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

                                   Form 10-KSB

(Mark One)
[X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT
      OF 1934


                 For the fiscal year ended December 31, 2004

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


            For the transition period from ____________ to ____________

                         Commission file number 0-14458

                 NATIONAL  HOUSING  PARTNERSHIP  REALTY  FUND TWO
       (Exact name of small business issuer as specified in its charter)

            Maryland                                            52-1365317
(State or other jurisdiction of                               (I.R.S.Employer
 incorporation or organization)                              Identification No.)

                         55 Beattie Place, P.O. Box 1089
                        Greenville, South Carolina 29601
                    (Address of principal executive offices)

                    Issuer's telephone number (864) 239-1000

        Securities registered under Section 12(b) of the Exchange Act:

                                      None

        Securities registered under Section 12(g) of the Exchange Act:

                        17,339 Limited Partnership Units
                                (Title of class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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___

Check if there is no disclosure  of delinquent  filers in response to Item 405
of  Regulation  S-B  contained  in  this  form,  and  no  disclosure  will  be
contained,  to the best of the Partnership's  knowledge in definitive proxy or
information  statements  incorporated  by  reference  in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year.  $53,000

State the aggregate  market value of the voting  partnership  interests  held by
non-affiliates computed by reference to the price at which the partnership units
were sold, or the average bid and asked prices of such  partnership  units as of
December 31, 2004.  No market  exists for the limited  partnership  units of the
Registrant, and, therefore, no aggregate market value can be determined.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None

The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government  regulations.  Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including,  without limitation:  national and local
economic  conditions;  the terms of  governmental  regulations  that  affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates;  financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest;  real estate risks, including variations of real estate values and
the general  economic  climate in local markets and  competition  for tenants in
such  markets;  litigation  including  costs  associated  with  prosecuting  and
defending  claims  and  any  adverse   outcomes,   and  possible   environmental
liabilities.   Readers  should  carefully  review  the  Registrant's   financial
statements and the notes thereto,  as well as the risk factors  described in the
documents  the  Registrant  files  from  time to time  with the  Securities  and
Exchange Commission.

                                     PART I

Item 1.     Business

National Housing  Partnership  Realty Fund Two, a Maryland  Limited  Partnership
(the "Partnership" or the  "Registrant"),  was formed under the Maryland Revised
Uniform  Limited  Partnership Act as of January 22, 1985. On March 15, 1985, the
Partnership  commenced offering 18,300 limited  partnership units, at a price of
$1,000 per interest,  through a public  offering  registered with the Securities
and Exchange  Commission (the  "Offering").  The Offering  terminated on May 22,
1985 with subscriptions for all 18,300 limited partnership units.

On June 3,  1997,  Apartment  Investment  and  Management  Company,  a  Maryland
corporation  and a publicly  held real estate  investment  trust  ("AIMCO"  and,
together  with its  subsidiaries  and  other  controlled  entities,  the  "AIMCO
Group"),  acquired  all of the  issued  and  outstanding  capital  stock  of NHP
Partners,  Inc., a Delaware  corporation ("NHP  Partners"),  and the AIMCO Group
acquired  all  of  the  outstanding   interests  in  NHP  Partners  Two  Limited
Partnership,  a Delaware limited  partnership ("NHP Partners Two"). NHP Partners
owns all of the  outstanding  capital  stock  of the  National  Corporation  for
Housing Partnerships,  a District of Columbia corporation ("NCHP"), which is the
general  partner of The  National  Housing  Partnership,  a District of Columbia
limited  partnership ("NHP" or the "General  Partner").  Together,  NCHP and NHP
Partners Two own all of the outstanding partnership interests in NHP. NHP is the
general partner of the Partnership. As a result of these transactions, the AIMCO
Group acquired control of the general partner of the Partnership and, therefore,
may be deemed to have acquired control of the Partnership.

The  Partnership's  business is to hold  limited  partnership  interests  in two
limited partnerships ("Local Limited Partnerships") at December 31, 2004, one of
which owns and operates a  multi-family  rental  housing  property  ("Property")
which receives one or more forms of assistance from the Federal Government.  Two
of the  partnerships in which the Partnership had invested sold their properties
one each during 2004 and 2003.  NHP is the general  partner of the Local Limited
Partnerships and the Partnership is the principal limited partner.  As a limited
partner,  the  Partnership's  liability  for  obligations  of the Local  Limited
Partnerships is limited to its investment, and the Partnership does not exercise
control over the activities of the Local Limited Partnerships in accordance with
the partnership agreements. See "Item 6. Management's Discussion and Analysis or
Plan of Operation"  for  information  relating to the  Partnership's  rights and
obligations  to  make  additional   contributions  or  loans  to  Local  Limited
Partnerships.

The Partnership's investment objectives are to:

(1)   preserve and protect Partnership capital;

(2)   provide current tax benefits to Limited  Partners to the extent  permitted
      by law,  including,  but not limited to,  deductions that Limited Partners
      may use to offset otherwise taxable income from other sources;

(3)   provide   capital   appreciation   through   increase   in  value  of  the
      Partnership's   investments,   subject   to   considerations   of  capital
      preservation and tax planning; and

(4)   provide  potential cash  distributions  from sales or  refinancings of the
      Partnership's investments and, on a limited basis, from operations.

The  Partnership  does not have any  employees.  Services are  performed for the
Partnership by the General Partner and agents retained by the General Partner.

The  following  is a  schedule  of  the  Property  owned  by the  Local  Limited
Partnerships in which the Partnership is a limited partner:

          SCHEDULE OF PROPERTIES OWNED BY LOCAL LIMITED PARTNERSHIPS
   IN WHICH NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO HAS AN INVESTMENT
<TABLE>
<CAPTION>

                                                                              Occupancy
                                                        Units Authorized     Percentage
                                           Financed,       for Rental    for the Year Ended
                                            Insured
   Property Name, Location    Number of  and Subsidized Assistance Under    December 31,
     and Partnership Name       Units        Under          Section 8       2004     2003

<S>                                <C>         <C>             <C>          <C>       <C>
Caroline Arms                    (B)          (B)              (B)          (B)       (B)
  Jacksonville, Florida
  (Caroline Arms Limited
    Partnership)

Harold House                     (C)          (C)              (C)          (C)       (C)
  Jacksonville, Florida
  (Harold House Limited
    Partnership)

San Juan del Centro              150          (A)              150           99%      99%
  Boulder, Colorado
  (San Juan del Centro Limited
    Partnership)
</TABLE>

(A)   The mortgage is insured by the Federal  Housing  Administration  under the
      provisions of Section 236 of the National Housing Act.

(B) Property sold in February 2003.

(C) Property sold in November 2004.

Ownership Percentages

The following details the Partnership's  ownership  percentages of the remaining
Local Limited  Partnership  and the cost of acquisition of such  ownership.  The
interest is a limited  partner  interest.  Also  included is the total  mortgage
encumbrance,  note payable,  and accrued  interest on the property for the Local
Limited Partnership as of December 31, 2004 (dollar amounts in thousands):
<TABLE>
<CAPTION>

                                   NHP Realty
                                  Fund Two      Cost of                  Note Payable
                                 Percentage    Ownership    Mortgage     and Accrued
Partnership                       Ownership     Interest      Note       Interest (A)
<S>                                 <C>          <C>         <C>            <C>
San Juan del Centro L.P.            94.5%        $ 799       $ 1,061        $4,087
</TABLE>

(A)   See "Item 6.  Management's  Discussion  and Analysis or Plan of Operation"
      for further details.

Although one of the Local  Limited  Partnerships  in which the  Partnership  has
invested  owns an apartment  complex,  which must  compete with other  apartment
complexes for tenants,  government  mortgage interest and rent subsidies make it
possible to rent units to eligible  tenants at below market  rates.  In general,
this insulates the Property from market competition.

Regulation

General

Multifamily  apartment  properties  are subject to various laws,  ordinances and
regulations,  including regulations relating to recreational  facilities such as
swimming  pools,  activity  centers  and other  common  areas.  Changes  in laws
increasing the potential liability for environmental  conditions existing on the
property or increasing the  restrictions on discharges or other  conditions,  as
well  as  changes  in  laws  effecting  development,   construction  and  safety
requirements, may result in significant unanticipated expenditures,  which would
adversely affect the cash flow from operating  activities.  In addition,  future
enactment of rent control or rent  stabilization  laws or other laws  regulating
multi-family  housing may reduce rental revenue or increase  operating  costs in
particular markets.

Regulation of Affordable Housing

The Federal  Housing  Administration  ("FHA") has contracted with the subsidized
rental  project  under  Section  8 of  Title  II of the  Housing  and  Community
Development Act of 1974 to make housing assistance payments to the Local Limited
Partnerships on behalf of qualified tenants. The terms of the agreements are for
one year with annual renewal options.

