FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                Quarterly Report Pursuant to Section 13 or 15 (d)
                     of the Securities Exchange Act of 1934

For the Quarter Ended                             Commission File Number
June 30, 1996                                              0-13331


             REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
            (Exact Name of Registrant as specified in its Charter)

Delaware                                     16-1234990
--------------------                         -----------------------------------
(State of Formation)                         (IRS Employer Identification No.)

2350 North Forest Road
Suite 12-A
Getzville, New York  14068
(Address of Principal Executive Office)

Registrant's Telephone Number:      (716) 636-0280


Indicate  by a check mark  whether the  Registrant:  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities  Exchange Act of
1934  during the  preceding  12 months (or for such  shorter  period  that the
Registrant  was  required to file such  reports),  and (2) has been subject to
such filing requirements for the past 90 days.  Yes   X        No
                                                    ----          ----

Indicate by a check mark if disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-K is not contained herein,  and will not be contained,  to
the best of the  registrant's  knowledge,  in definitive  proxy or information
statements  incorporated  by  reference  in part III of this  Form 10-Q or any
amendment to this Form 10-Q.   (X)

As of June 30, 1996, the issuer had 15,551 units of limited partnership interest
outstanding.



<PAGE>


               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III

                                      INDEX



                                                                       PAGE NO.
                                                                       --------
PART I:     FINANCIAL INFORMATION
-------     ---------------------

            Balance Sheets -
                  June 30, 1996 and December 31, 1995                     3

            Statements of Operations -
                  Three Months Ended June 30, 1996 and 1995               4

            Statements of Operations -
                  Six Months Ended June 30, 1996 and 1995                 5

            Statements of Cash Flows -
                  Six Months Ended June 30, 1996 and 1995                 6

            Statements of Partners' (Deficit) Capital -
                  Six Months Ended June 30, 1996 and 1995                 7

            Notes to Financial Statements                               8 - 19


PART II:    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
--------    FINANCIAL CONDITION AND RESULTS OF OPERATIONS              20 - 21
            --------------------------------------------- 




















                                      -2-

<PAGE>

              REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
                                 BALANCE SHEETS
                       June 30, 1996 and December 31, 1995
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                            June 30,       December 31,
                                                              1996            1995
                                                              ----            ----

<S>                                                      <C>              <C>   
ASSETS
------

Property, at cost:
     Land                                                $  1,410,000     $  1,410,000
     Buildings and improvements                            17,232,630       17,238,605
     Furniture and fixtures                                 2,275,548        2,275,548
                                                         ------------     ------------
                                                           20,918,178       20,924,153
     Less accumulated depreciation                          9,638,598        9,283,886
                                                         ------------     ------------
          Property, net                                    11,279,580       11,640,267

Investment in joint venture                                   147,699          167,321

Cash                                                             --               --
Cash - security deposits                                       54,800           53,989
Accounts receivable, net of allowance for doubtful
     accounts of $895,282 and $800,839, respectively            8,473           21,238
Other assets                                                  633,205          520,876
                                                         ------------     ------------

             Total Assets                                $ 12,123,757     $ 12,403,691
                                                         ============     ============


LIABILITIES AND PARTNERS' (DEFICIT)
-----------------------------------

Liabilities:
     Cash overdraft                                      $    141,299     $     36,921
     Mortgages payable                                     10,168,100       10,276,248
     Accounts payable and accrued expenses                    972,942          777,976
     Accounts payable - affiliates                          1,182,484        1,258,243
     Accrued interest                                          95,059           88,868
     Security deposits and prepaid rents                      313,935          269,591
                                                         ------------     ------------
             Total Liabilities                             12,873,819       12,707,847
                                                         ------------     ------------

Partners' (Deficit) Capital:
     General partners                                        (440,776)        (427,399)
     Limited partners                                        (309,286)         123,243
                                                         ------------     ------------
            Total Partners' (Deficit)                        (750,062)        (304,156)
                                                         ------------     ------------

            Total Liabilities and Partners' (Deficit)    $ 12,123,757     $ 12,403,691
                                                         ============     ============
</TABLE>


                        See notes to financial statements


                                       -3-


<PAGE>
              REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
                            STATEMENTS OF OPERATIONS
                    Three Months Ended June 30, 1996 and 1995
                                   (Unaudited)

                                                     Three Months  Three Months
                                                        Ended          Ended
                                                       June 30,       June 30,
                                                         1996           1995
                                                         ----           ----
Income:
     Rental                                         $ 1,019,899     $ 1,149,863
     Interest and other income                           43,687          68,757
                                                    -----------     -----------
     Total income                                     1,063,586       1,218,620
                                                    -----------     -----------

