I started another Daggerfall run and finally knocked over enough stores to buy the most expensive house in Daggerfall city. Thing is I'm not sure where it's at. My map wasn't marked with anything and I searched all the houses that had the same exterior. I thought I found it when there was a 'House for Sale' marked on my map but there was a friendly vampire NPC in there and when I tried to sleep I was almost pinched for vagrancy. My character is a vampire from that region so I thought maybe the NPC was supposed to be there.

So what do I look for to find my house? Is the PC allowed to sleep in their house or is it just a loot locker?

You can sleep in your own house, and it should have been marked on your map. Other than going around in Info mode, clicking on each house that looks like what you bought, I can't think of how you'd find it. You could save your game, sell the house and buy it back again, and see if it is marked properly; if so, reload and go to that house.

Most players find Boats to be the better investment. You can never lose your boat, you can teleport to it from any outside location and back instantly, and you can store stuff and sleep in the interior of the vessel. That's pretty awesome. Just remember to sleep below decks; outside on deck you can get pinched for vagrancy by... uh... the coast guard? I don't know.