In 1997 and again in 1999,  Congress  enacted new ways to determine  rent levels
for properties  receiving HUD's rental  assistance under Section 8 of the United
States  Housing Act of 1937 ("Section 8") after the expiration of their original
Section 8 contracts. This new legislation will affect 100% of the units in which
the Partnership has invested. On October 27, 1997, the President signed into law
the Multifamily Assisted Housing Reform and Affordability Act of 1997 (the "1997
Housing Act").  Under the 1997 Housing Act,  certain  properties  assisted under
expiring  Section 8 contracts and which have been  receiving  rents deemed to be
above  comparable  market levels for  unassisted  properties,  and financed with
HUD-insured  mortgage loans, will have, upon the renewal or extension of Section
8 contracts,  rents marked to market. This will be accomplished in various ways,
the goal being to reduce Section 8 rents to comparable  market  levels,  thereby
reducing  the  federal   Section  8  subsidy   obligation,   and   (ideally)  by
simultaneously  lowering,  or  eliminating,  required  debt  service  costs (and
decreasing  operating  costs) as needed to  ensure  financial  viability  at the
reduced rent levels.  The program also incorporates a requirement to perform any
repair or rehabilitation deemed necessary by depositing funds to cover the first
twelve month's work, and making  sufficient  monthly reserve  deposits to ensure
work required in succeeding  years. In 1999,  Congress enacted  legislation (the
"1999 Housing  Act") that  expanded on and clarified the  provisions of the 1997
Housing Act,  including  permitting  properties whose Section 8 rents were below
comparable market rents to increase their Section 8 rents to market.

The 1997 and 1999  Housing  Acts  (together,  the  "Housing  Acts")  permit  the
retention of project  based  Section 8 contracts  for most  properties in rental
markets  with a limited  supply of  affordable  housing or where the tenants are
particularly  vulnerable  populations  including the elderly,  disabled or large
families.  In rental markets without a limited supply of affordable housing, the
Housing Acts provide for phasing out project  based  subsidies,  converting  the
assistance to tenant based assistance or vouchers.  Under a tenant based system,
rental  vouchers  would be issued to  qualified  tenants who then could elect to
reside at  properties  of their  choice,  including  the  property in which they
currently  reside.   Voucher  rent  levels  are  established  by  local  housing
authorities  under  guidelines set by HUD. While the Partnership does not expect
the provisions of the Housing Acts to result in a significant  number of tenants
relocating from the property owned by the Local Limited  Partnership,  there can
be no assurance that the new legislation  will not  significantly  and adversely
affect the operations of the property of the Local Limited Partnership.

The following  table  indicates the year within which the Section 8 rent subsidy
contracts expire:

                                      Subsidized Units       Subsidized Units
                                        Expiring as a          Expiring as a
                       Number of     Percentage of Total       Percentage of
                         Units        Subsidized Units          Total Units

August 2005               150               100%                   100%

All of the units which  receive rent  subsidies  from  Section 8 have  contracts
which expire during the year ending  December 31, 2005. The Housing Acts provide
for  several  options  under which a Local  Limited  Partnership  may elect,  as
appropriate,  to renew its  Section 8  contracts:  (1)  marking  rents up to the
comparable market rent, if current rents are below market; (2) renewing rents at
the current level,  if the level does not exceed  comparable  market rents,  and
receiving an operating cost adjustment factor (an "OCAF") or a budget based rent
increase,  as long as the  rents do not  exceed  comparable  market  rents;  (3)
marking rents down to comparable  market rents;  (4) marking their rents down to
an  "exception  rent" level,  when  comparable  market rents would be too low to
permit  continued  operation of the property  under the Section 8 program,  even
with full debt  restructuring;  or (5) opting out of the section 8 program.  For
the  property  assisted  by  Section  8, but not  subject  to  these  provisions
(including,  but not limited to, the property  which does not have an underlying
HUD insured mortgage, or had been financed through certain state housing finance
agency or bond-financed  mortgage programs),  rents will be continued at current
levels,  plus an OCAF or (in some  instances) a budget based rent  increase.  In
addition,  the property can opt out of the Section 8 program only if very strict
notice  requirements  have been  met,  including  a  requirement  that HUD,  the
tenants,  and the local  governing  body,  be given twelve  months notice of the
Local  Limited  Partnership's  intention  to opt  out of the  program  prior  to
contract termination.

Each of the options  requires an application to HUD, and, to a greater or lesser
extent,  the  fulfillment  of certain  procedural  submission  requirements  and
financial   requirements,   which  must  be  weighed  in  connection   with  the
determination of which option to select.

The Section 8  requirements  are separate  from the  requirements  governing the
underlying  HUD-insured  mortgage  loan,  and any  other  HUD,  state  or  local
requirements, all of which must be fulfilled,  irrespective of the option chosen
with regard to the continuation of Section 8 participation.

HUD Approval and Enforcement

The property owned by the Local Limited Partnership is subject to regulations by
HUD. Under its regulations,  HUD reserves the right to approve the owner and the
manager of HUD-insured and the HUD-assisted properties as well as the principals
(e.g. general partners,  stockholders with 10% or greater interest, officers and
directors) in connection  with the acquisition of a property,  participation  in
HUD programs or the award of a management  contract.  This  approval  process is
commonly  referred to as "2530  Clearance."  HUD  monitors  the  performance  of
properties with HUD-insured  mortgage loans.  HUD also monitors  compliance with
applicable  regulations,  and takes  performance  and compliance into account in
approving the acquisition of management of a HUD-assisted property.

Management believes that the Local Limited Partnership's  property is covered by
adequate fire, flood and property insurance provided by reputable  companies and
with commercially reasonable deductibles and limits.

Item 2.     Property

See "Item 1. Business" for the real estate owned by the Partnership  through the
ownership of limited partnership interests in the Local Limited Partnership.

Item 3.     Legal Proceedings

The  Partnership  is unaware of any pending or  outstanding  litigation  matters
involving  it or  the  underlying  investment  property  of  the  Local  Limited
Partnerships in which the  Partnership  invests that are not of a routine nature
arising in the ordinary course of business.

Item 4.     Submission of Matters to a Vote of Security Holders

During the quarter ended December 31, 2004, no matter was submitted to a vote of
unit holders through the solicitation of proxies or otherwise.

                                     PART II

Item 5.     Market for the  Registrant's  Partnership  Interests  and  Related
            Partnership Matters

      (a)   Units in the Partnership were sold through a public offering.  There
            is no established market for resale of the units in the Partnership.
            Accordingly,  an investor may be unable to sell or otherwise dispose
            of his interest in the Partnership.

      (b)   As of December  31,  2004,  there were 1,090  registered  holders of
            17,339  limited  partnership  units (in  addition to 1133  Fifteenth
            Street Two  Associates  - See "Item 7.  Financial  Statements - Note
            1").  During  the year  ended  December  31,  2004,  384 units  were
            abandoned.

      (c)   No cash  dividends  or  distributions  have been  declared  from the
            inception of the Partnership through December 31, 2004.

Item 6.     Management's Discussion and Analysis or Plan of Operation

This item should be read in conjunction with the financial  statements and other
items contained elsewhere in this report.

Liquidity and Capital Resources

As of December  31,  2004,  the  Partnership  retained an interest in two of its
original twenty-one Local Limited Partnerships. The property in which one of the
Local  Limited  Partnerships  has  invested  in  receives  one or more  forms of
assistance  from  the  Federal  Government.  As  a  result,  the  Local  Limited
Partnership's  ability to transfer funds to the  Partnership in the form of cash
distributions,   loans,   or  advances   is   generally   restricted   by  these
government-assistance    programs.   These   restrictions   could   impact   the
Partnership's  ability  to meet  its cash  obligations  given  the low  level of
reserves at the Partnership level. The General Partner monitors  developments in
the area of legal and regulatory compliance. For example, the Sarbanes-Oxley Act
of 2002  mandates  or suggests  additional  compliance  measures  with regard to
governance,  disclosure,  audit and other areas. In light of these changes,  the
Partnership expects that it will incur higher expenses related to compliance.

Distributions  received in excess of investment  in Local  Limited  Partnerships
represent the Partnership's proportionate share of the excess cash available for
distribution from the Local Limited Partnerships.  As a result of the use of the
equity method of accounting for the  Partnership's  investments,  investments in
one of the two remaining Local Limited Partnerships have been reduced to zero as
of December 31, 2004. For these  investments,  cash  distributions  received are
recorded in income as  distributions  received in excess of  investment in Local
Limited  Partnerships.  If  these  investments  had not  been  reduced  to zero,
distributions received would be recorded as distributions from the Local Limited
Partnership  in the  statement of cash flow and would  reduce the  Partnership's
investment on the balance  sheet.  A distribution  of  approximately  $3,000 was
received  during  the  year  ended  December  31,  2004  from  a  Local  Limited
Partnership, which was sold several years ago as a result of some remaining cash
it had not used.  Distributions  of approximately  $1,113,000  consisting of the
Partnership's share of net proceeds from the sale of Caroline Arms were received
during the year ended December 31, 2003. In addition,  the Partnership  received
approximately  $3,000 from Harold  House  Limited  Partnership  in  repayment of
advances  and  accrued  interest  deemed by the  Partnership  as  unlikely to be
collected  and  treated  as  an  additional  investment  in  the  Local  Limited
Partnership.  The receipt of  distributions  in the future is dependent upon the
operations of the  underlying  properties of the Local Limited  Partnerships  to
generate  sufficient  cash for  distribution  in accordance  with applicable HUD
regulations.

