<PAGE>

                                                                     EXHIBIT 3.0


                           CERTIFICATE OF DESIGNATION

                                       of

                    TRANSCONTINENTAL REALTY INVESTORS, INC.

                               setting forth the

      VOTING POWERS, DESIGNATIONS, PREFERENCES, LIMITATIONS, RESTRICTIONS
                              AND RELATIVE RIGHTS

                                       of

                SERIES C CUMULATIVE CONVERTIBLE PREFERRED STOCK


                        (Pursuant to Section 78.1955 of
                          the Nevada Revised Statutes)

                           __________________________

     Pursuant to Section 78.1955 of the Nevada Revised Statutes ("NRS"), the
undersigned, being the President and Secretary, respectively, of
Transcontinental Realty Investors, Inc. (the "Corporation"), a Nevada
corporation, hereby certify that (a) the following resolution was duly adopted
on September 21, 2001, by the Board of Directors of the Corporation (the
"Board"), for the purposes of establishing a separate series of the
Corporation's authorized preferred stock, $0.01 par value ("Preferred Stock"),
and fixing the relative rights and preferences of such series of Preferred
Stock, and (b) such resolution has not been subsequently modified or rescinded:

     RESOLVED, that in accordance with the provisions of ARTICLE FOURTH of the
Articles of Incorporation of the Corporation, a series of Preferred Stock be,
and hereby is, created, and the voting powers, designations, preferences,
limitations, restrictions and relative, participating, optional or other special
rights of the shares of such series, and the qualifications, limitations or
restrictions thereof, be, and hereby are, as follows:

Section 1.  Designation and Amount.  The shares of such series shall be
            ----------------------
designated as "Series C Cumulative Convertible Preferred Stock" (the "Series C
Stock") and each share of the Series C Stock shall have a par value of $0.01 per
share and a preference on liquidation as specified in Section 6 below. The
number of authorized shares constituting the Series C Stock shall be 30,000.
Such number of shares may be increased or decreased by the Board by filing an
amendment to this Certificate of Designation,  provided, however, that no
decrease shall reduce the number of shares of Series C Stock to a number less
than the number of

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shares then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants.

Section 2.  Dividends and Distributions.
            ---------------------------

     (A) The holders of shares of Series C Stock shall be entitled to receive,
when, as, and if declared by the Board and to the extent permitted under the
NRS, out of funds legally available for the purpose and in preference to and
with priority over dividends upon all Junior Securities (as defined in Section 6
below), quarterly cumulative dividends payable in arrears in cash on the tenth
day following the end of each calendar quarter, unless such day is a Saturday,
Sunday or holiday, in which case such dividends shall be payable on the next
succeeding business day (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or fraction of a share of Series C Stock, in
an amount per share (rounded to the next highest cent) equal to (i) 5% per annum
during the period from issuance to September 30, 2002; (ii) 6% per annum during
the period from October 1, 2002 to September 30, 2003; and (iii) 7% per annum
from October 1, 2003 and thereafter of the Liquidation Value (as defined in
Section 6 below), as determined immediately prior to the beginning of such
calendar quarter assuming each year consists of 360 days and each quarter
consists of 90 days.

     (B) Dividends shall commence accruing cumulatively on outstanding shares of
the Series C Stock from the date of issuance of such shares to and including the
date on which the Redemption Price (as defined in Section 9(A) below) of such
shares is paid, whether or not such dividends have been declared and whether or
not there are profits, surplus or other funds of the Corporation legally
available for the payment of such dividends.  For purposes of this Section 2,
the date on which the Corporation has issued any share of Series C Stock is its
date of issuance, regardless of the number of times a transfer of such share is
made on the stock records maintained by or for the Corporation and regardless of
the number of certificates that may be issued to evidence such share (whether by
reason of transfer of such share or for any other reason).  Dividends paid on
the shares of Series C Stock in an amount less than the total amount of
dividends at the time accrued and payable on such shares shall be allocated
among the holders of such shares in proportion to their respective Unpaid
Accrual Amounts, where for this purpose the "Unpaid Accrual Amount" of a holder
of shares of Series C Stock at any time equals the total of accrued unpaid
dividends on all such shares held by such holder. The Board may fix a record
date for the determination of holders of shares of Series C Stock entitled to
receive payment of a dividend or distribution declared thereon other than a
quarterly dividend paid on the Quarterly Dividend Payment Date immediately after
such dividend accrued; which record date shall be not more than 50 days prior to
the date fixed for the payment thereof.

