This will be short, as it's just a copy of these instructions at Vanilla Review. It felt pretty cool to make homemade vanilla, it took only a short time and wasn't at all expensive.
Vanilla beans in stores can be $5 each, so you would need a small fortune if you wanted to make some serious extract working with what's available in your local store. After reading a few tips, I looked at the offerings on eBay and found something that looked decent: 30 organic beans for $23 Cdn. And when they arrived there was a bonus pack of 10 more. I chose grade A, but apparently grade B provide more flavour by weight, so if you're buying by the pound go for that option.
Slice beans lengthwise, and scrape out the inner "caviar". Stick caviar and bean husk in alcohol, shake like a hot-damn, let sit for several weeks, and you're good to go. Use 6-8 beans per cup of alcohol. I used vodka, as it's a more neutral alcohol, but it might be fun to try other flavoured alcohols. On the advice of the instructions I chopped the bean husks up, to allow for better flavour extraction. Done and done. Ceramic cutting board (our wooden ones would have absorbed so much vanilla flavour, I thought), knife, bottle, vodka, beans.
You can't really see, but the vanilla stuff is just under halfway to the top of the alcohol.