Cash and cash equivalents amounted to approximately $17,000 at December 31, 2004
compared to $53,000 at December 31, 2003. The decrease of approximately  $36,000
was due to approximately  $39,000 of cash used in operating activities partially
offset by approximately  $3,000 of cash provided by investing  activities.  Cash
used in operating activities consisted of the payment of non-resident income tax
withholding  to the state of Colorado on behalf of limited  partners,  partially
offset  by  reimbursement  by  limited  partners  of  non-resident   income  tax
withholding  paid by the  Partnership  in 2003 to the state of North Carolina on
behalf of limited partners.  Cash provided by investing  activities consisted of
the receipt of a distribution from a Local Limited  Partnership.  The ability of
the Partnership to meet its on-going cash requirements in excess of cash on hand
depends  upon  the  future  receipt  of  distributions  from the  Local  Limited
Partnerships  or proceeds from a sale or refinancing of the underlying  property
of the  Local  Limited  Partnerships.  The  Partnership's  only  other  form  of
liquidity  is  advances  from the General  Partner.  The  General  Partner  will
evaluate  advancing the Partnership  additional  funds as such funds are needed,
but is in no way legally obligated to make such advances.

Net  cash  used  in  operations  for  the  year  ended  December  31,  2004  was
approximately  $39,000 compared to  approximately  $1,180,000 for the year ended
December 31, 2003.  The decrease in cash used in  operations is primarily due to
the payment of administrative  and reporting fees payable in 2003 to the General
Partner from the  Partnership's  portion of proceeds  received  from the sale of
Caroline Arms noted below.

On November  22, 2004,  Harold House  Limited  Partnership  sold its  investment
property to a third party for  approximately  $2,220,000.  After paying  closing
costs,  the net  proceeds  were  used to  repay  the  mortgage  encumbering  the
property,  the deferred  acquisition note and accrued interest thereon,  which a
third party held,  and other  liabilities  of the property and the Local Limited
Partnership.  Subsequent  to  December  31,  2004,  the  Partnership  received a
distribution of approximately $125,000. It is anticipated that the Local Limited
Partnership will be completely liquidated by June 30, 2005.

On February 13, 2003  Caroline  Arms  Limited  Partnership  sold its  investment
property to a third party for  $4,600,000.  After paying closing costs,  the net
proceeds  were used to repay the mortgage  encumbering  the property  along with
other  liabilities  of the  property  and  the  Local  Limited  Partnership.  In
accordance  with an  agreement  reached  with the note  holder  of the  deferred
acquisition  note 60% or  approximately  $1,670,000  of the  remainder  was paid
against the  principal  of this note and 40%, or  approximately  $1,113,000  was
distributed  to the  Partnership.  An  additional  $198,000  was received by the
Partnership  for the repayment of advances to Caroline Arms Limited  Partnership
which had previously been deemed unlikely to be collected and were treated as an
additional  investment in the Local Limited  Partnership.  The funds received by
the Partnership were used to pay certain of its liabilities.  As of December 31,
2003, the Local Limited Partnership had been completely liquidated.

San Juan Del Centro  Limited  Partnership  has a note which was  executed by the
Local  Limited  Partnership  with the seller as part of the  acquisition  of the
property  by the  Local  Limited  Partnership.  The note is a  nonrecourse  note
secured  by a  security  interest  in the  Partnership's  interest  in the Local
Limited  Partnership and is subordinated to the respective  mortgage note on the
property  for as long as the  mortgage  note is insured by HUD. Any payments due
from  project  income  are  payable  from  surplus  cash,  as defined by the HUD
Regulatory  Agreement.  Neither the Local Limited  Partnership  nor any partners
thereof,  present or future assume any personal liability for the payment of the
note.  The note was due December 20, 1999.  The note is in default and the Local
Limited Partnership interest is subject to potential  foreclosure.  Continuation
of the Local Limited  Partnership's  operations in the present form is dependent
on its ability to extend the maturity date of the  respective  note, or to repay
or refinance the note.

As a result of the conditions above,  there is substantial doubt about the Local
Limited  Partnership's  ability to continue as a going  concern.  The  financial
statements do not include any adjustments to reflect the possible effects on the
recoverability  and  classification of assets or amounts and  classifications of
liabilities  that may result from this  uncertainty.  On  February  14, 2005 the
Local Limited Partnership entered into a contract,  with an affiliated party, to
sell its investment property during 2005 for a purchase price of $7,000,000.

The  General  Partner  advanced  approximately  $60,000  during  the year  ended
December 31, 2003.  Interest is charged on borrowings at prime plus 2% (7.25% at
December  31,  2004).  Interest  expense was less than $1,000 for the year ended
December 31, 2003. During 2003, the Partnership repaid approximately  $73,000 of
advances  from the General  Partner.  There were no balances owed or paid during
2004.

As of December 31, 2004, the Partnership owes the General Partner  approximately
$448,000 for administrative and reporting services performed. The payment of the
unpaid  administrative  and reporting fees will most likely  result,  if at all,
from the sale or  refinancing  of the  underlying  property of the Local Limited
Partnership  rather than  through  recurring  operations.  During the year ended
December 31, 2003 the Partnership repaid  approximately  $933,000 to the General
Partner  from the proceeds of the sale of the  property  owned by Caroline  Arms
Limited  Partnership as discussed above.  There were no such payments during the
year ended December 31, 2004.

Results of Operations

The  Partnership  originally  invested  as a limited  partner  in Local  Limited
Partnerships which operated  twenty-one rental housing  properties.  At December
31, 2004,  the  Partnership  continued to hold an interest in two Local  Limited
Partnerships.  To the extent  the  Partnership  still has a carrying  basis in a
respective Local Limited  Partnership,  results of operations are  significantly
impacted  by the  Partnership's  share of the  profits  or  losses  in the Local
Limited  Partnership.  These profits or losses include  depreciation and accrued
note  payable  interest  expense  which are  noncash in nature.  However,  as of
December 31, 2004,  the  Partnership  had no carrying basis in its investment in
one of the two Local Limited  Partnerships and, therefore,  reflected no results
of  operations  for its  share  of  profits  or  losses  for the  Local  Limited
Partnership.

The  Partnership  had net  income of  approximately  $19,000  for the year ended
December 31, 2004,  compared to net income of  approximately  $1,219,000 for the
year ended  December 31, 2003.  Net income per unit of limited  partnership  was
$1.07 for the year ended  December 31, 2004 compared to net income of $66.23 per
limited  partnership  unit for the year ended December 31, 2003. The decrease in
net income for the year ended December 31, 2004 is attributable to a decrease in
profits  recognized  from  Local  Limited  Partnerships,  interest  received  on
advances  to Local  Limited  Partnerships  and the receipt of  distributions  in
excess of  investment  in Local  Limited  Partnerships.  During  the year  ended
December 31, 2004 the Partnership  recognized  approximately  $50,000 of profits
from its investment in Harold House Limited Partnership.  The profits recognized
are comprised of the Partnership's  share of the profits of Harold House Limited
Partnership of approximately $409,000 offset against prior years' net losses not
taken of  approximately  $359,000.  During the year ended  December 31, 2003 the
Partnership recognized approximately $1,244,000 of profits and interest received
on advances  from its  investment  in Carolina  Arms  Limited  Partnership.  The
profits recognized were the Partnership's  share of the profits of Carolina Arms
Limited Partnership of approximately  $2,779,000 offset against prior years' net
losses not taken of approximately $1,561,000.  The Partnership did not recognize
approximately  $64,000 of its allotted  share of losses from San Juan Del Centro
Local  Limited  Partnership  for the year ended  December  31,  2004 and did not
recognize approximately $104,000 of its allocated share of losses from two Local
Limited  Partnerships for the year ended December 31, 2003, as the Partnership's
net carrying basis in these Local Limited  Partnerships had been reduced to zero
for the respective periods.  The Partnership's share of losses from San Juan Del
Centro  Local  Limited  Partnership,  if not limited to its  investment  account
balance, would have increased approximately $7,000 between periods. The increase
is primarily  due to a decrease in revenues at the  property  owned by the Local
Limited Partnership.