     (C) So long as any shares of the Series C Stock are outstanding, the
Corporation will not make, directly or indirectly, any distribution (as such
term is defined in the NRS) with respect to Junior Securities unless, on the
date specified for measuring such distribution, (a) all accrued dividends on the
Series C Stock for all past quarterly dividend periods have been paid in full
and the full amount of accrued dividends

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for the then current quarterly dividend period has been paid or declared and a
sum sufficient for the payment thereof set apart and (b) after giving effect to
such distribution (i) the Corporation would not be rendered unable to pay its
debts as they become due in the usual course of business and (ii) the
Corporation's total assets would not be less than the sum of its total
liabilities plus the amount that would be needed, if the Corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of the holders of the Series C Stock as provided in this
Certificate of Designation. Dividends shall not be paid (in full or in part) or
declared and set apart for payment (in full or in part) on any series of
Preferred Stock (including the Series C Stock) for any dividend period unless
all dividends, in the case dividends are being paid in full on the Series C
Stock, or a ratable portion of all dividends (i.e., so that the amount paid on
each share of each series of Preferred Stock as a percentage of total accrued
and unpaid dividends for all periods with respect to each such share is equal),
in the case dividends are not being paid in full on the Series C Stock, have
been or are, contemporaneously, paid and declared and set apart for payment on
all outstanding series of Preferred Stock (including the Series C Stock)
entitled thereto for each dividend period terminating on the same or earlier
date. If at any time the Corporation pays less than the total amount of
dividends then accrued with respect to the Series C Stock, such payment will be
distributed ratably among the then holders of Series C Stock so that an equal
amount is paid with respect to each outstanding share.

Section 3.  Conversion Rights.
            ------------------

     (A) The Series C Stock may be converted at any time and from time to time
in whole or in part after September 30, 2006, at the option of the holders
thereof, in accordance with subsection (D) below at the Conversion Price (as
defined in subsection (B) below) into fully paid and nonassessable shares of
common stock, $.01 par value, of the Corporation ("Common Stock").  The number
of shares of Common Stock to be issued pursuant to such conversion shall be
equal to the number of shares offered for conversion multiplied by the Adjusted
Liquidation Value per share and divided by the Conversion Price; provided,
however, that (1) as to any shares of Series C Stock which shall have been
called for redemption pursuant to Section 9, the right of conversion shall
terminate upon receipt by the holder of the notice of redemption from the
Corporation and (2) on the earlier of (a) the commencement of any liquidation,
dissolution or winding up of the Corporation by the filing of the relevant
document with the Secretary of State of the State of Nevada or with a federal
bankruptcy court or (b) the adoption by the stockholders of the Corporation of
any resolution authorizing the commencement of any liquidation, dissolution or
winding up of the Corporation, the right of conversion shall terminate.
Notwithstanding anything to the contrary herein provided, the Corporation may
elect to redeem the shares of Series C Stock sought to be converted, pursuant to
Section 9 hereunder, instead of issuing shares of Common Stock in replacement
thereof, in accordance with the provisions of Section 3(D) below.

