UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
         THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 1997

                                       OR

[ ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                        For the transition period from     to

                        Commission File Number 333-10635

                      APPLE RESIDENTIAL INCOME TRUST, INC.
             (Exact name of registrant as specified in its charter)

                   VIRGINIA                         54-1816010
         (State or other jurisdiction              (IRS Employer
       of incorporation or organization)        Identification No.)

             306 EAST MAIN STREET
              RICHMOND, VIRGINIA                     23219
   (Address of principal executive offices)       (Zip Code)

                                 (804) 643-1761
              (Registrant's telephone number, including area code)

                                 Not Applicable
                 (Former name, former address, and former fiscal
                       year, if changed since last report)

         Indicate by 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

At November 1, 1997, there were outstanding 10,023,044 shares of common stock,
no par value, of the registrant.

<PAGE>


                      APPLE RESIDENTIAL INCOME TRUST, INC.
                                    FORM 10-Q

                                      INDEX
<TABLE>
<CAPTION>

                                                                            Page Number
<S> <C>
PART I.           FINANCIAL INFORMATION

         Item 1.      Financial Statements (Unaudited)
                         Balance Sheets - September 30, 1997
                                 and December 31, 1996                          3

                      Statements of Operations -
                          Three months ended September 30, 1997
                                Nine months ended September 30, 1997            4

                      Statement of Shareholders' Equity-
                           Nine months ended September 30, 1997                 5

                      Statement of Cash Flows -
                           Nine months ended September 30, 1997                 6

                      Notes to Financial Statements                             7


         Item 2.      Management's Discussion and Analysis                     11
                      of  Financial Condition and Results of
                      Operations
</TABLE>


PART II.      OTHER INFORMATION:

         Item 1.      Legal Proceedings (not applicable).

         Item 2.      Changes in Securities (not applicable).

         Item 3.      Defaults Upon Senior Securities
                      (not applicable).

         Item 4.      Submission of Matters to a Vote of
                      Security Holders (not applicable).

         Item 5.      Other Information (not applicable)

         Item 6.      Exhibits and Reports on Form 8-K



                                       13

<PAGE>

BALANCE SHEETS (UNAUDITED)
APPLE RESIDENTIAL INCOME TRUST, INC.
<TABLE>
<CAPTION>

                                                                  September 30,              December 31,
                                                                       1997                      1996
                                                                --------------------       -------------------
<S> <C>
ASSETS

Investment in Rental Property
Land                                                                    $13,504,976               -
Building                                                                 67,365,012               -
Property improvements                                                     1,683,878               -
Furniture and fixtures                                                      489,322               -
                                                                --------------------       -------------------

                                                                         83,043,188               -
Less accumulated depreciation                                            (1,086,111)              -
                                                                --------------------       -------------------

                                                                         81,957,077               -

Cash and cash equivalents                                                 1,350,305                       100
Prepaid expenses                                                            161,391               -
Other assets                                                                561,464               -
                                                                --------------------       -------------------

                                                                          2,073,160                       100
                                                                --------------------       -------------------

                                                                        $84,030,237                      $100
                                                                ====================       ===================


LIABILITIES and SHAREHOLDERS' EQUITY

Liabilities
Notes payable                                                            $5,132,702               -
Accounts payable                                                            411,069               -
Accrued expenses                                                          1,647,832               -
Rents received in advance                                                    25,969               -
Tenant security deposits                                                    371,794               -
                                                                --------------------       -------------------
                                                                          7,589,366               -

Shareholders' equity
Common stock, no par value, authorized 50,000,000
   shares; issued and outstanding 8,676,784 shares
   and 10 shares, respectively                                           76,005,921                       100
Class B convertible stock, no par value.  Authorized
   200,000 shares:  issued and outstanding 200.000                           20,000                    20,000
Receivable from principal shareholder                                       (20,000)                  (20,000)
Net income greater than distributions                                       434,950               -
                                                                --------------------       -------------------

                                                                         76,440,871                       100
                                                                --------------------       -------------------

                                                                        $84,030,237                      $100
                                                                ====================       ===================


</TABLE>








See accompanying notes to financial statements.