Recent Accounting Pronouncements

As of December 31, 2004,  the  Partnership  adopted FASB  Interpretation  No. 46
"Consolidation  of  Variable  Interest  Entities"  (or "FIN 46") and applied its
requirements to all Local Limited  Partnerships in which the Partnership  held a
variable interest. FIN 46 addresses the consolidation by business enterprises of
variable interest entities. Generally, a variable interest entity, or VIE, is an
entity with one or more of the following  characteristics:  (a) the total equity
investment  at risk is not  sufficient  to  permit  the  entity to  finance  its
activities without additional subordinated financial support; (b) as a group the
holders of the equity  investment at risk lack (i) the ability to make decisions
about  an  entity's  activities  through  voting  or  similar  rights,  (ii) the
obligation  to absorb the expected  losses of the entity,  or (iii) the right to
receive the expected residual returns of the entity; or (c) the equity investors
have voting rights that are not  proportional  to their  economic  interests and
substantially all of the entity's activities either involve, or are conducted on
behalf of, an investor that has  disproportionately  few voting  rights.  FIN 46
requires a VIE to be consolidated in the financial statements of the entity that
is determined to be the primary  beneficiary of the VIE. The primary beneficiary
generally  is the  entity  that will  receive a majority  of the VIE's  expected
losses, receive a majority of the VIE's expected residual returns, or both. Upon
adoption  of  FIN  46,  the  Partnership   determined  that  its  Local  Limited
Partnership in which it held an investment was not a VIE.

Item 7.     Financial Statements

NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO

LIST OF FINANCIAL STATEMENTS

      Report of Independent Registered Public Accounting Firm

      Balance Sheet - December 31, 2004

      Statements of Operations - Years ended December 31, 2004 and 2003

      Statements of Changes in Partners'  Capital  (Deficiency)  - Years ended
      December 31, 2004 and 2003

      Statements of Cash Flows - Years ended December 31, 2004 and 2003

      Notes to Financial Statements



<PAGE>


           Report of Independent Registered Public Accounting Firm



To The Partners of
National Housing Partnership Realty Fund Two
Indianapolis, Indiana


We have audited the accompanying  balance sheet of National Housing  Partnership
Realty Fund Two (the  Partnership)  as of  December  31,  2004,  and the related
statements of operations,  changes in partners' capital  (deficiency),  and cash
flows for each of the two years in the period ended  December  31,  2004.  These
financial statements are the responsibility of the Partnership's management. Our
responsibility  is to express an opinion on these financial  statements based on
our audits. The financial  statements of the remaining Local Limited Partnership
at December 31, 2004 have been audited by other  auditors  whose report has been
furnished to us; insofar as our opinion on the financial  statements  relates to
the amounts included for this Local Limited  Partnership,  it is based solely on
their report.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  We were not engaged to perform an
audit of the Partnership's internal control over financial reporting.  Our audit
included  consideration of internal control over financial  reporting as a basis
for designing audit  procedures that are appropriate in the  circumstances,  but
not for the  purpose  of  expressing  an  opinion  on the  effectiveness  of the
Partnership's internal control over financial reporting. Accordingly, we express
no such opinion.  An audit also includes  examining,  on a test basis,  evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits  and the  report of other  auditors  provide a  reasonable  basis for our
opinion.

In our  opinion,  based upon our audits  and the report of other  auditors,  the
financial statements referred to above present fairly, in all material respects,
the  financial  position  of  National  Housing  Partnership  Realty Fund Two at
December 31, 2004, and the results of its operations and its cash flows for each
of the two years in the period ended December 31, 2004 in conformity  with U. S.
generally accepted accounting principles.

As discussed in Note 8 to the  financial  statements,  the due date of the Local
Limited  Partnership's note payable has expired,  and therefore,  the note is in
default.  Continuation  of the Local  Limited  Partnership's  operations  in its
present form is  dependent  on its ability to extend the  maturity  date of this
note or repay or refinance the note. These conditions  raise  substantial  doubt
about its ability to continue as a going  concern.  The financial  statements do
not  include  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.



                                                          /s/Ernst & Young LLP

Indianapolis, Indiana
March 28, 2005


<PAGE>




                 NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                                  Balance Sheet
                                December 31, 2004
                        (in thousands, except unit data)



                                        ASSETS
Cash and cash equivalents                                            $ 17
Investments in and advances to Local Limited
  Partnerships (Note 2)                                                 50
Receivables - limited partners                                         202
                                                                     $ 269


                    LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY)
Liabilities:
  Accrued expenses                                                   $ 4
  Administrative and reporting fees payable to
   General Partner (Note 3)                                            448
                                                                       452
Partners' capital (deficiency):
  General Partner                                                      640
  Original Limited Partner                                            (170)
  Other Limited Partners - 17,339 investment units                    (653)
                                                                      (183)
                                                                      $ 269

                See Accompanying Notes To Financial Statements



<PAGE>


                 NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                            Statements of Operations
                      (in thousands, except per unit data)
<TABLE>
<CAPTION>


                                                               Years Ended December 31,
                                                                   2004         2003
REVENUES:
<S>                                                      <C>       <C>        <C>
  Share of profits from Local Limited Partnerships (Note 2)        $ 50       $ 1,218
  Interest received on advances to Local Limited Partnerships
    (Note 2)                                                          --           68
                                                                      50        1,286
COSTS AND EXPENSES:
  Administrative and reporting fees to General Partner
    (Note 3)                                                          11           13
  Other operating expenses                                            23           83
                                                                      34           96

Income from partnership operations                                    16        1,190
Distribution in excess of investment in Local Limited
  Partnerships (Note 2)                                                3           29

NET INCOME                                                         $ 19       $ 1,219

ALLOCATION OF NET INCOME
  General Partner                                                  $ --         $ 12
  Original Limited Partner                                            --           12
  Other Limited Partners                                              19        1,195

                                                                   $ 19       $ 1,219
PER LIMITED PARTNERSHIP UNIT:
  NET INCOME PER OTHER LIMITED PARTNERSHIP UNIT                   $ 1.07      $ 66.23

                See Accompanying Notes To Financial Statements
</TABLE>



<PAGE>


                 NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
             Statements Changes of Partners' Capital (Deficiency)
                        (in thousands, except unit data)

<TABLE>
<CAPTION>

                                                     1133
                                   The National   Fifteenth       Other
                                     Housing      Street Two     Limited
                                   Partnership    Associates     Partners        Total

Capital (deficiency) at
<S>       <C>                         <C>           <C>          <C>            <C>
  January 1, 2003                     $ 628         $ (182)      $(1,867)       $(1,421)

Net income for the year ended
  December 31, 2003                       12            12         1,195          1,219

Capital (deficiency) at
  December 31, 2003                      640          (170)         (672)          (202)

Net income for the year ended
  December 31, 2004                       --            --            19             19

Capital (deficiency) at               $ 640         $ (170)       $ (653)       $ (183)
  December 31, 2004

Percentage interest at
  December 31, 2004 and 2003              1%            1%            98%          100%
                                          (A)           (B)           (C)
</TABLE>


(A)   General Partner

(B)   Original Limited Partner

(C)   Consists of 17,339 and 17,723  investment  units at December  31, 2004 and
      2003, respectively. See "Note 4" for further information.

                See Accompanying Notes To Financial Statements



<PAGE>



                 NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                            Statements of Cash Flows
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                    Years Ended December 31,
                                                                      2004           2003
CASH FLOWS FROM OPERATING ACTIVITIES:
  Interest received on advances to the Local Limited
<S>                                                                   <C>            <C>
     Partnership                                                      $ --           $ 68
  Payment of administrative and reporting fees                           --            (933)
  Payment of non-resident income tax withholding to the
   state of Colorado and North Carolina on behalf
     of limited partners                                                (27)           (182)
  Reimbursement by limited partners of non-resident income
    Tax withholding paid by the Partnership to the State of
    North Carolina on behalf of limited partners                          7              --
  Operating expenses paid                                               (19)           (132)
  Payment of interest on advances payable to General Partner             --              (1)
        Net cash used in operating activities                           (39)         (1,180)

CASH FLOWS FROM INVESTING ACTIVITIES:
  Distributions from Local Limited Partnerships                           3           1,113
  Repayment of advances to Local Limited Partnership                     --             133
        Net cash provided by investing activities                         3           1,246

CASH FLOWS FROM FINANCING ACTIVITIES:
  Repayment of advances from General Partner                             --             (73)
  Proceeds from advances from General Partner                            --              60
        Net cash used in financing activities                            --             (13)

NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                    (36)             53
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                           53              --

