In an excerpt from his annual letter to investors published in Fortune today, Warren Buffett extols the virtues of value investing. While that advice might seem rather old hat coming from a legendary value investor like Buffett, this time he’s pointing to his real estate investments rather than his stock and bond investments.

Warren Buffett Continues To Preach Value - Even In Real Estate

The farm — buying when markets are down

The first real estate purchase Buffett discusses in his letter in a farm he bought back in 1986 after the farm bubble of the late 70s and early 80s burst and prices tumbled by as much as 50%.

“In 1986, I purchased a 400-acre farm, located 50 miles north of Omaha, from the FDIC. It cost me $280,000, considerably less than what a failed bank had lent against the farm a few years earlier. I knew nothing about operating a farm. But I have a son who loves farming, and I learned from him both how many bushels of corn and soybeans the farm would produce and what the operating expenses would be. From these estimates, I calculated the normalized return from the farm to then be about 10%. I also thought it was likely that productivity would improve over time and that crop prices would move higher as well. Both expectations proved out.”

Buffett bought NYC retail property after commercial real estate bubble burst

The second example Buffett mentions is his purchase of a prime piece of retail property close to NYU back in 1993 when the commercial real estate market was bottoming out after a big boom.

“Here, too, the analysis was simple. As had been the case with the farm, the unleveraged current yield from the property was about 10%. But the property had been undermanaged by the RTC, and its income would increase when several vacant stores were leased. Even more important, the largest tenant — who occupied around 20% of the project’s space — was paying rent of about $5 per foot, whereas other tenants averaged $70. The expiration of this bargain lease in nine years was certain to provide a major boost to earnings. The property’s location was also superb: NYU wasn’t going anywhere.”

Buffett’s two fundamental investing principles

Slow and steady wins the race — Buffett returns to his theme of long-term investing in this year’s letter to investors. His advice? “Keep things simple and don’t swing for the fences. When promised quick profits, respond with a quick “no.”

Focus on future productivity — Buffett’s second fundamental investing principle is to avoid speculation and make investing decisions based on the future return of an asset. He says, “If you don’t feel comfortable making a rough estimate of the asset’s future earnings, just forget it and move on.”