     (B) For purposes of this Section 3, the term "Conversion Price" shall be
and mean the amount obtained (rounded upward to the next

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highest cent) by multiplying (i) 0.9 by (ii) the simple average of the daily
closing price of the Common Stock for the five (5) Business Days immediately
prior to the date of conversion on the New York Stock Exchange or, if the Common
Stock is not then being traded on the New York Stock Exchange, then on the
principal stock exchange (including without limitation The Nasdaq Stock Market)
on which the Common Stock is then listed or admitted to trading as determined by
the Corporation ("Principal Stock Exchange") or, if the Common Stock is not then
listed or admitted to trading on a Principal Stock Exchange, the average of the
last reported closing bid and asked prices on such days in the over-the-counter
market or, if no such prices are available, the fair market value per share of
the Common Stock, as determined by the Board in its sole discretion. The
Conversion Price shall not be subject to any adjustment as a result of the
issuance of any additional shares of Common Stock by the Corporation for any
purpose, except for stock splits (whether accomplished by stock dividends or
otherwise) or reverse stock splits occurring during the five (5) Business Days
referenced in the calculation of the Conversion Price. For purposes of
calculating the Conversion Price, the term "Business Day" shall mean a day on
which the Principal Stock Exchange is open for business or, if no such exchange,
the term "Business Day" shall have the meaning given such term in Section 3(D)
below.

     (C)    Upon any conversion, fractional shares of Common Stock shall not be
issued but any fractions shall be adjusted by the delivery of one additional
share of Common Stock in lieu of any cash.  The Corporation shall pay all issue
taxes, if any, incurred in respect to the issuance of Common Stock on
conversions, provided, however, that the Corporation shall not be required to
pay any transfer or other taxes incurred by reason of the issuance of such
Common Stock in names other than those in which the Series C Stock surrendered
for conversion may stand.

     (D)    Any conversion of Series C Stock into Common Stock shall be made by
the surrender to the Corporation, at the office of the Corporation set forth in
Section 11 hereof or at the office of the transfer agent for such shares, of the
certificate or certificates representing the Series C Stock to be converted,
duly endorsed or assigned (unless such endorsement or assignment be waived by
the Corporation) together with a written request for conversion.  The
Corporation shall either (i) issue as of the date of receipt by the Corporation
of such surrender shares of Common Stock calculated as provided above and
evidenced by a stock certificate delivered to the holder as soon as practicable
after the date of such surrender; or (ii) within two (2) Business Days (unless
otherwise provided, "Business Day" herein shall mean any day other than a
Saturday, a Sunday or a day on which banking institutions in Dallas, Texas are
authorized or obligated by law or executive order to remain closed) after the
date of such surrender advise the holder of the Series C Stock that the
Corporation is exercising its option to redeem the Series C Stock pursuant to
Section 9, in which case the Corporation shall have ninety (90) days from the
date of such surrender to pay to the holder cash in an amount equal to the
Redemption Price (as defined in Section 9(A) below) for each share of Series C
Stock so redeemed.  The date of surrender of any Series C Stock shall be the
date of receipt by the Corporation or its agent of such surrendered shares of
Series C Stock.

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     (E)    A number of authorized shares of Common Stock sufficient to provide
for the conversion of the Series C Stock outstanding upon the basis hereinbefore
provided shall at all times be reserved for such conversion.  If the Corporation
shall propose to issue any securities or to make any change in its capital
structure which would change the number of shares of Common Stock into which
each share of Series C Stock shall be convertible as herein provided, the
Corporation shall at the same time also make proper provision so that thereafter
there shall be a sufficient number of share of Common Stock authorized and
reserved for conversion of the outstanding Series C Stock on the new basis.

