Pour the water and milk in a saucepan, and heat on the stove till quite hot but not boiling. Pour this liquid into a large bowl and add the butter. Stir till the butter is melted. Then add in the sugar and stir till the sugar dissolves. Let this mixture cool down till it is lukewarm, so that the yeast will proof. If it is too hot, it will kill the yeast and curdle the egg.