Expenses:
     Property operations                                594,105         874,444
     Interest:
          Paid to affiliates                             37,241          21,574
          Other                                         192,180         283,941
     Depreciation and amortization                      185,774         194,503
     Administrative:
          Paid to affiliates                             75,729         146,300
          Other                                         137,019         118,805
                                                    -----------     -----------
     Total expenses                                   1,222,048       1,639,567
                                                    -----------     -----------

Loss before allocated loss from joint venture          (158,462)       (420,947)

Allocated loss from joint venture                       (16,097)        (17,965)
                                                    -----------     -----------

Net loss                                            $  (174,559)    $  (438,912)
                                                    ===========     ===========

Loss per limited partnership unit                   $    (10.89)    $    (27.38)
                                                    ===========     ===========

Distributions per limited partnership unit          $      --       $      --
                                                    ===========     ===========

Weighted average number of
     limited partnership units
     outstanding                                         15,551          15,551
                                                    ===========     ===========







                         See notes to financial statements

                                       -4-


<PAGE>

               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III


                            STATEMENTS OF OPERATIONS
                     Six Months Ended June 30, 1996 and 1995
                                   (Unaudited)

                                                    Six Months       Six Months
                                                      Ended            Ended
                                                     June 30,         June 30,
                                                       1996             1995
                                                       ----             ----
Income:
     Rental                                         $ 2,055,648     $ 2,256,624
     Interest and other income                          138,490         125,717
                                                    -----------     -----------
     Total income                                     2,194,138       2,382,341
                                                    -----------     -----------

Expenses:
     Property operations                              1,205,978       1,545,998
     Interest:
          Paid to affiliates                             72,828          40,611
          Other                                         564,730         613,239
     Depreciation and amortization                      372,676         372,615
     Administrative:
          Paid to affiliates                            145,110         257,306
          Other                                         259,100         284,937
                                                    -----------     -----------
     Total expenses                                   2,620,422       3,114,706
                                                    -----------     -----------

Loss before allocated loss from joint venture          (426,284)       (732,365)

Allocated loss from joint venture                       (19,622)        (42,571)
                                                    -----------     -----------

Net loss                                            $  (445,906)    $  (774,936)
                                                    ===========     ===========

Loss per limited partnership unit                   $    (27.81)    $    (48.34)
                                                    ===========     ===========

Distributions per limited partnership unit          $      --       $      --
                                                    ===========     ===========

Weighted average number of
     limited partnership units
     outstanding                                         15,551          15,551
                                                    ===========     ===========




                        See notes to financial statements

                                       -5-

<PAGE>
               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
                            STATEMENTS OF CASH FLOWS
                     Six Months Ended June 30, 1996 and 1995
                                   (Unaudited)
                                                         Six Months   Six Months
                                                           Ended        Ended
                                                          June 30,     June 30,
                                                            1996         1995
                                                            ----         ----
Cash flow from operating activities:
     Net loss                                           $(445,906)    $(774,936)

Adjustments to reconcile net loss to net cash
   provided by (used in)  operating activities:
     Depreciation and amortization                        372,676       372,615
     Loss from joint venture                               19,622        42,571
Changes in operating assets and liabilities:
     Cash - security deposits                                (811)        2,543
     Accounts receivable                                   12,765        13,501
     Other assets                                        (130,293)     (124,934)
     Accounts payable and accrued expenses                194,966       247,162
     Accrued interest                                       6,191          --
     Security deposits and prepaid rent                    44,344        30,548
                                                        ---------     ---------
Net cash provided by (used in) operating activities        73,554      (190,930)
                                                        ---------     ---------

Cash flow from investing activities:
     Capital expenditures                                   5,975          --
     Distributions from joint venture                        --            --
                                                        ---------     ---------
Net cash provided by investing activities                   5,975          --
                                                        ---------     ---------

Cash flows from financing activities:
     Cash overdraft                                       104,378          --
     Accounts payable - affiliates                        (75,759)      292,310
     Principal payments on mortgages and notes           (108,148)     (107,777)
     Distributions to partners                               --            --
                                                        ---------     ---------
Net cash (used in) provided by financing activities       (79,529)      184,533
                                                        ---------     ---------

Increase (decrease) in cash                                  --          (6,397)

Cash - beginning of period                                   --           8,534
                                                        ---------     ---------

Cash - end of period                                    $    --       $   2,137
                                                        =========     =========


Supplemental Disclosure of Cash Flow Information:
     Cash paid for interest                             $ 558,539     $ 580,378
                                                        =========     =========

                        See notes to financial statements

                                       -6-

<PAGE>

              REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
                    STATEMENTS OF PARTNERS' (DEFICIT) CAPITAL
                     Six Months Ended June 30, 1996 and 1995
                                   (Unaudited)