<PAGE>

                      APPLE RESIDENTIAL INCOME TRUST, INC
                      STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>

                                                                       Three Months Ended             Nine Months Ended
                                                                         September 30,                  September 30,
                                                                              1997                          1997
                                                                      ---------------------         ----------------------
<S> <C>
REVENUE:

                   Rental income                                                $3,789,266                     $7,771,744

EXPENSES:
                         Utility expenses                                          385,718                        796,570
                         Repairs and maintenance                                   317,500                        581,796
                         Taxes and insurance                                       597,227                      1,176,182
                         Property management                                       207,026                        403,479
                         Advertising                                                88,782                        194,785
                         General and administrative                                192,520                        391,837
                         Amortization                                                8,484                         25,444
                         Depreciation of rental property                           642,770                      1,086,111
                         Other operating expenses                                  278,735                        602,517
                                                                      ---------------------         ----------------------

                                            Total expenses                       2,718,762                      5,258,721
                                                                      ---------------------         ----------------------

Income before other income (expense)                                             1,070,504                      2,513,023

   Interest and investment income                                                   19,043                        107,584
   Interest expense                                                               (232,818)                      (377,154)
                                                                      ---------------------         ----------------------

Net income                                                                        $856,729                     $2,243,453
                                                                      =====================         ======================

Net income per share                                                                 $0.12                          $0.44
                                                                      =====================         ======================

Weighted average number of shares outstanding                                    7,135,536                      5,053,423
                                                                      =====================         ======================

</TABLE>




See accompanying notes to financial statements.








                  STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
                      APPLE RESIDENTIAL INCOME TRUST, INC.

<TABLE>
<CAPTION>

                                                                     Common Stock


                                                                            Number
                                                                          of Shares              Amount
                                                                     ---------------------------------------
<S> <C>
Balance at December 31, 1996                                                    10                  $100

Net proceeds from the sale of shares                                     8,147,064            71,238,441
Net income                                                                       -                     -
Cash distributions declared to shareholders ($.401  per share)                   -                     -
Shares issued to Cornerstone Realty Income Trust, Inc.                     417,778             3,760,000
Shares issued through Additional Share Option                              111,932             1,007,380
                                                                     ---------------------------------------

Balance at September 30, 1997                                            8,676,784           $76,005,921
                                                                     =======================================

</TABLE>


<TABLE>
<CAPTION>

                                                                      Convertible Class B Stock
                                                                                        Net of             Net
                                                                                      receivable          income         Total
                                                                        Number      from principal     greater than   Shareholders'
                                                                      of Shares       shareholder     distributions      Equity
                                                                    ----------------------------------------------------------------
<S> <C>
Balance at December 31, 1996                                           200,000             $0               $0                $ 100

Net proceeds from the sale of shares                                    -                -                -              71,238,441
Net income                                                              -                -           2,243,453            2,243,453
Cash distributions declared to shareholders ($.401  per share)          -                -          (1,808,503)          (1,808,503)
Shares issued to Cornerstone Realty Income Trust, Inc.                  -                -                -               3,760,000
Shares issued through Additional Share Option                           -                -                -               1,007,380
                                                                    ----------------------------------------------------------------

Balance at September 30, 1997                                         200,000             $0          $434,950           76,440,871
                                                                    ================================================================

</TABLE>


See accompanying notes to financial statements.

