The Farm of Omaha.
Of all the investments Warren Buffett could use to explain investing, he picked two rather ordinary ones.
A 400-acre farm in Nebraska.
And a retail property next to NYU.
Neither was a stock. Neither required some brilliant new technology or complicated financial model.
Yet Buffett said both should remain “solid and satisfactory” investments not only for his lifetime, but for his children and grandchildren — with income that would probably keep growing for decades.
That’s quite a vote of confidence from a man with a fairly decent investing résumé.
So what made these two investments so durable?
The answer starts with $280,000, 400 acres of farmland, and some surprisingly simple math⇩
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1 The Farm.
Buffett was pretty open about his agricultural credentials:
“I knew nothing about operating a farm.”
Fortunately, he didn’t need to.
His son understood farming, so the two worked through the numbers that actually mattered — how much corn and soybeans the land could produce, what it cost to operate, and what was left over.
The math put the farm’s normalized return at roughly 10%.
Buffett also figured productivity would improve and crop prices would rise over time.
Both did.
By 2014, the farm was earning 3× as much and was worth 5× what Buffett had paid.
The lesson: Buffett wasn’t betting on what someone might pay for the farm years later. He was looking at what the land could produce today — and whether that production justified the $280,000 price tag.
The long-term case helped too.
People still need to eat, which gives farmland unusually durable demand. And when food prices rise with inflation, farmland values have historically tended to rise with them.
The appreciation was nice.
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2 Seven Years Later
In 1993, Buffett found himself in familiar territory.
Another bubble had burst. This time, it was commercial real estate.
A retail property next to NYU had landed with the Resolution Trust Corporation, and the numbers caught Buffett’s attention.
The starting yield was roughly 10% — without using any debt.
But there was more hiding underneath.
The property had been poorly managed, with stores sitting vacant. Filling that space alone could increase the income without requiring much else to go right.
✱ And then Buffett spotted something even better.
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The $5 Rent?
→ Largest tenant — ~20% of the property — $5/sq. ft.
Rent locked in under an old lease
→ Other tenants, average — $70/sq. ft.
Roughly 14× higher
And that’s where the upside got considerably more interesting.
The property’s largest tenant occupied roughly 20% of the space — while paying just $5 per square foot.
Everyone else averaged around $70.
The catch was time: the bargain lease still had nine years left.
But Buffett wasn’t exactly in a hurry.
Once it expired, he expected bringing that space closer to market rates to deliver what he called “a major boost to earnings.”
Then there was one part of the investment that required considerably less math:
“NYU wasn’t going anywhere.”
And Then the Rent Checks Arrived↓
The investment did considerably more than work out.
Annual distributions eventually grew to more than 35% of Buffett’s original investment. And two refinancings — in 1996 and 1999 — produced additional distributions totaling more than 150% of the original equity.
In other words, Buffett had already received more than his initial investment back through the refinancings alone — while still owning his stake in the property.
After years of collecting distributions from a property he’d analyzed, bought and held, Buffett wrote:
“I’ve yet to view the property.”
Apparently, the numbers had already told him enough.
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