                                         General             Limited Partners
                                        Partners
                                         Amount           Units         Amount
                                         ------           -----         ------
Balance, January 1, 1995           $  (385,610)          15,551     $ 1,474,437

Net loss                               (23,248)            --          (751,688)
                                   -----------      -----------     -----------

Balance, June 30, 1995             $  (408,858)          15,551     $   722,749
                                   ===========      ===========     ===========


Balance, January 1, 1996           $  (427,399)          15,551     $   123,243

Net loss                               (13,377)            --          (432,529)
                                   -----------      -----------     -----------

Balance, June 30, 1996             $  (440,776)          15,551     $  (309,286)
                                   ===========      ===========     ===========


























                        See notes to financial statements



                                       -7-


<PAGE>

               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
                          NOTES TO FINANCIAL STATEMENTS
                     Six Months Ended June 30, 1996 and 1995
                                   (Unaudited)


1.    GENERAL PARTNER'S DISCLOSURE

     In the opinion of the  General  Partners  of  Realmark  Property  Investors
     Limited   Partnership   III,  all   adjustments   necessary  for  the  fair
     presentation  of  the   Partnership's   financial   position,   results  of
     operations,  and  changes in cash  flows for the six months  ended June 30,
     1996 and 1995 have been made in the  financial  statements.  The  financial
     statements are unaudited and subject to any year-end  adjustments which may
     be necessary.

2.   FORMATION AND OPERATION OF PARTNERSHIP

     Realmark Property Investors Limited Partnership III (the "Partnership"),  a
     Delaware Limited Partnership,  was formed November 18, 1983, to invest in a
     diversified portfolio of income-producing real estate.

     In February 1984 the Partnership  commenced the public offering of units of
     limited partnership interest.  Other than matters relating to organization,
     it had no  business  activities  and,  accordingly,  had not  incurred  any
     expenses  or earned any income  until the first  interim  closing  (minimum
     closing) of the offering which occurred April 26, 1984. All items of income
     and expense arose subsequent to this date. On January 31, 1985 the offering
     was concluded,  at which time 15,551 units of limited partnership  interest
     were  outstanding.  The General Partners are Realmark  Properties,  Inc., a
     Delaware  corporation,  the corporate  General  Partner,  and Mr. Joseph M.
     Jayson,  the  individual  General  Partner.  Joseph  M.  Jayson is the sole
     shareholder of J.M. Jayson & Company,  Inc. (JMJ) and Realmark  Properties,
     Inc. is a wholly-owned subsidiary of J.M. Jayson & Company, Inc.

     Under the Partnership  agreement,  the General  Partners and affiliates can
     receive  compensation for services  rendered and reimbursement for expenses
     incurred on behalf of the Partnership.













                                       -8-

<PAGE>

      FORMATION AND OPERATION OF PARTNERSHIP  (CONTINUED)

     Net  income  or  loss  arising  from  the  sale  or  refinancing  shall  be
     distributed  first to the limited partners in an amount  equivalent to a 7%
     return on the average of their adjusted capital  contributions,  then in an
     amount  equal to their  capital  contributions,  then an amount equal to an
     additional 5% of the average of their adjusted capital  contributions after
     the general  partners receive a disposition fee, then to all partners in an
     amount equal to their respective positive capital balances, and finally, in
     the ratio of 87% to the limited partners and 13% to the general partners.

     Partnership  income or loss not arising from sale or  refinancing  shall be
     allocated 97% to the limited partners and 3% to the general partners.

3.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Cash
     ----

     For purposes of reporting  cash flows,  cash includes the following  items:
     cash on hand; cash in checking; and money market savings.

     Cash - security deposits
     ------------------------

     Cash - security  deposits  represents  cash on deposit in  accordance  with
     terms  of  a  U.S.  Department  of  Housing  and  Urban  Development  (HUD)
     regulatory  agreement  for  multi-family  housing  projects  under  Section
     223(f).

     Property and depreciation
     -------------------------

     Depreciation is provided using the straight-line  method over the estimated
     useful lives of the respective  assets.  Expenditures  for  maintenance and
     repairs are expensed as incurred,  and major renewals and  betterments  are
     capitalized.  The  Accelerated  Cost Recovery  System are used to calculate
     depreciation expense for tax purposes.

     Rental income
     -------------

     Leases  for  residential  properties  have  terms  of  one  year  or  less.
     Commercial leases generally have terms of one to five years.  Rental income
     is recognized on the straight-line method over the term of the lease.








                                       -9-

<PAGE>

     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Investment in Joint Venture
     ---------------------------

     The interest in joint venture is accounted for on the equity method.

