a school you could give a teacher-sounding name like "Ms. ____".

i like to go with a theme, ie:

mayor: Princess
2nd: Witch
3rd: Prince
4: possibly Knight?

In a themed town I'd prefer they have a name related to what the house is, but still an actual name. I had a town (which I had to get rid of, unfortunately) named Fable. The characters were BigBad (the mayor), Lil'Red, Goldie, and Hazel. BigBad's house was like an old woman's, Lil'Red's was just a cabin, Goldie's was the 3 bears house, and Hazel was supposed to be the witch from Hansel and Gretel so hers was a gingerbread house.

When I had to get rid of that town I recreated BigBad and Lil'Red in my main town. My other side character is Ichigo, named after my cat. It honestly never occurred to me to give them names to match the house on the map.

I haven't had a "themed" town yet, so in the case of my towns, I just named side characters random names. A lot of times, I pull names from other original characters I've had in other games, because I'm uncreative haha.