I purchased a good domain and want to target a city on Google, but not sure if the location of the host matters. I have a physical address, a phone number, but cant decide if the site should be hosted in the same city or somewhere else?
There seem to be hardly any hosts in the city (Montreal).
I also checked other sites with IP checker. Ones that rank well for local queries are all hosted abroad or in another city, so I guess the location does not matter much.
It matters the country you host in, so if you wanted to be seen as a Canadian website hosting in Canada by default does that. If you want to host outside of Canada you can create a Google Webmaster Tool account and change your website settings from the US to Canada.
As for city level, currently while Google does GEO target results at a city level there is no switch/setting to control this, in the future I sure that Google Webmaster Tool will allow this, but at present its based on traffic patterns to your site.