CASH AND CASH EQUIVALENTS AT END OF YEAR                              $ 17           $ 53

RECONCILIATION OF NET INCOME TO NET CASH USED IN
  OPERATING ACTIVITIES:
   Net income                                                         $ 19          $ 1,219
   Adjustments to reconcile net income to net cash
     used in operating activities:
      Share of profits from Local Limited Partnerships                  (50)         (1,218)
      Distributions in excess of investment in Local Limited
        Partnerships                                                     (3)            (29)
      Changes in operating assets and liabilities:
        Decrease in accrued interest on advances
          from General Partner                                           --              (1)
        Increase (decrease) in administrative and reporting
          fees payable                                                   11            (920)
        Increase in receivables - limited partners                      (20)           (182)
        Increase (decrease) in other accrued expenses                     4             (49)
        Total adjustments                                               (58)         (2,399)
Net cash used in operating activities                                $ (39)         $(1,180)


                See Accompanying Notes To Financial Statements
</TABLE>
<PAGE>

                 NATIONAL HOUSING PARTNERSHIP REALTY FUND TWO
                          Notes to Financial Statements
                                December 31, 2004


(1)   SUMMARY OF PARTNERSHIP ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

Organization

National Housing  Partnership  Realty Fund Two (the  "Partnership") is a limited
partnership organized under the laws of the State of Maryland under the Maryland
Revised Uniform Limited Partnership Act on January 22, 1985. The Partnership was
formed for the  purpose  of raising  capital by  offering  and  selling  limited
partnership  units and then investing in limited  partnerships  ("Local  Limited
Partnerships"),  each of which owns and  operates  an  existing  rental  housing
project  which is  financed  and/or  operated  with one or more  forms of rental
assistance or financial assistance from the U.S. Department of Housing and Urban
Development ("HUD").

The General  Partner was  authorized  to raise  capital for the  Partnership  by
offering  and  selling  to  additional  limited  partners  not more than  18,300
interests at a price of $1,000 per interest.  During 1985, the sale of units was
closed after the sale of 18,300 units to limited partners.

During 1985, the  Partnership  acquired 94.5% (98% with respect to allocation of
losses)  of the  limited  partnership  interests  in  twenty-one  Local  Limited
Partnerships.  At December  31,  2004,  the  Partnership  retained an  ownership
interest in two of the original Local Limited Partnerships.

On June 3,  1997,  Apartment  Investment  and  Management  Company,  a  Maryland
corporation  and a publicly  held real estate  investment  trust  ("AIMCO"  and,
together  with its  subsidiaries  and  other  controlled  entities,  the  "AIMCO
Group"),  acquired  all of the  issued  and  outstanding  capital  stock  of NHP
Partners,  Inc., a Delaware  corporation ("NHP  Partners"),  and the AIMCO Group
acquired  all  of  the  outstanding   interests  in  NHP  Partners  Two  Limited
Partnership,  a Delaware limited  partnership ("NHP Partners Two"). NHP Partners
owns all of the  outstanding  capital  stock  of the  National  Corporation  for
Housing Partnerships,  a District of Columbia corporation ("NCHP"), which is the
general  partner of The  National  Housing  Partnership,  a District of Columbia
limited  partnership ("NHP" or the "General  Partner").  Together,  NCHP and NHP
Partners Two own all of the outstanding partnership interests in NHP. NHP is the
general partner of the Partnership. As a result of these transactions, the AIMCO
Group has  acquired  control  of the  general  partner of the  Partnership  and,
therefore, may be deemed to have acquired control of the Partnership.

The Original  Limited  Partner of the  Partnership is 1133 Fifteenth  Street Two
Associates,  whose  limited  partners were key employees of NCHP at the time the
Partnership was formed and whose general partner is NHP.

Investments in Local Limited  Partnerships  is accounted for by using the equity
method and thus are  carried at cost less the  Partnership's  share of the Local
Limited  Partnership's  losses and distributions plus the Partnership's share of
the Local Limited  Partnership's income (see "Note 2"). An investment account is
maintained for the limited partnership investments and losses are not taken once
an investment account has been decreased to zero. Cash distributions are limited
by the Regulatory  Agreements  between the Local Limited  Partnership and HUD to
the extent of surplus cash as defined by HUD.  Distributions  received  from the
Local Limited  Partnerships in which the  Partnership's  investment  account has
been  decreased  to zero are recorded as revenue in the year  received.  Once an
investment account has been reduced to zero, profits reported by a Local Limited
Partnership  are not  recognized  by the  Partnership  until such profits  equal
losses not recognized plus distributions  received and previously  recognized as
revenue. Advances to the Local Limited Partnership are included with Investments
in the Local  Limited  Partnerships  to the  extent  that the  advances  are not
temporary advances of working capital.

Cash and Cash Equivalents

The  Partnership  considers all highly liquid debt  instruments  purchased  with
original maturities of three months or less to be cash equivalents.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  requires  management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.

Fair Value of Financial Instruments

Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures About
Fair Value of Financial  Instruments",  as amended by SFAS No. 119, "Disclosures
about Derivative Financial Instruments and Fair Value of Financial Instruments",
requires  disclosure  of fair value  information  about  financial  instruments,
whether or not recognized in the balance  sheet,  for which it is practicable to
estimate  the fair  value.  Fair  value is  defined in the SFAS as the amount at
which  the  instruments  could be  exchanged  in a current  transaction  between
willing  parties,  other than in a forced or liquidation  sale. The  Partnership
believes that the carrying  amount of other assets and  liabilities  reported on
the balance sheet that require such disclosure approximate fair value.

Segment Reporting

SFAS  No.  131,   "Disclosure  about  Segments  of  an  Enterprise  and  Related
Information"  established standards for the way that public business enterprises
report information about operating  segments in annual financial  statements and
requires that those  enterprises  report  selected  information  about operating
segments in interim financial reports.  SFAS No. 131 also established  standards
for related disclosures about products and services,  geographic areas and major
customers.  Under the criteria  established by SFAS No. 131, the Partnership has
only one reportable segment.

Recent Accounting Pronouncements

As of December 31, 2004,  the  Partnership  adopted FASB  Interpretation  No. 46
"Consolidation  of  Variable  Interest  Entities"  (or "FIN 46") and applied its
requirements to all Local Limited  Partnerships in which the Partnership  held a
variable interest. FIN 46 addresses the consolidation by business enterprises of
variable interest entities. Generally, a variable interest entity, or VIE, is an
entity with one or more of the following  characteristics:  (a) the total equity
investment  at risk is not  sufficient  to  permit  the  entity to  finance  its
activities without additional subordinated financial support; (b) as a group the
holders of the equity  investment at risk lack (i) the ability to make decisions
about  an  entity's  activities  through  voting  or  similar  rights,  (ii) the
obligation  to absorb the expected  losses of the entity,  or (iii) the right to
receive the expected residual returns of the entity; or (c) the equity investors
have voting rights that are not  proportional  to their  economic  interests and
substantially all of the entity's activities either involve, or are conducted on
behalf of, an investor that has  disproportionately  few voting  rights.  FIN 46
requires a VIE to be consolidated in the financial statements of the entity that
is determined to be the primary  beneficiary of the VIE. The primary beneficiary
generally  is the  entity  that will  receive a majority  of the VIE's  expected
losses, receive a majority of the VIE's expected residual returns, or both. Upon
adoption  of  FIN  46,  the  Partnership   determined  that  its  Local  Limited
Partnership in which it held an investment was not a VIE.

(2)   INVESTMENTS IN AND ADVANCES TO LOCAL LIMITED PARTNERSHIPS

During 1985, the Partnership  acquired a 94.5% limited partnership interest (98%
with respect to allocation of losses) in twenty-one Local Limited  Partnerships.
At December 31, 2004, the Partnership continues to hold an interest in two Local
Limited  Partnerships:  San Juan del Centro Limited Partnership and Harold House
Limited Partnership.

On November  22, 2004,  Harold House  Limited  Partnership  sold its  investment
property to a third party for  approximately  $2,220,000.  After paying  closing
costs,  the net  proceeds  were  used to  repay  the  mortgage  encumbering  the
property,  the deferred  acquisition note and accrued interest thereon,  which a
third party held,  and other  liabilities  of the property and the Local Limited
Partnership.  The  Local  Limited  Partnership  will  distribute  the  remaining
proceeds.   Subsequent  to  December  31,  2004,  the  Partnership   received  a
distribution of approximately  $125,000  relating to the sale. It is anticipated
that the Local Limited  Partnership  will be  completely  liquidated by June 30,
2005.

On February 13, 2003,  Caroline  Arms Limited  Partnership  sold its  investment
property to a third party for  $4,600,000.  After paying closing costs,  the net
proceeds  were used to repay the mortgage  encumbering  the property  along with
other  liabilities  of the  property  and  the  Local  Limited  Partnership.  In
accordance  with an  agreement  reached  with the note  holder  of the  deferred
acquisition  note 60% or  approximately  $1,670,000  of the  remainder  was paid
against the  principal of this note and 40%, or  approximately  $1,113,000,  was
distributed  to the  Partnership.  An  additional  $198,000  was received by the
Partnership  for the repayment of advances to Caroline Arms Limited  Partnership
which had previously been deemed unlikely to be collected and were treated as an
additional  investment in the Local Limited  Partnership.  The funds received by
the Partnership were used to pay certain of its liabilities.  As of December 31,
2003, the Local Limited Partnership has been completely liquidated.

