In a medium saucepan, combine the water and granulated sugar. Heat over medium heat, stirring until the sugar fully dissolves.

Add the ground coffee to the sugar water and bring it to a gentle simmer.

Let the coffee syrup simmer for about 30 minutes.

Strain the mixture through a fine mesh sieve or cheesecloth to remove the coffee grounds.

Stir in the vanilla extract while the syrup is still warm.

Once the syrup has cooled slightly, mix in the vodka.

Using a funnel if necessary, pour your Kahlua into clean glass bottles. Seal tightly.

Allow the Kahlua to rest for at least 24 hours before using.