4.   ACQUISITION AND DISPOSITION OF RENTAL PROPERTY

     In August 1984 the Partnership  acquired a 112 unit apartment complex (Bryn
     Mawr) located in Ypsilanti,  Michigan for a purchase  price of  $1,833,554,
     which included  $134,857 in acquisition  fees. In 1985 the acquisition fees
     related  to  the  purchase  of  Bryn  Mawr  were  reduced  by  $18,600  and
     reallocated to properties by the Partnership that year.

     In August 1986 the Bryn Mawr Apartments  were sold for $3,110,000.  The net
     cash proceeds of  approximately  $667,000 from the sale were distributed to
     the investors on a pro rata basis.  The  Partnership  recognized a gain for
     financial  statement purposes of $1,475,313.  For income tax purposes,  the
     gain will be recognized under the installment sale method.

     In February  1985 the  Partnership  acquired a 190 unit  apartment  complex
     (Castle Dore) in Indianapolis,  Indiana for a purchase price of $4,601,233,
     which included acquisition fees of $414,279.

     In February  1985 the  Partnership  acquired a 208 unit  apartment  complex
     (Parc  Bordeaux)  in   Indianapolis,   Indiana  for  a  purchase  price  of
     $2,845,064, which included acquisition fees of $371,233.

     In December 1988 the Partnership  sold Parc Bordeaux  Apartments for a sale
     price  of  $5,300,000  which  generated  a total  net  gain  for  financial
     statement purposes of $2,338,067. For income tax purposes, the gain will be
     recognized under the installment sale method.

     In  June  1985  the  Partnership  acquired  a 200  unit  apartment  complex
     (Williamsburg South Apartments) in Atlanta, Georgia for a purchase price of
     $5,138,745, which included acquisition fees of $368,745.

     In August 1985 the Partnership acquired a 38,500 square foot office complex
     (Perrymont) in Pittsburgh, Pennsylvania for a purchase price of $2,078,697,
     which included acquisition fees of $168,697.
















                                      -10-

<PAGE>

     ACQUISITION AND DISPOSITION OF RENTAL PROPERTY (CONTINUED)

     In  October  1985 the  Partnership  acquired a 130 unit  apartment  complex
     (Pleasant  Run) in  Cincinnati,  Ohio for a purchase  price of  $3,434,728,
     which included acquisition fees of $267,228.

     In December  1985 the  Partnership  acquired a 280 unit  apartment  complex
     (Ambassador Towers, formerly Cedar Ridge) in Monroeville,  Pennsylvania for
     a  purchase  price  of  $6,766,424,  which  included  acquisition  fees  of
     $646,424.

5.   INVESTMENT IN JOINT VENTURES

     In April 1985 the  Partnership  entered  into an  agreement  and formed the
     Inducon  Joint  Venture - Amherst  (the  Joint  Venture),  for the  primary
     purpose of constructing office/warehouse buildings in Erie County, New York
     as income producing property. The site is part of the Amherst Foreign Trade
     Zone.  This is U.S.  Customs  Territory  under federal  supervision,  where
     foreign and domestic  merchandise  is brought for  storage,  manufacturing,
     salvage,  repair, exhibit,  repacking,  relabeling or re-export.  Under the
     terms of the joint venture agreement,  the Partnership supplied $545,000 of
     capital to acquire the land and undertake  initial  development  of Phase I
     and $275,000 for Phase II. The other Joint Venturer delivered and completed
     on behalf of the Joint Venture all plans,  specifications,  maps,  surveys,
     accounting pro-formas for construction, initial leasing and operations, and
     cost estimates with respect to development.

     Ownership of the Joint Venture is divided  equally  between the Partnership
     and the other Joint Venturer. The Joint Venture agreement provides that the
     Partnership will be allocated 95% of any income or loss.

     Net cash flow from the Joint Venture is to be distributed as follows:

     To the  Partnership  until  has  received  a return  of 7% per annum on its
     underwritten  syndicated  equity. To the extent a 7% return is not received
     from year to year, it will accrue and be paid from the next  available cash
     flow.

     To the  other  Joint  Venturer  in an  amount  equal  to  that  paid to the
     Partnership. No amount will accumulate in favor of the other investor.

     Any remaining amount will be divided equally.











                                      -11-

<PAGE>

     INVESTMENT IN JOINT VENTURES  (CONTINUED)

     To the extent there are net proceeds  from any sale or  refinancing  of the
     subject  property,  the  proceeds  will be paid in the  following  order of
     priority:

     To  the  Partnership  to  the  extent  the 7%  per  annum  returned  on its
     underwritten equity is unpaid.

     Next to the  Partnership  until it has  received  an overall 9%  cumulative
     return on its underwritten equity.