San Juan Del Centro  Limited  Partnership  has a note which was  executed by the
Local Limited  Partnership  with the former owners as part of the acquisition of
the property by the Local Limited Partnership. The note bears simple interest at
the rate of 9% per annum.  The note is a nonrecourse  note secured by a security
interest  in  all  partnership   interests  in  the  respective   Local  Limited
Partnership and is  subordinated to the respective  mortgage note for as long as
the mortgage  note is insured by HUD.  Any payments due from project  income are
payable from the respective Local Limited Partnership's surplus cash, as defined
by the respective HUD Regulatory  Agreement.  The note may be repaid in whole or
in part at any time without penalty.  Neither the Local Limited  Partnership nor
any partner thereof,  present or future,  assumes any personal liability for the
payment of the note. The note is in default and the Local Limited  Partnership's
interest is subject to potential foreclosure.  Continuation of the Local Limited
Partnership's operation in the present form depends on its ability to extend the
maturity date of the  respective  note,  or to repay or refinance the note.  The
financial  statements do not include any adjustments which might result from the
outcome  of  this  uncertainty.   The  Local  Limited  Partnership  is  actively
attempting  to sell the net  assets.  On  February  14,  2005 the Local  Limited
Partnership  entered  into a contract,  with an  affiliated  party,  to sell its
investment property during 2005 for a purchase price of $7,000,000.

The note matured as follows (in thousands):
<TABLE>
<CAPTION>

Local Partnership                            Due Date   Note Amount  Accrued Interest

<S>                                          <C>   <C>     <C>            <C>
San Juan Del Centro Limited Partnership      12/20/99      $1,458         $2,629
</TABLE>

Subsequent  to December 31,  2004,  the note  payable  encumbering  Harold House
Limited Partnership was repaid in full.

Since the Partnership,  as a limited partner, does not exercise control over the
activities of the Local Limited  Partnerships in accordance with the partnership
agreements,  these investments are accounted for using the equity method.  Thus,
the  investment  is  carried at cost less the  Partnership's  share of the Local
Limited  Partnership  losses and distributions  plus the Partnership's  share of
Local Limited Partnership income.  However, since the Partnership is not legally
liable  for  the  obligations  of  the  Local  Limited  Partnership,  and is not
otherwise  committed to provide additional support, it does not recognize losses
once its  investment in the Local Limited  Partnership  reduced for its share of
losses and cash distributions, reaches zero. Once an investment account has been
reduced  to  zero,  income  reported  by a  Local  Limited  Partnership  is  not
recognized by the  Partnership  until such income  equals losses not  recognized
plus distributions  received and previously  recognized as revenue. As a result,
the Partnership did not recognize  approximately $64,000 of losses from San Juan
Del Centro Limited  Partnership  during 2004. During the year ended December 31,
2004, the Partnership's  share of profits from Harold House Limited  Partnership
was  approximately  $409,000  offset  against  prior  years  losses not taken of
approximately $359,000. During the year ended December 31, 2003, the Partnership
did not  recognize  approximately  $104,000  of losses  from two  Local  Limited
Partnerships.  During the year ended December 31, 2003, the Partnership's  share
of profits from Caroline Arms Limited  Partnership was approximately  $2,779,000
offset against prior year losses not taken of  approximately  $1,561,000.  As of
December 31, 2004 and 2003, the  Partnership  has not  recognized  approximately
$1,527,000 and $1,822,000,  respectively,  of its allocated  cumulative share of
losses from one and two Local Limited  Partnerships  in which its investment has
been reduced to zero.

During 1993 the Partnership re-evaluated the timing of the collectibility of the
advances and determined, based on the Local Limited Partnership operations, that
such  advances are not likely to be  collected.  For  accounting  purposes,  the
Partnership  treated the advance balance as additional  investments in the Local
Limited Partnerships. The balance was then reduced to zero, with a corresponding
charge to operations to reflect a portion of the previously  unrecognized losses
on  investments.  At  December  31,  2004,  there were no  advances to the Local
Limited Partnerships owed to the Partnership.

Summaries of the combined  balance  sheet of the  aforementioned  Local  Limited
Partnerships as of December 31, 2004 and the combined  results of operations for
the years ended December 31, 2004 and 2003, are as follows:

                           CONDENSED COMBINED BALANCE SHEET
                          OF THE LOCAL LIMITED PARTNERSHIPS
                                    (in thousands)
                                                               December 31, 2004
Assets:
  Land                                                                $ 779
  Buildings and improvements, net of accumulated
   depreciation of approximately $2,838                                2,228
  Other                                                                  733
  Assets in liquidation                                                   75

                                                                      $ 3,815
Liabilities:
  Mortgage note payable                                              $ 1,061
  Note payable                                                         1,458
  Accrued interest on note payable                                     2,629
  Other liabilities                                                      280

Partners' Deficit:
  National Housing Partnership Realty Fund Two                        (1,456)
  Other partners                                                        (157)
                                                                      (1,613)

                                                                     $ 3,815


                     CONDENSED COMBINED STATEMENTS OF OPERATIONS
                          OF THE LOCAL LIMITED PARTNERSHIPS
                                    (in thousands)
<TABLE>
<CAPTION>

                                                         Years Ended December 31,
                                                           2004             2003
                                                                         (Restated)
<S>                                                       <C>             <C>
Revenues                                                  $ 970           $ 1,114

Expenses:
  Operating expenses                                         507              655
  Interest, taxes and insurance                              312              312
  Depreciation                                               217              205
                                                           1,036            1,172

Loss from continuing operations                              (66)             (58)
Loss from discontinued operations                            (63)             (88)
Gain on sale of discontinued operations                      499              262
Gain on forgiveness of debt of discontinued
  Operations                                                  --            2,720

Net income                                                $ 370           $ 2,836
</TABLE>

The condensed  combined  statement of operations  for December 31, 2003 has been
restated to reflect the  operations of Harold House Limited  Partnership,  which
was sold  during  2004,  as  discontinued  operations.  The  combined  financial
statements of the Local Limited  Partnerships  are prepared on the accrual basis
of accounting.  One of the Local Limited  Partnerships  operates  rental housing
projects  organized  under Section 236 of the National  Housing Act. Each of the
Local Limited  Partnerships  receives some form of rental  assistance  from HUD.
During the year ended December 31, 2004 and 2003, the projects  received a total
of approximately $644,000 and $685,000,  respectively, of rental assistance from
HUD.

Regulation of Affordable Housing

The Federal  Housing  Administration  ("FHA") has contracted with the subsidized
rental  project  under  Section  8 of  Title  II of the  Housing  and  Community
Development Act of 1974 to make housing assistance payments to the Local Limited
Partnerships on behalf of qualified tenants.  The terms of the agreement are for
one year with annual renewal options.

In 1997 and again in 1999,  Congress  enacted new ways to determine  rent levels
for properties  receiving HUD's rental  assistance under Section 8 of the United
States  Housing Act of 1937 ("Section 8") after the expiration of their original
Section 8 contracts. This new legislation will affect 100% of the units in which
the Partnership has invested. On October 27, 1997, the President signed into law
the Multifamily Assisted Housing Reform and Affordability Act of 1997 (the "1997
Housing Act").  Under the 1997 Housing Act,  certain  properties  assisted under
expiring  Section 8 contracts and which have been  receiving  rents deemed to be
above  comparable  market levels for  unassisted  properties,  and financed with
HUD-insured  mortgage loans, will have, upon the renewal or extension of Section
8 contracts,  rents marked to market. This will be accomplished in various ways,
the goal being to reduce Section 8 rents to comparable  market  levels,  thereby
reducing  the  federal   Section  8  subsidy   obligation,   and   (ideally)  by
simultaneously  lowering,  or  eliminating,  required  debt  service  costs (and
decreasing  operating  costs) as needed to  ensure  financial  viability  at the
reduced rent levels.  The program also incorporates a requirement to perform any
repair or rehabilitation deemed necessary by depositing funds to cover the first
twelve month's work, and making  sufficient  monthly reserve  deposits to ensure
work required in succeeding  years. In 1999,  Congress enacted  legislation (the
"1999 Housing  Act") that  expanded on and clarified the  provisions of the 1997
Housing Act,  including  permitting  properties whose Section 8 rents were below
comparable market rents to increase their Section 8 rents to market.

