Fortunately, the stories that I write have real world places for the settings, so I don't have to think much about names for places.
There's this unfinished story I did for NaNoWriMo whose setting I hadn't quite decided.
So I wrote and it ended up looking a lot like Paris and its surroundings.
Mostly because I wrote something I could relate too.
But since I hadn't decided, I tended not to name places and the only proper name there is in it is a restaurant "Chez Mathilde" that sounds like the regular "crêperie" in the middle of what could only be St Michel's area... It helped that it was a fantasy story (Werewolves vs Vampires stuff, I was particularly uninspired that year...)
You can indeed make up a lot of things when you write fantasy, but even when it's about the real world, you can take some liberties.
The only instance where I invented less place and insisted on making it as accurate as possible was a romantic story I made for an anonymous fanfiction prompts board about another game.
I was so outraged by them thinking Paris' cabarets in the 1920's were basically brothels (even though most self righteous and very local people from that epoch may have thought so...) that I thoroughly schooled them about proper Parisian culture between 1920 and WWII with real places, real names and a romantic story between two characters torn from their original medieval fantasy setting.
Some of those places are gone though... From the descriptions I read both on Wikipedia and books, some of them looked marvelous, even the less respected establishments.
It was fun looking up the old streets names (and hard too!). I can't believe some of them changed within the century when I passed through them often when I was a student and myself went to drink in a café near the Moulin Rouge...
I think research is truly about 75% of the fun.