<PAGE>



APPLE RESIDENTIAL INCOME TRUST, INC.
STATEMENT OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>

                                                                          Nine  Months Ended
                                                                           September 30,
                                                                                1997
                                                                          -------------------
<S> <C>
Cash flow from operating activities:
   Net income                                                                     $2,243,453
   Adjustments to reconcile net income to net cash
   provided by operating activities
     Depreciation and amortization                                                 1,111,555
     Changes in operating assets and liabilities:
       Prepaid expenses                                                             (161,391)
       Other assets                                                                 (586,908)
       Accounts payable                                                              411,069
       Accrued expenses                                                            1,647,832
       Rent received in advance                                                       25,969
       Tenant security deposits                                                      371,794
                                                                          -------------------

                         Net cash provided by  operating activities                5,063,373

Cash flow from investing activities:

   Acquisitions of rental property                                               (80,869,988)
   Capital improvements                                                           (2,173,200)
                                                                          -------------------

                         Net cash used in investing activities                   (83,043,188)

Cash flow from financing activities:

   Proceeds from short-term borrowings                                            39,640,000
   Repayments of short-term borrowings                                           (34,507,298)
   Net proceeds from issuance of shares                                           76,005,821
   Increase (decrease) in commissions payable to underwriters                    -
   Cash distributions paid to shareholders                                        (1,808,503)
                                                                          -------------------

                         Net cash provided by financing activities                79,330,020

                         Increase  in cash and cash equivalents                    1,350,205

Cash and cash equivalents, beginning of year                                             100
                                                                          -------------------

                                            Cash and cash equivalents,
                                            end of period                         $1,350,305
                                                                          ===================




</TABLE>


See accompanying notes to financial statements



<PAGE>


                       APPLE RESIDENTIAL INCOME TRUST, INC
                    Notes to Financial Statements (Unaudited)

                               September 30, 1997

(1)    General Information and Summary of Significant Accounting Policies

       Basis of Presentation

       The accompanying unaudited financial statements have been prepared in
       accordance with the instructions for Form 10-Q and Article 10 of
       Regulation S-X. Accordingly, they do not include all of the information
       required by generally accepted accounting principles. In the opinion of
       management, all adjustments (consisting of normal recurring accruals)
       considered necessary for a fair presentation have been included.
       Operating results for the three and nine months ended September 30, 1997
       are not necessarily indicative of the results that may be expected for
       the year ended December 31, 1997. These financial statements should be
       read in conjunction with the Company's December 31, 1996 Annual Report on
       Form 10-K.

       The Company was formed in August, 1996. Operations commenced in January,
       1997.

       During the first quarter of 1997, the Financial Accounting Standards
       Board issued a new statement on the calculation of earnings per share
       which is effective beginning in the 4th quarter of 1997 and early
       adoption is prohibited. Under the new statement, primary and fully
       dilutive earnings per share are replaced with basic and diluted earnings
       per share. The Company's basic earnings per share for the nine month
       period ended September 30, 1997 according to the new statements would not
       change from the reported amounts.

       In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of
       an Enterprise and Related Information." The Company will adopt SFAS No.
       131 in 1998. SFAS No. 131 will not have any impact on the financial
       results or financial condition of the Company, but will result in certain
       in required disclosures of segment reporting.

       Cash and Cash Equivalents:

       Cash equivalents include highly liquid investments with original
       maturities of three months or less. The fair market value of cash and
       cash equivalents approximates their carrying value.

       Investment in Rental Property

       The Company records impairment losses on rental property used in the
       operations if indicators of impairment are present and the undiscounted
       cash flows estimated to be generated by the respective properties are
       less than their carrying amount. Impairment losses are measured as the
       difference between the asset's fair value and its carrying value.

       The investment in rental property is recorded at depreciated cost and
       includes real estate brokerage commissions paid to an affiliated company
       Apple Realty Group for purchase prior to March 1, 1997, and Cornerstone
       Realty Income Trust, Inc. after March 1, 1997.



<PAGE>


Income Recognition

       Rental, interest and other income are recorded on an accrual basis. The
       Company's properties are leased under operating leases that, typically,
       have terms that do not exceed one year.

Advertising Costs

       Costs incurred for the production and distribution of advertising are
       expensed as incurred.

