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There are unique advantages and drawbacks to each, so weigh each option before making a final decision.  If you will house your rabbit outdoors, make sure he has a secure living space that will protect him from predators and the elements. Even urban areas have threats like raccoons and cats that can harm or kill your rabbit, so you'll need to make sure he is protected. Also be sure to provide your rabbit with plenty of company and social interaction. It would also be helpful to give your rabbit an outdoor pen to play in during the day. If your rabbit will be an indoor pet, remember that rabbits like to chew. You'll need to sufficiently protect your furniture and valuables from getting damaged. He will also need daily exposure to sunlight to help with vitamin D production, so bring him outside regularly to ensure he stays healthy. Will your rabbit be allowed to roam the whole house, or is there a specific room you want to keep him in?  Your rabbit will need several hours of exercise outside his cage every day. When choosing an area, remember that he needs enough room to explore and roam to make sure he gets enough exercise. At the minimum a full room should do. Keep in mind that the bigger area you allow your rabbit to roam in, the more bunny-proofing you'll have to do. Rabbits love to chew, which can not only damage your home and furniture, but can be fatal for your rabbit. You need to remove or protect certain items within the rabbit's area.  Either remove electrical wires from the rabbit's reach or wrap them to prevent your rabbit from chewing through them. To wrap them, get plastic tubes from the hardware store. Using scissors or a utility knife, carefully cut the tube lengthwise and push the wire inside.  Cover open outlets with child-proof plugs. Remove any plants from the area. Rabbits have sensitive digestive systems and eating unfamiliar plants can make them sick. Continue supervising your rabbit if he is roaming the house. Even if you think you've taken everything out of his reach, rabbits can easily sneak through small openings and reach areas they aren't supposed to. This is especially true for younger rabbits. Rabbits are generally fine around other house pets like dogs and cats, so long as they are well-mannered. Puppies especially should be well-trained before you let them interact with your rabbit, as they may hurt him trying to play. Your rabbit will need a place to sleep, eat, drink, and rest. Choosing the right cage is very important for keeping your rabbit healthy and happy.  As a general rule, your rabbit should be able to stretch out fully and stand on his hind legs without hitting the top of the cage. For a more concrete measurement, the minimum recommended size is 24" x 36" x 24". If you have a wire-bottom cage, lay a piece of wood or plastic over part of the floor, to make sure your rabbit stays comfortable. You can also substitute a dog or cat cage for a specialized rabbit cage, so long as it is big enough. Include a small rug or mat and some hay for your rabbit to lay on.  If your rabbit goes back into his cage, let him stay there and don't force him out. Rabbits often use their cages as a safe area where they can rest and relax. Make sure the rabbit has a place to hide within the cage. Rabbits are burrowing animals and need the security of a small dark space. A simple shoe box will do as a hide, but be prepared to replace it regularly because he will probably chew on it. Like cats, rabbits can be trained to use a litter box.  First see which corner of the cage your rabbit chooses as his bathroom. Then place a litter box there. When he consistently uses the litter box in his cage, you can allow him to roam more outside his cage. Place more litter boxes around his area to encourage him to use them. Always use positive reinforcement when house-training your rabbit, never punishments. Rewards include things like offering your rabbit's favorite treat. If the rabbit is well-socialized and loves people, reward him with praise or being groomed. Avoid using clumping litters, as your rabbit may eat clumps and cause an intestinal blockage. Use litters made from wood pulp, paper, or citrus. You could also use newspaper as an alternative, though this may not be as absorbent.

Summary:
Decide whether your rabbit will be an indoor or outdoor pet. Designate the area that your rabbit will be allowed in. Bunny-proof your rabbit's area. Get your rabbit a cage. House-train your rabbit.