     Next to the Partnership  until it has received an amount equal to its total
     underwritten  equity,  reduced by any prior distribution of sale, financing
     or refinancing proceeds.

     Next to the  Partnership  until it has received a  cumulative  20% per year
     return on its total underwritten equity.

     Thereafter   any  remaining  net  proceeds  will  be  divided  50%  to  the
     Partnership and 50% to the other joint venturer.

     A summary of the assets, liabilities and capital of the joint venture as of
     June 30, 1996 and December 31, 1995 and the results of its  operations  for
     the six months ended June 30, 1996 and 1995 is as follows:


























                                      -12-

<PAGE>

                         INDUCON JOINT VENTURE - AMHERST
                                 BALANCE SHEETS
                       June 30, 1996 and December 31, 1995
<TABLE>
<CAPTION>

                                                              June 30,    December 31,
                                                                 1996           1995
                                                                 ----           ----
<S>                                                          <C>           <C>    
ASSETS
------

Property, at cost:
     Land                                                    $  177,709    $  177,709
     Land improvements                                          221,399       221,399
     Buildings and improvements                               3,070,246     3,072,913
     Equipment                                                    8,466         8,466
     Furniture and fixtures                                       2,101         2,101
                                                             ----------    ----------
                                                              3,479,921     3,482,588
     Less accumulated depreciation                            1,138,551     1,074,688
                                                             ----------    ----------
          Property, net                                       2,341,370     2,407,900

Cash and cash equivalents                                       176,029       157,789
Other assets                                                     31,276        39,925
Deferred debt expense, net of accumulated
     amortization of $280,396 and $273,372, respectively         41,545        28,841
                                                             ----------    ----------

                   Total Assets                              $2,590,220    $2,634,455
                                                             ==========    ==========


LIABILITIES AND PARTNERS' CAPITAL
---------------------------------

Liabilities:
     Bonds payable                                           $2,040,000    $2,040,000
     Mortgage payable                                           286,655       292,033
     Accounts payable and accrued expenses                       67,073        87,679
     Accounts payable - affiliates                               34,310        31,906
                                                             ----------    ----------
                   Total Liabilities                          2,428,038     2,451,618
                                                             ----------    ----------

Partners' Capital:
     The Partnership                                            147,699       167,321
     Other joint venturer                                        14,483        15,516
                                                             ----------    ----------
                  Total Partners' Capital                       162,183       182,837
                                                             ----------    ----------

                  Total Liabilities and Partners' Capital    $2,590,220    $2,634,455
                                                             ==========    ==========


</TABLE>




                                      -13-


<PAGE>

                         INDUCON JOINT VENTURE - AMHERST
                            STATEMENTS OF OPERATIONS
                     Six Months Ended June 30, 1996 and 1995

                                                         Six Months   Six Months
                                                           Ended        Ended
                                                          June 30,     June 30,
                                                            1996         1995
                                                            ----         ----
Income:
     Rental                                             $ 223,580     $ 204,321
     Interest and other income                              4,942         5,138
                                                        ---------     ---------
     Total income                                         228,522       209,459
                                                        ---------     ---------

Expenses:
     Property operations                                   49,415        59,596
     Interest                                              93,497        91,894
     Depreciation and amortization                         85,034        87,556
     Administrative                                        21,230        15,225
                                                        ---------     ---------
     Total expenses                                       249,176       254,271
                                                        ---------     ---------

Net loss                                                $ (20,654)    $ (44,812)
                                                        =========     =========


Allocation of net loss:

     The Partnership                                    $ (19,622)    $ (42,571)
     Other Joint Venturer                                  (1,033)       (2,241)
                                                        ---------     ---------

                                                        $ (20,654)    $ (44,812)
                                                        =========     =========


A reconciliation  of the  Partnership's  investment in the joint venture for the
six month periods ended June 30, 1996 and 1995 is as follows:

                                                            1996          1995
                                                            ----          ----


Investment in joint venture - beginning of period       $ 167,321     $ 261,019
Allocated loss                                            (19,622)      (42,571)
                                                        ---------     ---------

Investment in joint venture - end of period             $ 147,699     $ 218,448
                                                        =========     =========





                                      -14-

<PAGE>

6.   MORTGAGES AND NOTES PAYABLE

     Castle Dore
     -----------

     A  mortgage  of  $2,144,384  and  $2,197,403  at June 30,  1996  and  1995,
     respectively,  bearing interest at 7.50%. The mortgage  provides for annual
     principal  and  interest  payments  of  $216,026  payable in equal  monthly
     installments through September 1, 2014. The carrying amount of the mortgage
     of  $1,556,102  and  $1,570,627  at June 30,  1996 and 1995,  respectively,
     reflects an unamortized  mortgage discount of $588,282 and $626,776 at June
     30,  1996 and  1995,  respectively.  The  discount  is based on an  imputed
     interest rate of 12.5% and will be amortized using the interest method over
     the remaining term of the mortgage.