Income Per Share

       Net income per share is computed based upon the weighted average number
       of shares outstanding during the year. Potentially dilutive securities
       are not included since their inclusion would not materially dilute net
       income per share.


(2)    Notes Payable

       On March 1, 1997, the Company entered into an agreement with a commercial
       bank for an unsecured revolving line of credit of $10 million. The line
       of credit expires on March 31, 1998. During August, 1997, the Company
       increased its unsecured line of credit to $20 million. Borrowings under
       the agreement are evidenced by an unsecured promissory note and bear
       interest at one-month LIBOR plus 200 basis points. As of September 30,
       1997 the interest rate on the unsecured line of credit was 7.6875% and
       the outstanding balance was approximately $5.1 million. In October 1997,
       the Company repaid the full outstanding balance of the line of credit
       with proceeds from the additional sale of shares.

(3)    Related Parties


       Prior to March 1, 1997, the Company had contracted with Apple Residential
       Management Group, Inc. (The "Management Company") to manage the acquired
       properties, Apple Residential Advisors, Inc. (The "Advisor") to advise
       and provide the Company with day to day management, and Apple Realty
       Group, Inc. to acquire and dispose of real estate assets held by the
       Company. The Company paid the Management Company a management fee equal
       to 5% of rental income plus reimbursement of certain expenses in the
       amount of $61,135. The Company paid the Advisor a fee equal to .1% to
       .25% of total contributions received by the Company in the amount of
       $13,585. The Company paid Apple Realty Group, Inc. a fee of 2% of the
       purchase price of the acquired properties in the amount of $624,863.

       Effective March 1, 1997, with the approval of the Company, Cornerstone
       Realty Income Trust Inc. ("Cornerstone"), for which Glade M. Knight
       (Chief Executive Officer and Chairman of the Board of the Company)
       entered into subcontract agreements with the Management Company and
       Advisor whereby Cornerstone will provide advisory and property management
       services to the Company in exchange for fees and expense reimbursement
       per the same terms described above.



<PAGE>


       Effective March 1, 1997, with the consent of the Company, Cornerstone
       acquired all the assets of Apple Realty Group, Inc. The sole material
       asset of the company was the acquisition/disposition agreement with the
       Company. Cornerstone paid $350,000 in cash and issued 150,000 common
       shares in exchange for the assignment of the rights to the
       acquisition/disposition agreement. Cornerstone will be entitled to a real
       estate commission equal to 2% of the gross purchase price of the
       Company's properties. As of September 30, 1997, Cornerstone had earned
       approximately $1,476,041 for all of the subcontracted and acquired
       services.

       During the first quarter of 1997, the Company granted Cornerstone a
       continuing right to acquire up to 9.8% of the common shares of the
       Company at the market price, net of selling commissions. Cornerstone
       committed to purchase shares of the Company at $9 per share for
       approximately $3.76 million which represented approximately 9.5% of the
       total common shares of the Company outstanding as of March 1, 1997. In
       April 1997, Cornerstone purchased 417,777 common shares of the Company.
       Cornerstone intends to make periodic evaluations with the approval of its
       board of directors to purchase additional common shares of the Company as
       of the end of each calendar quarter in order to maintain its ownership of
       approximately 9.5% of the outstanding common shares of the Company, if
       such additional purchases are deemed by the Cornerstone board of
       directors to be in the best interests of Cornerstone and its
       shareholders.

(4)    Subsequent Events

       During October 1997, the Company distributed to its shareholders
       approximately $1,356,204 (20.2 cents per share) of which approximately
       $855,613 was reinvested in the purchase of additional shares through the
       Additional Share Option. The Company also closed the sale to investors of
       1,346,262 shares at $10 per share representing net proceeds to the
       Company of $12,116,361.

