Herin are a number of ways your magic item might come into being, apart from something you order from your local wizard.
A standard roleplaying environment: the tavern. This is another easy one to create in your own home, providing you have a large enough group of roleplaying friends. Let us assume your PC group is no larger than five, and that the rest of your friends can be NPCs. Let us also aim for an exceptionally seedy and unscrupulous city tavern.
In a good LARP it is desirable to separate the players out individually at some stage, because they are more suggestible and afraid when they are alone. Some form of individual challenge is probably the best way of doing this. One possible setting for this is a cave system, and it is probably one of the easiest to recreate realistically, and one of the most perfect for playing on fears of claustrophobia and darkness.
The city of Nausopol is built on stilts. Lots of very sturdy stilts and butresses, of course, because it rises about five hundred feet from the ocean. Even the most terrific of storms is only heard in the city as a distant cacophony of blasts as waves strike the solid stonework fathoms below. It has never been attacked because of its isolation and impregnability.
It's not a place for the faint-hearted: vertigo and sea-sickness are not desirable traits. But when you are standing in the middle of the city there is no way you could tell that you were standing above an ocean, separated only by a gulf of air and a few stones.
A thousand steps lead down from Nausopol to the floating docks. These docks are pitch-coated wooden and can be raised by winches during squalls. Trade with other cities and countries is good: Nausopol is built over a sunken atoll whose minerals are still mined by divers, and it was from this that it originally derived its wealth.
But the principal method of getting to and from the city is by riding the giant sea-eagles which have been captured and bred for that very reason.