‘No downside’: Warren Buffett trusts 2 key assets for his grandkids — and says the income will likely jump for decades

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Warren Buffett is best known as one of the greatest stock market investors of all time.

But some of the investments he has spoken most glowingly about aren't stocks at all.

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In a letter to Berkshire Hathaway (NYSE: BRK.B) shareholders, Buffett reflected on two personal investments he had made decades earlier — both far outside his usual world of publicly traded companies.

While not as famous as Berkshire's stock holdings, Buffett has expressed unwavering confidence in these investments.

"The two investments will be solid and satisfactory holdings for my lifetime and, subsequently, for my children and grandchildren," he wrote (1).

He also projected that the income from the two investments "will probably increase in the decades to come."

The answer reveals a lot about how the legendary investor thinks about building wealth that can last for generations.

The first opportunity appeared in 1986, after a bubble in asset prices had burst in the Midwest.

Buffett paid $280,000 for a 400-acre property about 50 miles north of Omaha — considerably less than the amount a failed bank had previously lent against it.

The Oracle of Omaha admitted that he "knew nothing" about operating a farm. But his son had a passion for farming, and Buffett was able to learn about the farm's production of corn and soybeans and its operating expenses.

Buffett then calculated that the normalized return from the farm would be 10%. He also believed that productivity would likely improve over time and that crop prices would increase. He highlighted that "both expectations proved out."

It didn't seem to be a hard decision to make, as he remarked, "I needed no unusual knowledge or intelligence to conclude that the investment had no downside and potentially had substantial upside."

That confidence paid off. Buffett noted that the farm had tripled its earnings by 2014 and was worth five times more than what he paid.