Pour the water in a medium heavy-bottom sauce pot. Place over medium heat and add the sugar. Watch closely while the sugar dissolves and darken, 5-10 minutes.
The moment the sugar darkens to your desired color (somewhere between golden-brown and medium brown) remove from the heat and whisk in the heavy cream. *Darker caramels are really flavorful, but don't let the sugar get too dark, or you'll have to start over.
Once the cream is incorporated, stir in the butter, salt and vanilla until smooth. Serve warm, or jar and refrigerate until ready to use.