     Williamsburg
     ------------

     A 12.85% mortgage which provides for annual principal and interest payments
     of $341,602  payable in equal monthly  installments  through December 1999.
     The mortgage had a balance of $2,412,875 at June 30, 1996.

     Perrymont
     ---------

     A mortgage  which  provides  for  interest  rates and monthly  installments
     through December 1998 as follows:

             Year            Rate         Payment
             ----            ----         -------

             1995            7.50%        $   7,907  (Interest only)
             1996            7.875%       $   9,660  (Principal and interest)
             1997 - 1998     8.50%        $   10,187 (Principal and interest)

     The  outstanding  balance  at June  30,  1996  and  1995  respectively  was
     $1,265,185 (to date no principal has been paid).

     Pleasant Run
     ------------

     A 10% mortgage with a balance of $2,211,259 at June 30, 1996, providing for
     annual principal and interest payments of $245,349 payable in equal monthly
     installments, with the remaining balance due August 1, 1998.










                                      -15-

<PAGE>

     MORTGAGES AND NOTES PAYABLE (CONTINUED)

     Ambassador Towers (formerly Cedar Ridge)
     ----------------------------------------

     A mortgage  with a balance of  $494,542  and  $561,513 at June 30, 1996 and
     1995,  respectively,  bearing interest at 7.75%. The mortgage  provides for
     monthly principal and interest payments of $8,980 through April 1, 2002.

     A mortgage with a balance of $1,232,902 and $1,477,232 at June 30, 1996 and
     1995,  respectively,  bearing interest at 8.75%. The mortgage  provides for
     monthly principal and interest payments of $20,455 through October 1, 2003.

     A mortgage  with a balance of $995,235 and  $1,000,000 at June 30, 1996 and
     1995,  respectively which provides for interest payments at prime rate plus
     2% (10.25% at June 30, 1996).  The mortgage was originally due in September
     1994,  but in September  1995 the General  Partner  negotiated an extension
     until May 1996. The  Partnership  has been utilizing a temporary  extension
     while it seeks refinancing for the loan.

     The  aggregate  maturities of the mortgages for each of the next five years
     and thereafter are as follows:

             Year                         Amount
             ----                         ------

             1996                         $   1,319,177
             1997                               349,132
             1998                             2,525,632
             1999                             3,849,622
             2000                                74,225
             Thereafter                       2,925,584
                                           ------------   
                                             11,043,303
             (Unamortized discount)         (   767,055)
                                           ------------

             TOTAL                         $ 10,276,248
                                           ============













                                      -16-

<PAGE>

7.   RELATED PARTY TRANSACTIONS

     Management fees for the management of Partnership's  properties are paid to
     an affiliate of the General Partner.  The management agreement provides for
     5% of gross monthly  rental  receipts of the complex to be paid as fees for
     administering  the operations of the property.  These fees totaled $112,800
     and $114,739 for the six months ended June 30, 1996 and 1995, respectively.

     According to the terms of the Partnership  agreement,  the general partners
     are  entitled to receive a  Partnership  management  fee equal to 7% of net
     cash  flow  (as  defined  in the  Partnership  agreement),  2% of  which is
     subordinated to the limited  partners having received an annual cash return
     equal to 7% of their adjusted capital  contributions.  No such fee has been
     paid or accrued by the  Partnership  for the six months ended June 30, 1996
     and 1995.

     The general partners are also allowed to collect property  disposition fees
     upon sale of acquired  properties.  This fee is not to exceed the lesser of
     50% of amounts customarily  charged in arm's-length  transactions by others
     rendering similar services for comparable  properties or 2.75% of the sales
     price.  The  property  disposition  fee is  subordinate  to payments to the
     limited partners of a cumulative annual return (not compounded) equal to 7%
     of their average  adjusted capital balances and to repayment to the limited
     partners of an amount equal to their capital contributions.

     The general  partners have not to date  received a  disposition  fee on the
     sale of Bryn  Mawr or Parc  Bordeaux,  as the  limited  partners  have  not
     received a return of 7% on their average adjusted capital or their original
     capital as defined in the Partnership agreement.  Once the limited partners
     receive their original  capital and a 7% return,  the general partners will
     be entitled to disposition fees of 2.75%.

     Accounts  payable - affiliates  amounted to $1,182,484 and $978,687 at June
     30, 1996 and 1995,  respectively.  The payable  represents  fees due to the
     general partner or to affiliates of the general  partner.  Interest charged
     on amounts due  affiliates  totaled  $72,828 for the six month period ended
     June 30, 1996.
















