Q: I'm writing a story set in Iceland (inspired by three visits in the last three years with another one coming up in August) and need some help with authenticity and realistic places for my characters to live please. This might take a while. First off, I've put a music teacher in a house off Miklabraut, possibly Eskahlid (spelling...oops) and wonder if people do teach from home as they do in the UK and if a house would be believable or if it should be a flat. Told you it might take a while. Secondly (nearly there!), would it be believable for a family owning a restaurant in Reykjavik to live outside the city in a rural area and commute? I have more questions but think you need a rest. I'm already grateful for whatever insider insight you can give.
A: All of what you are imagining is possible. However, to get into details a little bit: is the music teacher married/cohabiting? Is he a famous or sought-after performing musician? If the answer to both of these is no, then he would probably live in a flat (as, indeed, the majority of Reykjavíkings do). However, there is nothing unbelievable about him living in a house. Have you considered a "tvíbýli" (a two-storey house with two or more residences in it? They are common. If he is a youngish, hip, or hippie type music teacher, he may prefer living in Vesturbær or downtown, but otherwise the leafy Hlíðar area (where Eskihlíð is located) is a very music-teacher-friendly type neighborhood.
It is less likely that he would teach music at home than in the UK, because most towns and cities have a music school where subsidized lessons are held for children and young people. If he teaches kids, then he would probably work at a music school. He could teach music to adults at home, though. Or he might teach at home if he is a renowned master of his craft. Teaching at home, however, would probably make a house more necessary than a flat...
Talking about your restaurant-owning family: sure! Why not? It would be unusual, granted, but if their reasoning is that they love living in the countryside, but also like owning their profitable city center restaurant, then they would be as likely to do that in Iceland as they would be in the UK or anywhere else. People in all sorts of jobs commute to Reykjavík for work from places like Akranes, Keflavík, Selfoss and rural spots all in between.