Slice vanilla bean in half lengthwise (so the paste is showing) and then into small pieces width-wise.
Either, place vanilla bean pieces on a tray in a toaster oven for a few minutes, stirring it on occasion and being sure to watch it carefully so it doesn't burn. Or put vanilla bean pieces in a skillet over medium-low heat and cook, stirring on occasion, for about 2 minutes, until fragrant. You'll know it's done when the bean emits a yummy toasted vanilla fragrance.
Put water and sugar in a medium saucepan and bring to a boil. Lower heat, add toasted vanilla bean pieces, and let mixture simmer for about 10 minutes until sugar is completely dissolved and mixture has thickened a bit.
Pour syrup into a heat-proof bowl or mason jar and let cool. Syrup will thicken more as it cools. I recommend keeping vanilla bean pieces in syrup to continue infusing flavor. Just filter out before using.