In a saucepan over medium heat, combine sugar and water. Stir until sugar dissolves, then let it cook without stirring until it turns a golden caramel color.
Pour the caramel into a flan mold, swirling to coat the bottom evenly. Let it cool.
In a blender, combine sweetened condensed milk, evaporated milk, eggs, and vanilla. Blend until smooth.
Pour the mixture into the caramel-coated mold. Cover tightly with aluminum foil.
Place the mold in a larger baking dish and fill it with hot water halfway up the sides (bain-marie method).
Bake at 350°F (175°C) for 60 minutes, or until set.
Remove from the oven and let it cool to room temperature. Then refrigerate for at least 2 hours.
To serve, run a knife around the edges and invert onto a plate to release the caramel.
Notes
For a twist, add a splash of rum or orange zest to the flan mixture for extra flavor!