The 1997 and 1999  Housing  Acts  (together,  the  "Housing  Acts")  permit  the
retention of project  based  Section 8 contracts  for most  properties in rental
markets  with a limited  supply of  affordable  housing or where the tenants are
particularly  vulnerable  populations  including the elderly,  disabled or large
families.  In rental markets without a limited supply of affordable housing, the
Housing Acts provide for phasing out project  based  subsidies,  converting  the
assistance to tenant based assistance or vouchers.  Under a tenant based system,
rental  vouchers  would be issued to  qualified  tenants who then could elect to
reside at  properties  of their  choice,  including  the  property in which they
currently  reside.   Voucher  rent  levels  are  established  by  local  housing
authorities  under  guidelines set by HUD. While the Partnership does not expect
the provisions of the Housing Acts to result in a significant  number of tenants
relocating from the property owned by the Local Limited  Partnership,  there can
be no assurance that the new legislation  will not  significantly  and adversely
affect the operations of the property of the Local Limited Partnership.

The following  table  indicates the year within which the Section 8 rent subsidy
contracts expire:

                                      Subsidized Units       Subsidized Units
                                        Expiring as a          Expiring as a
                       Number of     Percentage of Total       Percentage of
                         Units        Subsidized Units          Total Units

August 2005               150               100%                   100%

All of the units which  receive rent  subsidies  from  Section 8 have  contracts
which expire during the year ending  December 31, 2005. The Housing Acts provide
for  several  options  under which a Local  Limited  Partnership  may elect,  as
appropriate,  to renew its  Section 8  contracts:  (1)  marking  rents up to the
comparable market rent, if current rents are below market; (2) renewing rents at
the current level,  if the level does not exceed  comparable  market rents,  and
receiving an operating cost adjustment factor (an "OCAF") or a budget based rent
increase,  as long as the  rents do not  exceed  comparable  market  rents;  (3)
marking rents down to comparable  market rents;  (4) marking their rents down to
an  "exception  rent" level,  when  comparable  market rents would be too low to
permit  continued  operation of the property  under the Section 8 program,  even
with full debt  restructuring;  or (5) opting out of the section 8 program.  For
the  property  assisted  by  Section  8, but not  subject  to  these  provisions
(including,  but not limited to, the property  which does not have an underlying
HUD insured mortgages,  or which has been financed through certain state housing
finance agency or bond-financed  mortgage programs),  rents will be continued at
current  levels,  plus  an OCAF or (in  some  instances)  a  budget  based  rent
increase. In addition, the property can opt out of the Section 8 program only if
very strict notice requirements have been met, including a requirement that HUD,
the tenants,  and the local  governing  body, be given twelve months notice of a
Local  Limited  Partnership's  intention  to opt  out of the  program  prior  to
contract termination.

Each of the options  requires an application to HUD, and, to a greater or lesser
extent,  the  fulfillment  of certain  procedural  submission  requirements  and
financial   requirements,   which  must  be  weighed  in  connection   with  the
determination of which option to select.

The Section 8  requirements  are separate  from the  requirements  governing the
underlying  HUD-insured  mortgage  loan,  and any  other  HUD,  state  or  local
requirements, all of which must be fulfilled,  irrespective of the option chosen
with regard to the continuation of Section 8 participation.

Depreciation  is calculated  generally using the  straight-line  method over the
estimated useful lives of the related assets.

The mortgage note payable is insured by the Federal Housing Administration (FHA)
and  collateralized  by first deeds of trust on the rental  property.  FHA makes
subsidy payments  directly to the mortgage lender reducing the monthly principal
and interest  payments of the project owner to an effective  interest rate of 1%
over the  forty-year  term of the  note.  The  liability  of the  Local  Limited
Partnership  under the mortgage note is limited to the  underlying  value of the
real estate collateral plus other amounts deposited with lenders. The note bears
interest at the rate of 9% per annum.

(3)   TRANSACTIONS  WITH THE  GENERAL  PARTNER AND  AFFILIATES  OF THE GENERAL
      PARTNER

The Partnership accrued administrative and reporting fees payable to the General
Partner of approximately $11,000 and $13,000 during 2004 and 2003, respectively.
The balance owed to the General Partner for these fees is approximately $448,000
as of December 31, 2004.

If paid at all, the accrued  administrative  and  reporting  fees payable to the
General  Partner  will be  paid  as  cash  flow  permits  or  from  the  sale or
refinancing  of  the  underlying   property  of  the  remaining   Local  Limited
Partnership.  The  Partnership  repaid  approximately  $933,000  to the  General
Partner during the year ended  December 31, 2003,  from the proceeds of the sale
of the property  owned by Caroline  Arms Limited  Partnership.  No payments were
made during 2004 for these fees.

The  General  Partner  advanced  approximately  $60,000  during  the year  ended
December 31, 2003.  Interest is charged on borrowings at prime plus 2% (7.25% at
December  31,  2004).  Interest  expense was less than $1,000 for the year ended
December 31, 2003. During 2003, the Partnership repaid approximately  $73,000 of
advances  from the General  Partner.  There were no balances owed or paid during
2004.

An  affiliate  of the General  Partner is the project  management  agent for the
projects.  The  management  agent  and  other  affiliates  earned  approximately
$135,000 and $221,000 for  management  fees and other  services  provided to the
Local Limited Partnerships during 2004 and 2003, respectively.

(4)   ABANDONMENT OF LIMITED PARTNERSHIP UNITS

During  the  years  ended  December  31,  2004 and 2003 the  number  of  limited
partnership  units  decreased by 384 units and 320 units,  respectively,  due to
limited  partners  abandoning  their  units.  In  abandoning  his or her Limited
Partnership  Unit(s),  a limited  partner  relinquishes  all right,  title,  and
interest in the partnership as of the date of abandonment.  However, the limited
partner is allocated  his or her share of net income or loss for that year.  The
income or loss per other limited partnership unit in the accompanying statements
of  operations  for 2004 and 2003 is  calculated  based on the  number  of units
outstanding  at the  beginning  of the year or 17,723  units for 2004 and 18,043
units for 2003.

(5)   INCOME TAXES

The  Partnership  is not taxed on its income.  The  partners  are taxed in their
individual  capacities based upon their  distributive share of the Partnership's
taxable income and are allowed the benefits to be derived from off-setting their
distributive  share of the tax losses against  taxable income from other sources
subject to passive  loss rule  limitations.  The taxable  income or loss differs
from  amounts  included in the  statements  of  operations  because of different
methods used in  determining  the losses of the Local  Limited  Partnerships  as
discussed  below. The tax loss is allocated to partner groups in accordance with
Section  704(b) of the Internal  Revenue Code and  therefore is not  necessarily
proportionate to the interest percentage owned.

A reconciliation follows (in thousands):

                                                  Years Ended December 31,
                                                     2004            2003

Net income per financial statements                  $ 19          $ 1,219

Add (deduct):
  Partnership's share of Local Limited
   Partnerships' income                                657           4,053
  Other                                                (39)           (331)

Income per tax return                               $ 637          $ 4,941

The following is a reconciliation between the Partnership's reported amounts and
the  Federal  tax basis of net  (liabilities)  assets at  December  31, 2004 (in
thousands):

               Net liabilities as reported                $ (183)

               Add (deduct):
                 Investment in Partnership                   804
                 Other                                       146

               Net assets - Federal tax basis             $ 767

(6)   ALLOCATION OF RESULTS OF OPERATIONS,  CASH  DISTRIBUTIONS  AND GAINS AND
      LOSSES FROM SALE OR REFINANCING

Cash received from the sale or  refinancing  of any  underlying  property of the
Local Limited  Partnerships,  after  payment of the  applicable  mortgage  debt,
payment of the deferred acquisition note and the payment of all expenses related
to the transaction, is to be distributed in the following manner:

      First,  to the General  Partner for any unrepaid loans to the  Partnership
      and any unpaid fees (other than disposition and refinancing fees);

      Second,  to the  establishment  of any reserves which the General  Partner
      deems  reasonably  necessary  for  contingent,   unmatured  or  unforeseen
      liabilities or obligations of the Partnership.

      Third, to the Limited Partners, until the Limited Partners have received a
      return of their  capital  contributions,  after  deduction  for prior cash
      distributions  from sales or refinancing,  but without deduction for prior
      cash distribution from operations;

      Fourth, to the Limited  Partners,  until each Limited Partner has received
      an amount equal to a  cumulative  noncompounded  12% annual  return on its
      capital contribution, after deduction of (a) an amount equal to 50% of the
      tax  losses   allocated  to  the  Limited   Partner  and  (b)  prior  cash
      distributions  from operations and prior cash  distributions from sales or
      refinancing;

      Fifth,  to the General  Partner  until the General  Partner has received a
      return of its  capital  contributions,  after  deduction  for  prior  cash
      distributions  from sales or refinancing,  but without deduction for prior
      cash distributions from operations;

      Sixth,  to the  General  Partner for  disposition  and  refinancing  fees,
      including prior  disposition and refinancing  fees which have been accrued
      but are unpaid;

      Seventh,  to the partners  with  negative  capital  accounts to bring such
      accounts to zero; and

      Finally,  85% of the remaining sales proceeds to the Limited  Partners and
      15% to the General Partner.