(5)    Acquisitions (unaudited)



<PAGE>



       The following unaudited pro forma information for the nine months ended
       September 30, 1997 is presented as if (a) the Company had owned the
       properties referred to below on January 1, 1997, (b) the Company had
       qualified as a REIT, distributed at least 95% of its taxable income and,
       therefore incurred no federal income tax expense during the period, and
       (c) the Company had used proceeds from its best efforts offering to
       acquire the properties. The Company had no operations prior to December
       31, 1996. The pro forma information does not purport to represent what
       the Company's results of operations would actually have been if such
       transactions, in fact, had occurred on January 1, 1997, nor does it
       purport to represent the results of operations for future periods.




<PAGE>



                                    Nine Months
                                      Ended
                                     9/30/97

         Rental Income              $12,259,452

         Net Income                 $ 3,615,983

         Net Income Per Share       $       .45

         The pro forma information reflects adjustments for the actual rental
         income and rental expenses of Brookfield, Eagle Crest, Tahoe, Mill
         Crossing, Toscana, Polo Run, Wildwood, The Arbors , Paces Cove,
         Chaparosa and River Hill Apartments for the periods in 1997 prior to
         their acquisitions by the Company. Net income has been adjusted as
         follows: (1) property management and advisory expenses have been
         adjusted based on the Company's contractual arrangements of 5% of
         revenues from rental income plus reimbursement of certain monthly
         expenses estimated to be $2.50 per unit; (2) advisory expenses have
         been adjusted based on the Company's contractual arrangement of .25%
         annual gross proceeds of common stock raised; and (3) depreciation has
         been adjusted based on the Company's allocation of purchase price to
         buildings over an estimated useful life of 27.5 years.



<PAGE>



                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                       CONDITION AND RESULTS OF OPERATIONS

Liquidity and Capital Resources

         There was a significant change in the Company's liquidity during the
         nine months ended September 30, 1997. During the nine months ended
         September 30, 1997, the Company closed the sale to investors of
         8,258,996 shares representing gross proceeds to the Company of
         $80,923,281 and net proceeds after payment of selling commissions and
         other costs of $72,245,821. The Company capitalized $2,173,200 of
         improvements to its various properties as of September 30, 1997. It is
         anticipated that some $3,000,000 additional capital improvements will
         be completed during the next year on the current portfolio. The source
         to fund these improvements is from equity raised and set aside
         specifically for the improvements and from the expected sale of
         additional shares.

         During 1997, the Company made ten acquisitions of residential rental
         property as follows:

<TABLE>
<CAPTION>

         Property Name              Date Acquired                 Units     Purchase Price       Location
         -------------              -------------                 -----     --------------       --------
<S> <C>
         Brookfield Apartments      January 1997                  223       $5,458,485           Dallas, TX
         Eagle Crest Apartments     January 1997                  484       $15,650,000          Irving, TX
         Tahoe Apartments           January 1997                  240       $5,690,560           Arlington, TX
         Mill Crossing Apartments   February 1997                 184       $4,544,121           Arlington, TX
         Wildwood Apartments        March 1997                    120       $3,963,519           Euless, TX
         Toscana Apartments         March 1997                    192       $5,854,531           Dallas, TX
         Polo Run Apartments        March 1997                    224       $5,854,531           Arlington, TX
         The Arbors Apartments      April 1997                    210       $7,748,907           Bedford, TX
         Paces Cove Apartments      June 1997                     328       $9,277,355           Dallas, TX
         Chaparosa Apartments       August 1997                   170       $5,825,000           Irving, TX
         River Hill Apartments      August 1997                   192       $7,275,000           Irving, TX

</TABLE>

         During the nine months ended September 30, 1997, the Company borrowed
         $39,640,000 against the line of credit in conjunction with property
         acquisitions and repaid $34,507,298 of the balance. The balance on the
         line of credit as of September 30, 1997 was $5,132,702. In October
         1997, the Company repaid this outstanding balance. This is consistent
         with the Company's long term business objective to hold its properties
         on an unleveraged basis.

         Cash and cash equivalents totaled $1,350,305 at September 30, 1997.