                                      -17-

<PAGE>

     RELATED PARTY TRANSACTIONS (CONTINUED)

     Pursuant to the terms of the Partnership  agreement,  the corporate general
     partner  charges the  Partnership  for  reimbursement  of certain costs and
     expenses  incurred by the corporate  general  partner and its affiliates in
     connection with the  administration of the Partnership.  These charges were
     for the  Partnership's  allocated  share  of  costs  and  expenses  such as
     payroll, travel and communication, costs related to partnership accounting,
     and partner's communication and relations.

     Computer  service  charges  for the  Partnership  are paid or accrued to an
     affiliate  of the  General  Partner.  The fee is based  upon the  number of
     apartment  units and totaled  $7,020 for the six months ended June 30, 1996
     and 1995.

8.   INCOME TAXES

     No provision has been made for income taxes since the income or loss of the
     Partnership  is to be  included  in  the  tax  returns  of  the  individual
     partners.

     The tax returns of the  Partnership  are subject to  examination by federal
     and state  taxing  authorities.  Under  federal and state  income tax laws,
     regulations  and rulings,  certain  types of  transactions  may be accorded
     varying  interpretations  and,  accordingly,  reported  Partnership amounts
     could be changed as a result of any such examination.

     The  reconciliation  of net loss for the six month  periods  ended June 30,
     1996 and 1995 as reported in the statements of operations,  and as would be
     reported for tax purposes respectively, is as follows:

                                                June 30,               June 30,
                                                  1996                   1995
                                                  ----                   ----

      Net loss -
           Statement of operations            $ (445,906)            $ (774,936)
      (Add to)  deduct from:
           Difference in depreciation          (  42,882)             (  62,800)
           Difference in amortization             32,862                 32,861
           Non-deductible expenses               125,792                 41,853
           Difference in loss of joint venture     3,224                 10,400
                                              ----------             ---------- 
      Net loss for tax purposes               $ (326,910)            $ (752,622)
                                              ==========             ========== 











                                      -18-

<PAGE>

     INCOME TAXES (CONTINUED)

     The  reconciliation  of  partner's  (deficit)  capital at June 30, 1996 and
     December  31, 1995 as reported in the balance  sheets,  and as reported for
     tax purposes, is as follows:

                                                 June 30,           December 31,
                                                  1996                   1995
                                                  ----                   ----
      Partner's (Deficit) Capital -
       balance sheet                        $   (750,062)         $    (304,156)
       Add to (deduct from):
            Accumulated difference in
            depreciation                      (3,967,532)            (3,924,650)
            Accumulated difference in
            amortization                          60,987                 11,694
            Syndication fees and selling
            expenses                           1,842,060              1,842,060
            Gain on sale of property           ( 817,092)             ( 817,092)
            Other non-deductible expenses        932,547                806,755
            Difference in book and tax
            depreciable cost basis               915,085                915,085
            Difference in book and tax
            basis of investments                (740,376)              (743,600)
            Other                              (  69,286)             (  69,286)
                                            ------------           ------------ 
      Partner's (Deficit) Capital -
       tax return                           $ (2,593,669)          $ (2,283,190)
                                            ============           ============ 

 9.   SUBSEQUENT EVENTS

      On July 16, 1996 the Corporate  General Partner entered into a contract on
     behalf of the Partnership to sell Castle Dore Apartments, Ambassador Towers
     (formerly Cedar Ridge Apartments), Pleasant Run Apartments and Williamsburg
     South Apartments at sales prices of $5,500,000,  $5,800,000, $3,350,000 and
     $4,831,000,   respectively.   The  contract  is  subject  to  a  number  of
     contingencies as were described in Form 8-K filed on July 31, 1996. No firm
     closing date on the sale has been established to date.












                                      -19-

<PAGE>


PART II:    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources
-------------------------------

The Partnership  continues to struggle with cash shortfalls  being funded by the
General  Partner,  although under no obligation to do so. At this point in time,
there is no assurance that the General Partner will continue to advance funds to
assist with the Partnership's cash flow  difficulties.  Although the Partnership
had a better  quarter  than it did in the previous  year,  and also a better six
months  than in the same  period a year  ago,  it still  suffered  from  another
disappointing quarter.  Operating revenue decreased  approximately $201,000 from
the same six month  period in the  previous  year,  while  total  expenses  also
decreased slightly over $494,000.  Management is optimistic that the decrease in
expenses will  continue as more control is being  exercised  over  expenditures;
with more control over spending now in place,  management is focusing on ways to
increase operating revenue.

The Partnership  continues to review the possibility of refinancing mortgages in
order to reduce interest rates and increase cash flow.

