There are basically two options: south of the Golden Horn or north of it.
The good news is that there is no good or bad area. It’s just a matter of preference. The bad news is that you should expect to spend plenty of time in taxis, regardless of the area you choose. Why? Because most visitors tend to spend a fair amount of time in both areas. Luckily taxis come rather cheap!
North or South of the Golden Horn?
The Golden Horn (Haliç, see blue area on map) is the river-mouth that is spanned by the Galata and the Atatürk bridges. South of the Golden Horn, you’ll find the historical part of Istanbul (red area on map). North of the Golden Horn is the modern part of Istanbul (purple area on map) and basically means Beyoğlu (Taksim), the business and entertainment district.
South of the Golden Horn has traditionally been the centre for the city’s budget and mid-range accommodation, with a lot of historical hotels and pensions, while Beyoğlu (and Taksim in particular) was the place to be for four star and deluxe hotels. To a certain extend this is still the case, but in recent years both areas can offer a wide variety in hotel choices. For an overview of my favorite hotels, check out recommended hotels in the historical part of Istanbul and recommended hotels in the modern part of Istanbul.
So, based on what should I pick an area?
Both areas have their pros and cons. If you want to sleep within walking distance of top sightseeing attractions like Topkapi Palace, the Grand Bazaar and the Basilica Cistern or enjoy breakfast on a rooftop terrace while admiring the cleavage created by the Blue Mosque and the Hagia Sophia, then you can’t go wrong south of the Golden Horn. The downside is however that the streets tend to get less crowded after sundown and good night-entertainment is rather scarce.
Beyoğlu on the other hand misses out on the romance and views offered in Sultanahmet, but largely compensates this with its Bosphorus views, countless cozy (rooftop) restaurants and lively bars and nightclubs, all just a short stagger home afterwards.
And the winner is…
Over the years I have stayed in both areas and had to find lodging for numerous visitors. Based on those experiences I favor a stay north of the Golden Horn. Certainly if your city-trip exceeds a three-night stay, since this means you’ll travel outside the boundaries of Sultanahmet and its neighboring districts. In which case Taksim is ideally located as the centre for your excursions. Even if this means you need to take a 15-minute taxi ride (or double in rush hour but still only TL 10) to reach Sultanahmet.