         While the Company is always assessing potential acquisitions, no
         material commitments existed on November 1, 1997 for the purchase of
         additional properties. The Company's only on-going commitment for
         capital expenditures is to the renovation of its existing portfolio.
         Equity funds have been raised in conjunction with the acquisition of
         properties to fund capital expenditures for currently held properties.
         In addition, the Company will acquire new properties as funds are
         available.

<PAGE>

         The Company has short-term cash flow needs to conduct the operation of
         its properties. The rental income generated from the properties
         supplies sufficient cash to provide for the payment of these operating
         expenses.

         The Company's capital resources are expected to grow with the continued
         sale of its shares and through operations.

Results of Operations

         As operations of the Company began in January 1997, a comparison of the
         three months or nine months ended September 30, 1997 and 1996 is not
         possible. The Company's property operations for the nine months ended
         September 30, 1997 reflect the operations of the Company's eleven
         acquisitions from their respective acquisition dates. Rental income for
         the three and nine months ended September 30, 1997 was $3,789,266 and
         $7,771,744, respectively.

         The economic occupancy levels for the Company's properties averaged 92%
         at the end of the three months and 93% for the nine months ended
         September 30, 1997. Overall, the average rental rates for the portfolio
         was $525 per month for the nine months ended September 30, 1997 and
         $539 for the three months ended September 30, 1997.

         The Company's other source of income is the investment of its cash and
         cash reserves. Interest income for the three and nine months ended
         September 30, 1997 was $19,043 and $107,584, respectively.

         Total expenses for the nine months ended September 30, 1997 was
         $5,258,721 and $2,718,762 for the three months ended September 30,
         1997. The operating expense ratio (the ratio of rental expenses,
         excluding general and administrative, amortization and depreciation
         expense, to rental income) was 48% for the nine months ended September
         30, 1997 versus 49% for the three months ended September 30, 1997.
         General and administrative expenses totaled 5% of total rental income
         for the three and nine months ended September 30, 1997. This percentage
         is expected to decrease as the Company's asset base and rental income
         grow. These expenses represent the administrative expenses of the
         Company as distinguished from the operations of the Company's
         properties. Depreciation expense for the nine months ended September
         30, 1997 was $1,086,111 and $642,770 for the three months ended
         September 30, 1997.

         The Company does not believe that inflation had any significant impact
         on the operation of the Company during the nine months ended September
         30, 1997. Future inflation, if any, would likely cause increased
         operating expenses, but the Company believes that increases in expenses
         would be offset by increases in rental income. Inflation may also cause
         capital appreciation of the Company's properties over time, as rental
         rates and replacement costs increase.


<PAGE>



 Part II, Item 6.  Exhibits and Reports on Form 8-K


   (a)   Exhibits - None


   (b)   Reports on Form 8-K

         The following table lists the reports on Form 8-K filed by the Company
   during the quarter ended September 30, 1997, the items reported and the
   financial statements included in such filings.


<TABLE>
<CAPTION>

Type and Date of Reports             Items Reported                         Financial Statements Filed
-------------------------            --------------                        ----------------------------
<S> <C>
Form 8-K dated                          2                                               None
June 24, 1997
Form 8-K dated                          2                                               None
August 6, 1997
Form 8-K/A (date of  Original  Report:  7(a),(b) and (c)                       Historical  Statement  of Income and
June 24, 1997)                                                                 Direct Operating  Expenses of Paces's
                                                                               Cove Apartments for the twelve months
                                                                               ended May 31, 1997.


</TABLE>


<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.

                                           Apple Residential Income Trust, Inc.
                                            (Registrant)


                                          BY:  /s/ Glade M. Knight
                                             ---------------------------------
                                              Glade M. Knight
                                              President

DATE:   11-11-97                          BY:  /s/ Stanley J. Olander
                                            -----------------------------------
                                          Stanley J. Olander
                                          Treasurer