There were no  distributions  for the six month  periods  ended June 30,1996 and
1995. The Partnership does not expect to resume  distributions  until it is able
to generate sufficient excess cash flow and repay the General Partner advances.


Results of Operations:
----------------------

For the quarter ended June 30, 1996, the  Partnership's net loss was $174,559 or
$10.89 per limited  partnership  unit.  Net loss for the quarter  ended June 30,
1995  amounted to $438,912 or $27.38 per unit.  For the six month  period  ended
June 30, 1996, the net loss was $445,906 or $27.81 per limited  partnership unit
as compared to $774,936 or $48.34 per limited partnership unit for the six month
period ended June 30, 1995.

Partnership  revenue for the quarter ended June 30, 1996 totaled  $1,063,586,  a
decrease of  approximately  $155,000 from the 1995 amount of  $1,218,620.  Total
rental revenue dropped almost  $130,000,  which makes up most of the decrease in
total  revenue.  The  majority  of the  decrease  can be  attributed  to falling
economic  occupancy  levels at  Ambassador  Towers  (formerly  Cedar  Ridge) and
continued  vacancies at Perrymont Office  Building.  Compared to the prior year,
physical   occupancy   dropped,   while  rental  concessions  and  delinquencies
increased. Management continues to offer rental concessions and other promotions
in an attempt to increase the occupancies.








                                      -20-

<PAGE>

Results of Operations  (continued):
---------------------  ------------

For  the  quarter  ended  June  30,  1996,   Partnership  expenses  amounted  to
$1,222,048, decreasing an inordinate $417,000 from the same 1995 quarter amount.
For the six month period ended June 30, 1996,  Partnership expenses decreased by
over  $494,000  from the same  period  in 1995.  A large  decrease  in  property
operations  expenditures  should  be  noted;  in  this  area,  specifically,  at
Williamsburg  South Apartments,  there was a roughly $10,000 decrease in payroll
and  associated  costs and repairs and  maintenance;  at  Perrymont,  there were
decreases in most operations costs including  repairs and maintenance  expenses,
contracted services and utilities;  at Pleasant Run there were similar decreases
in payroll expenses, repairs and maintenance and utilities; at Ambassador Towers
(formerly Cedar Ridge), operating expenses remained fairly consistent with those
of the same  period in the  previous  year;  inconsistent  with the trend of the
other  properties  in the  Partnership,  there were  increases  in  payroll  and
associated  costs,  repairs  and  maintenance  and  utilities  at  Castle  Dore.
Depreciation  and amortization  expenses  remained fairly stable between the six
month periods ended June 30, 1996 and 1995.

Some of the properties did begin to see an increase in occupancy  levels,  which
should  ultimately  lead to increased  revenue for the  Partnership  in the near
future.  The  Partnership  is  beginning to see vacancy  levels  decrease and an
increase in rental rates; as occupancy levels increase,  rental concessions will
diminish.

On a tax basis,  the  partnership  had a loss of  $326,910 or $20.39 per limited
partner  unit for the six month  period ended June 30, 1996 versus a tax loss of
$752,622 or $46.95 per unit for the six month period ended June 30, 1995.

























                                      -21-

<PAGE>
               REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP III
               ---------------------------------------------------


                                     PART II
                                     -------

                                OTHER INFORMATION
                                -----------------


Item 1 - Legal Proceedings
--------------------------

The Partnership is not a party to, nor are any of the  Partnership's  properties
subject to any material pending legal proceedings  other than ordinary,  routine
litigation incidental to the Partnership's business.

Items 2, 3, 4 and 5
-------------------

Not applicable.

Item 6 - Exhibits and reports on Form 8-K
-----------------------------------------

Item  7 (c) -  Financial  Statements  and  Exhibits  -  Contract  between  the
Partnership  and  Partnership  Equities,  Inc.  dated July 16, 1996  attached.

Exhibit 27 - Financial Data Schedule (Electronic filing only)

Form 8-K was filed July 31, 1996.




















                                      -22-

<PAGE>
                                   SIGNATURES
                                   ----------


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.


REALMARK PROPERTY INVESTORS
LIMITED PARTNERSHIP III


By:   /s/Joseph M. Jayson                       January 2, 1997 
      ------------------------------            ------------------------
      Joseph M. Jayson,                         Date
      Individual General Partner



Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following  persons on behalf of the registrant and in the
capacities and on the dates indicated.


By:   REALMARK PROPERTIES, INC.
      Corporate General Partner

      /s/Joseph M. Jayson                       January 2, 1997  
      ------------------------------            ------------------------
      Joseph M. Jayson,                         Date
      President and Director



      /s/Michael J. Colmerauer                  January 2, 1997  
      ------------------------------            ------------------------
      Michael J. Colmerauer                     Date
      Secretary