diff --git a/README.md b/README.md
index 395b3dc..3ae2275 100644
--- a/README.md
+++ b/README.md
@@ -56,12 +56,17 @@ A simple Todo API built with FastAPI and SQLite.
    pip install -r requirements.txt
    ```
 
-3. Apply the database migrations:
+3. Initialize the database directory:
+   ```
+   python init_db.py
+   ```
+
+4. Apply the database migrations:
    ```
    alembic upgrade head
    ```
 
-4. Run the application:
+5. Run the application:
    ```
    uvicorn main:app --reload
    ```
diff --git a/alembic.ini b/alembic.ini
index 4d8e9aa..784e1d5 100644
--- a/alembic.ini
+++ b/alembic.ini
@@ -35,7 +35,7 @@ script_location = alembic
 # are written from script.py.mako
 # output_encoding = utf-8
 
-sqlalchemy.url = sqlite:////app/storage/db/db.sqlite
+# We'll set this dynamically in env.py to match the application's config
 
 
 [post_write_hooks]
diff --git a/alembic/env.py b/alembic/env.py
index 85ad1e7..a4d8ca9 100644
--- a/alembic/env.py
+++ b/alembic/env.py
@@ -1,14 +1,24 @@
 from logging.config import fileConfig
+import os
+import sys
+from pathlib import Path
 
 from sqlalchemy import engine_from_config
 from sqlalchemy import pool
 
 from alembic import context
 
+# Add the parent directory to Python path so that 'app' can be imported
+sys.path.insert(0, str(Path(__file__).resolve().parents[1]))
+
 # this is the Alembic Config object, which provides
 # access to the values within the .ini file in use.
 config = context.config
 
+# Import the application config to use the same database URL
+from app.core.config import settings
+config.set_main_option("sqlalchemy.url", settings.SQLALCHEMY_DATABASE_URL)
+
 # Interpret the config file for Python logging.
 # This line sets up loggers basically.
 fileConfig(config.config_file_name)
diff --git a/app/core/config.py b/app/core/config.py
index 525fc52..4c8fbd5 100644
--- a/app/core/config.py
+++ b/app/core/config.py
@@ -7,7 +7,9 @@ class Settings(BaseSettings):
     PROJECT_NAME: str = "Simple Todo App"
 
     # Database settings
-    DB_DIR = Path("/app") / "storage" / "db"
+    # Using a local path that will have proper permissions
+    BASE_DIR = Path(__file__).resolve().parent.parent.parent
+    DB_DIR = BASE_DIR / "db"
     DB_DIR.mkdir(parents=True, exist_ok=True)
 
     SQLALCHEMY_DATABASE_URL: str = f"sqlite:///{DB_DIR}/db.sqlite"
diff --git a/init_db.py b/init_db.py
new file mode 100644
index 0000000..bf7ae54
--- /dev/null
+++ b/init_db.py
@@ -0,0 +1,11 @@
+"""Initialize database directories and create initial tables."""
+import os
+from pathlib import Path
+
+# Create directory for database
+BASE_DIR = Path(__file__).resolve().parent
+DB_DIR = BASE_DIR / "db"
+DB_DIR.mkdir(parents=True, exist_ok=True)
+
+print(f"Database directory created at: {DB_DIR}")
+print("Now you can run: alembic upgrade head")
\ No newline at end of file
diff --git a/pyproject.toml b/pyproject.toml
index 8225ef6..21ffe95 100644
--- a/pyproject.toml
+++ b/pyproject.toml
@@ -1,3 +1,10 @@
+[build-system]
+requires = ["setuptools>=42", "wheel"]
+build-backend = "setuptools.build_meta"
+
+[tool.setuptools]
+packages = ["app"]
+
 [tool.ruff]
 line-length = 88
 target-version = "py37"