Personally, I'd love this. It's a cool idea.
Think about it, once you've earned a high enough rank with a faction, you're granted a section of land.
You can know pay to build a keep on that land. This is basically a small "personal" town.
At first, it's nothing but an inn and a storage room. A place to rest, and keep extra items.
Also, it could have it's own "vault" where you deposit money to maintain it.
Now, as you gain wealth, you can pay to upgrade the keep.
You can eventually build a barracks. This would allow you to keep troops there. You'd still have to pay their salaries of course. You could also eventually buy a "trainer" which would give the +5 XP a day bonus to all troops stationed there (maybe this increases as the keep does).
You could return to the keep and change troops as you wish (there's times when I'd like to have a swarm of crossbowmen).
You could also pay to hire merchants (weapons, armor, and general goods). This would be a one time payment. Once you have merchants, your town would now be added to the "trade route". And caravans would head back and forth from it. You would need enough caravans arriving a week to keep your merchants (the caravans can be attacked like the others).
Raiders, bandits, opposing troops, etc... would all be able to come by and attack your caravans (and maybe peasants who wander the area, loosing peasants lowers the overall morale of the keep troops).
You can fight them off yourself. As well as being able to select from the troops you have at the keep to "patrol". They would then basically wander the immediate area around your keep, and fight off enemies (and escort caravans they encounter).
What do you guys think? Does this have merit? Personally, I'd have great fun with this.