     (F)    In case the Corporation shall propose at any time before all shares
of the Series C Stock have been redeemed by the Corporation or converted into
Common Stock:

            (i)   to pay any dividend on the Common Stock outstanding payable in
     Common Stock or to make any other distribution, other than cash dividends
     to the holders of the Common Stock outstanding; or

            (ii)  to offer for subscription to the holders of the Common Stock
     outstanding any additional shares of any class or any other rights or
     option; or

            (iii) to effect any re-classification or recapitalization of the
     Common Stock outstanding involving a change in the Common Stock, other than
     a subdivision or combination of the Common Stock outstanding; or

            (iv)  to merge or consolidate with or into any other corporation
     (unless the Corporation is the surviving entity and holders of Common Stock
     continue to hold such Common Stock without modification and without receipt
     of any additional consideration), or to sell, lease, or convey all or
     substantially all its property or business, or to liquidate, dissolve or
     wind up;

then, in each such case, the Corporation shall mail to the holders of record of
each of the shares of Series C Stock at their last known address as shown by the
Corporation's records a statement, signed by an officer of the Corporation, with
respect to the proposed action.  Such statement shall be so mailed at least
thirty (30) days prior to the date of the taking of such action or the record
date for holders of the Common Stock for the purposes thereof, whichever is
earlier.  If such statement relates to any proposed action referred to in
clauses (iii) or (iv) of this subsection (F), it shall set forth such facts with
respect thereto as shall reasonably be necessary to inform the holders of the
Series C Stock as to the effect of such action upon the conversion rights of
such holders.

Section 4.  Voting Rights and Powers. The holders of shares of Series C Stock
            ------------------------
shall have only the following voting rights:

     (A) Except as may otherwise be specifically required by law or otherwise
provided herein, the holders of the shares of Series C Stock shall not have the
right to vote such stock, directly or indirectly, at any meeting of the
stockholders of the Corporation, and such shares of

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stock shall not be counted in determining the total number of outstanding shares
to constitute a quorum at any meeting of stockholders.

     (B) In the event that, under the circumstances, the holders of the Series C
Stock are required by law to vote upon any matter, the approval of such series
shall be deemed to have been obtained only upon the affirmative vote of the
holders of a majority of the shares of the Series C Stock then outstanding.

     (C) Except as set forth herein, or as otherwise provided by the Articles of
Incorporation or by law, holders of the Series C Stock shall have no voting
rights and their consent shall not be required for the taking of any corporate
action.

Section 5.  Reacquired Shares.  Any shares of Series C Stock purchased or
            -----------------
otherwise acquired by the Corporation in any manner whatsoever or surrendered
for conversion shall no longer be deemed to be outstanding and all rights with
respect to such shares of stock, including the right, if any, to receive notices
and to vote, shall forthwith cease, except, in the case of stock surrendered for
conversion hereunder, rights of the holder thereof to receive Common Stock in
exchange therefor.  All shares of Series C Stock obtained by the Corporation
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein, in the
Articles of Incorporation, or in any other Certificates of Designations creating
a series of Preferred Stock or any similar stock or as otherwise required by
law.

Section 6.  Liquidation, Dissolution or Winding Up.  The Liquidation Value of
            --------------------------------------
the Series C Stock shall be $100.00 per share.  Upon any liquidation,
dissolution or winding up of the Corporation, and after paying and providing for
the payment of all creditors of the Corporation, the holders of shares of the
Series C Stock then outstanding shall be entitled, before any distribution or
payment is made upon the Common Stock and any other equity security of any kind,
other than Preferred Stock, which the Corporation at any time has issued, issues
or is authorized to issue (collectively, "Junior Securities"), to receive a
liquidation preference in an amount in cash equal to the Adjusted Liquidation
Value as of the date of such payment, whether such liquidation is voluntary or
involuntary, and the holders of the Series C Stock shall not be entitled to any
other or further distributions of the assets.  If, upon any liquidation,
dissolution or winding up of the affairs of the Corporation, the net assets
available for distribution shall be insufficient to permit payment to the
holders of all outstanding shares of all series of Preferred Stock of the amount
to which they respectively shall be entitled, then the assets of the Corporation
to be distributed to such holders will be distributed ratably among them based
upon the amounts payable on the shares of each such series of Preferred Stock in
the event of voluntary or involuntary liquidation, dissolution or winding up, as
the case may be, in proportion to the full preferential amounts, together with
any and all arrearages to which they are respectively entitled.  Upon any such
liquidation, dissolution or winding up of the Corporation, after the

