A water level meter usually utilizes water resistance as most kinds of drinkable water is contaminated with salts making water conductive. Using a capacitance to measure water level is possible if the water is distilled and deionized.
You can try both by making a pair of sensor electrodes from stainless steel in a dielectric holder. The electrodes are immersed in water under test and a circuit connected to them outside water pipe or tank.
The circuit for resistance testing is a simple ohmmeter, you can use a DVM. If you build your own ohmmeter, make sure the circuit and power supply are insulated from the sensor. Or you can use one electrode only and use the water pipe or tank wall as the other electrode.
If you wish to sense the capacitive sensor, make a larger-area electrode like a stainless-steel sheet some 4 cm square area, and connect a RF oscillator to the sensing electrode through a 50-100 Ohm resistor. Directly to the electrode connect a RF detector and a voltmeter (you can use a DVM again.) Depending on the electrode area immersed in water, the detector voltage will vary. MOre water, less voltage.
Do experiments and learn from the results. Good luck!