The location must be well ventilated and there are minimum distance requirements between a stationary combustion engine and any door, window, or outside air intake vent -- typically 5 feet, but may be higher depending on the circumstances -- to prevent carbon monoxide and other noxious fumes entering the home.
The setback from the property line usually depends on the local noise ordinances. In some municipalities, the noise ordinances apply only to prime and continuous generators, not emergency/standby generators. However, they may restrict the times during the week when running an emergency/standby generator for testing and maintenance is allowed.
The location may also depend on the local ordinances for fuel storage if a permanent external tank is provided.
Also, if you are locating the generator between two homes, consider the drainage conditions during major thunderstorms. A retaining wall and housekeeping pad may be necessary to protect the generator from flooding, mud and debris if the runoff to the street funnels through the location being considered.
And, as edward said, follow the manufacturer's instructions.