                                      35
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holders of Preferred Stock have been paid in full the amounts to which they are
entitled, the remaining assets of the Corporation may be distributed to holders
of Junior Securities, including Common Stock, of the Corporation. The
Corporation will mail written notice of such liquidation, dissolution or winding
up, not less than twenty (20) nor more than fifty (50) days prior to the payment
date stated therein to each record holder of Series C Stock. Neither the
consolidation nor merger of the Corporation into or with any other corporation
or corporations, nor the sale or transfer by the Corporation of less than all or
substantially all of its assets, nor a reduction in the capital stock of the
Corporation, nor the purchase or redemption by the Corporation of any shares of
its Preferred Stock or Common Stock or any other class of its stock will be
deemed to be a liquidation, dissolution or winding up of the Corporation within
the meaning of this Section 6. "Adjusted Liquidation Value" shall mean the
Liquidation Value as defined in this Section 6 plus all accrued and unpaid
dividends through the applicable date.

Section 7.  Ranking.  Except as provided in the following sentence, the Series C
            -------
Stock shall rank on a parity as to dividends and upon liquidation, dissolution
or winding up with all other shares of Preferred Stock issued by the
Corporation.  The Corporation shall not issue any shares of Preferred Stock of
any series which are superior to the Series C Stock as to dividends or rights
upon liquidation, dissolution or winding up of the Corporation as long as any
shares of the Series C Stock are issued and outstanding, without the prior
written consent of the holders of at least a majority of such shares of Series C
Stock then outstanding voting separately as a class.

Section 8.  Redemption at the Option of the Holder.   The shares of Series C
            ---------------------------------------
Stock shall not be redeemable at the option of the holder of Series C Stock.

Section 9.  Redemption at the Option of the Corporation
            --------------------------------------------

     (A) The Corporation shall have the right to redeem all or a portion of the
Series C Stock issued and outstanding at any time and from time to time, at its
option, for cash.   The redemption price of the Series C Stock pursuant to this
Section 9 shall be an amount per share equal to the Adjusted Liquidation Value
as of the Redemption Date (the "Redemption Price").

     (B) The Corporation may redeem all or a portion of any holder's shares of
Series C Stock by giving such holder not less than twenty (20) days nor more
than thirty (30) days notice thereof prior to the date on which the Corporation
desires such shares to be redeemed, which date shall be a Business Day (the
"Redemption Date").  Such notice shall be in writing  and shall be hand
delivered or mailed, postage prepaid, to the holder (the "Redemption Notice").
If mailed, such notice shall be deemed to be delivered when deposited in the
United States Mail, postage prepaid, addressed to the holder of shares of Series
C Stock at his address as it appears on the stock transfer records of the
Corporation. The Redemption Notice shall state (i) the total number of shares of
Series C Stock held by such holder; (ii) the total number of shares of the
holder's Series C Stock that the Corporation intends to redeem; (iii) the
Redemption Date and the Redemption Price; and (iv) the place

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at which the holder(s) may obtain payment of the applicable Redemption Price
upon surrender of the share certificate(s).

