01 - Preheat oven to 350°F. Position the rack in the center of the oven.
02 - Combine granulated sugar and water in a medium saucepan. Cook over medium heat without stirring until the sugar dissolves and turns a deep golden amber color, approximately 8 to 10 minutes. Immediately pour the hot caramel into a 9-inch round cake pan or flan mold, tilting and swirling to coat the bottom evenly. Work quickly as the caramel hardens fast.
03 - Place the softened cream cheese, sweetened condensed milk, evaporated milk, eggs, and vanilla extract into a blender. Blend on medium speed until the mixture is completely smooth and no lumps remain, scraping down the sides as needed.
04 - Pour the blended custard mixture gently over the set caramel in the prepared pan. Use a spatula to spread evenly if needed.
05 - Place the flan pan inside a larger baking dish. Carefully pour hot water into the outer dish until it reaches halfway up the sides of the flan pan, creating a bain-marie for gentle, even cooking.
06 - Bake in the preheated oven for 1 hour, or until the center is just set and a thin knife inserted into the middle comes out clean. The edges should be lightly golden while the center retains a slight jiggle.
07 - Remove from the oven and the water bath. Allow the flan to cool completely to room temperature, then cover with plastic wrap and refrigerate for at least 3 hours, preferably overnight, until fully chilled and set.
08 - Run a thin knife around the edges of the pan to loosen the flan. Place a serving plate upside down over the pan, then quickly invert. Allow a few seconds for the flan to release and the caramel sauce to drizzle over the top.