That way should work. I have not done it that way personally since I just let the installer throw it wherever it wants and then manually rename the database later. That's more involved since you need to update footprints-environment.properties, but I do it this way since I also change the SQL login passwords at the same time, so it doesn't add any work for me, just renaming it.
Also, you can use the same SQL logins for multiple FP databases:
That's my general preference unless you absolutely want to have different SQL passwords for each environment.
You can create a database and have the installer use that database.