     (C) If fewer than all shares of the Series C Stock at any time outstanding
shall be called for redemption, such shares shall be redeemed pro rata, by lot
drawn or other manner deemed fair in the sole discretion of the Board of
Directors to redeem one or more such shares without redeeming all such shares of
Series C Stock.  If a Redemption Notice shall have been so delivered or mailed,
at least two (2) Business Days prior to the Redemption Date the Corporation
shall provide for payment of a sum sufficient to redeem the applicable number of
shares of Series C Stock subject to redemption either by (i) setting aside the
sum required to be paid as the Redemption Price by the Corporation, separate and
apart from its other funds, in trust for the account of the holder(s) of the
shares of Series C Stock to be redeemed or (ii) depositing such sum in a bank or
trust company (either located in the state where the principal executive office
of the Corporation is maintained, such bank or trust company having a combined
surplus of at least $20,000,000 according to its latest statement of condition,
or such other bank or trust company as may be permitted by the Articles of
Incorporation, or by law) as a trust fund, with irrevocable instructions and
authority to the bank or trust company to give or complete the notice of
redemption and to pay, on or after the Redemption Date, the applicable
Redemption Price on surrender of certificates evidencing the share(s) of Series
C Stock so called for redemption and, in either event, from and after the
Redemption Date (a) the share(s) of Series C Stock shall be deemed to be
redeemed, (b) such setting aside or deposit shall be deemed to constitute full
payment for such shares(s), (c) such share(s) so redeemed shall no longer be
deemed to be outstanding, (d) the holder(s) thereof shall cease to be a
shareholder of the Corporation with respect to such share(s), and (e) such
holder(s) shall have no rights with respect thereto except the right to receive
the Redemption Price for the applicable shares.  Any interest on the funds so
deposited shall be paid to the Corporation.  Any and all such redemption
deposits shall be irrevocable except to the following extent:  any funds so
deposited which shall not be required for the redemption of any shares of Series
C Stock because of any prior sale or purchase by the Corporation other than
through the redemption process, subsequent to the date of deposit but prior to
the Redemption Date, shall be repaid to the Corporation forthwith and any
balance of the funds so deposited and unclaimed by the holder(s) of any shares
of Series C Stock entitled thereto at the expiration of one calendar year from
the Redemption Date shall be repaid to the Corporation upon its request or
demand therefor, and after any such repayment of the holder(s) of the share(s)
so called for redemption shall look only to the Corporation for payment of the
Redemption Price thereof.  All shares of Series C Stock redeemed shall be
canceled and retired and no shares shall be issued in place thereof, but such
shares shall be restored to the status of authorized but unissued shares of
Preferred Stock.

     (D) Holders whose shares of Series C Stock have been redeemed hereunder
shall surrender the certificate or certificates representing such shares, duly
endorsed or assigned (unless such endorsement or assignment be waived by the
Corporation), to the Corporation by mail, courier or personal delivery at the
Corporation's principal executive office or other location so designated in the
Redemption Notice, and

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upon the Redemption Date the Redemption Price shall be payable to the order of
the person whose name appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be canceled and retired. In the
event fewer than all of the shares represented by such certificates are
redeemed, a new certificate shall be issued representing the unredeemed shares.

Section 10. Sinking Fund.  The Corporation shall not be required to maintain any
            ------------
so-called "sinking fund" for the retirement on any basis of the Series C Stock.

Section 11. Notice.  Any notice or request made to the Corporation in connection
            ------
with the Series C Stock shall be given, and shall conclusively be deemed to have
been given and received three (3) Business Days following deposit thereof in
writing, in the U.S. mails, certified mail, return receipt requested, duly
stamped and addressed to the Corporation, to the attention of its General
Counsel, at its principal executive offices (which shall be deemed to be the
address most recently provided to the Securities and Exchange Commission ("SEC")
as its principal executive offices for so long as the Corporation is required to
file reports with the SEC).

     IN WITNESS WHEREOF, this Certificate of Designation is executed on behalf
of the Corporation by its President and its Secretary as of September 27, 2001.



                                              /s/ Karl L. Blaha
                                    -------------------------------------
                                           Karl L. Blaha, President



                                              /s/ Robert A. Waldman
                                    -------------------------------------
                                          Robert A. Waldman, Secretary


STATE OF TEXAS    (S)
                  (S)
COUNTY OF DALLAS  (S)

  This instrument was acknowledged before me on September 27, 2001 by Karl L.
Blaha.


                                                  /s/ S L Bratton
                                          -----------------------------
                                          Notary Public, State of Texas


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