Net income or loss from  operations of the  Partnership  is allocated 98% to the
Limited  Partners,  1% to the  General  Partner and 1% to the  Original  Limited
Partner.   Cash  distributions   from  operations,   after  payment  of  certain
obligations  (including  reimbursement  on a cumulative basis of direct expenses
incurred by the General  Partner or its  affiliates in managing the  properties)
and  payment  of  annual  cumulative   administrative  and  reporting  fees,  is
distributed 98% to the Limited Partners, 1% to the General Partner and 1% to the
Original Limited Partner.

Gain for Federal income tax purposes realized in the event of dissolution of the
Partnership  or  upon  sale  of  interests  in a Local  Limited  Partnership  or
underlying property will be allocated in the following manner:

      First, to the Limited Partners in an amount up to the negative balances of
      the capital  accounts of Limited  Partners in the same  proportion as each
      Limited  Partner's  negative  capital  account  bears  to  such  aggregate
      negative capital accounts;

      Second,  to the General  Partner in an amount up to the General  Partner's
      negative capital account, if any;

      Third,  to the Limited  Partners,  up to the  aggregate  amount of capital
      contributions  of the Limited  Partners,  after  deduction  for prior cash
      distributions  from sales or refinancing,  but without deduction for prior
      cash  distributions  from  operations,  in the same  proportion  that such
      Limited  Partner's  capital  contribution  bears to the  aggregate  of all
      Limited Partners' capital contributions;

      Fourth,  to the  Limited  Partners,  until each  Limited  Partner has been
      allocated  such an amount equal to a cumulative  noncompounded  12% annual
      return on their  capital  contribution,  after  deduction of (a) an amount
      equal to 50% of the tax losses  allocated  to the Limited  Partner and (b)
      prior cash distributions from operations and prior cash distributions from
      sales or refinancing;

      Fifth,  to the  General  Partner,  up to the  aggregate  amount of capital
      contributions made by the General Partner,  after deduction for prior cash
      distributions  from sales or refinancing,  but without deduction for prior
      cash distributions from operations; and

      Finally,  85% of the remaining gain to the Limited Partners and 15% to the
      General Partner.

Losses for Federal  income tax purposes  realized in the event of dissolution of
the  Partnership  or upon sale of interest  in a Local  Limited  Partnership  or
underlying property will be allocated 85% to the Limited Partners and 15% to the
General Partner.

(7)   CONTINGENCIES

The  Partnership  is unaware of any pending or  outstanding  litigation  matters
involving  it or  the  underlying  investment  property  of  the  Local  Limited
Partnerships in which the  Partnership  invests that are not of a routine nature
arising in the ordinary course of business.

As  previously  disclosed,  the  Central  Regional  Office of the United  States
Securities  and  Exchange   Commission   (the  "SEC")  is  conducting  a  formal
investigation relating to certain matters.  Although the staff of the SEC is not
limited  in the  areas  that it may  investigate,  AIMCO  believes  the areas of
investigation include AIMCO's miscalculated monthly net rental income figures in
third quarter 2003,  forecasted  guidance,  accounts payable,  rent concessions,
vendor  rebates,  capitalization  of payroll and certain  other  costs,  and tax
credit  transactions.  AIMCO is cooperating  fully. AIMCO is not able to predict
when the matter  will be  resolved.  AIMCO does not  believe  that the  ultimate
outcome  will  have a  material  adverse  effect on its  consolidated  financial
condition  or results of  operations.  Similarly,  the General  Partner does not
believe that the ultimate  outcome  will have a material  adverse  effect on the
Partnership's financial condition or results of operations.

(8)   GOING CONCERN

The San Juan Del Centro Limited  Partnership  note payable is past due (see Note
2).  Therefore,  there is the  possibility  that the  Partnership  will lose its
ownership interest in the Local Limited  Partnership  through foreclosure by the
noteholder.  Continuation of the Local Limited  Partnership's  operations in the
present form depends on its ability to extend the maturity  date of this note or
to repay or refinance the note. This condition  raises  substantial  doubt about
its ability to continued as a going  concern.  The  financial  statements do not
include any adjustments which might result from the outcome of this uncertainty.
On February 14, 2005 the Local Limited Partnership entered into a contract, with
an affiliated party, to sell its investment  property during 2005 for a purchase
price of $7,000,000.

(9)   REAL ESTATE AND ACCUMULATED DEPRECIATION OF THE LOCAL LIMITED
      PARTNERSHIP IN WHICH NHP REALTY FUND TWO HAS INVESTED

                                                                   Cost
                                       Initial Cost              Capitalized
                                     To Local Limited             Subsequent
                                        Partnership             to Acquisition
                                      (in thousands)            (in thousands)

                                                    Buildings
                                                   and Related
                                                     Personal
        Description         Encumbrances   Land      Property    Improvements

San Juan Del Centro
  Limited Partnership           (1)       $ 725      $ 3,360       $ 1,760


                         Gross Amount At Which
                                Carried
                              At December 31, 2004
                                 (in thousands)
<TABLE>
<CAPTION>

                               Buildings
                                  And
                                Related
                               Personal            Accumulated    Date of     Date   Depreciable
     Description        Land   Property  Total(2) Depreciation  Construction Acquired Life-Years
                                           (3)         (3)
                                                  (in thousands)
San Juan Del Centro
<S>                    <C>      <C>      <C>        <C>            <C>       <C>        <C>
  Limited Partnership  $ 779    $ 5,066  $ 5,845    $(2,838)       1970      04/85      5-50
</TABLE>

(1) Schedule of Encumbrances (in thousands)
<TABLE>
<CAPTION>

                                                               Notes
                                                             Payable and
                                               Mortgage       Accrued
Partnership Name                                Notes         Interest       Total

<S>                                            <C>            <C>           <C>
San Juan del Centro Limited Partnership        $ 1,061        $ 4,087       $ 5,148
</TABLE>

(2)   The  aggregate  cost of real  estate for  Federal  income tax  purposes at
      December   31,  2004  is   approximately   $5,841,000,   and   accumulated
      depreciation  for Federal  income tax  purposes  at  December  31, 2004 is
      approximately $4,584,000.

(3)   Reconciliation of real estate (in thousands)

                                                 Years Ended December 31,
                                                   2004           2003

Balance at beginning of year                      $ 8,964       $16,188
Improvements                                          387           387
Disposals of rental properties                     (3,506)       (7,611)
Balance at end of year                            $ 5,845       $ 8,964

      Reconciliation of accumulated depreciation (in thousands)

                                                   2004           2003

Balance at beginning of year                      $ 4,415       $ 7,543
Depreciation expense for the year                     426           420
Disposals of rental properties                     (2,003)       (3,548)
Balance at end of year                            $ 2,838       $ 4,415



<PAGE>



Item 8.     Changes in and  Disagreements  with  Accountants on Accounting and
            Financial Disclosure

None.

Item 8a.    Controls and Procedures

(a) Disclosure Controls and Procedures.  The Partnership's management,  with the
participation of the principal executive officer and principal financial officer
of the General Partner,  who are the equivalent of the  Partnership's  principal
executive officer and principal financial officer,  respectively,  has evaluated
the  effectiveness of the Partnership's  disclosure  controls and procedures (as
such term is defined  in Rules  13a-15(e)  and  15d-15(e)  under the  Securities
Exchange  Act of 1934,  as amended  (the  "Exchange  Act")) as of the end of the
period covered by this report. Based on such evaluation, the principal executive
officer and  principal  financial  officer of the General  Partner,  who are the
equivalent  of the  Partnership's  principal  executive  officer  and  principal
financial  officer,  respectively,  have  concluded  that, as of the end of such
period, the Partnership's disclosure controls and procedures are effective.

(b) Internal Control Over Financial  Reporting.  There have not been any changes
in the Partnership's  internal control over financial reporting (as such term is
defined in Rules  13a-15(f)  and  15d-15(f)  under the Exchange  Act) during the
fourth quarter of 2004 that have materially  affected,  or are reasonably likely
to  materially  affect,  the  Partnership's   internal  control  over  financial
reporting.

Item 8b.    Other Information

None.



<PAGE>


                                    PART III

Item 9.     Directors and Executive Officers of the Registrant

The Partnership has no directors, officers or significant employees of its own.

The names, ages, business experience and involvement in legal proceedings of the
directors and officers of National  Corporation for Housing Partnerships (NCHP),
the sole general partner of The National Housing  Partnership,  the sole general
partner of the Partnership, and certain of its affiliates, are as follows:

Directors of NCHP

Three individuals comprise the Board of Directors of NCHP.

Jeffrey Adler                    43   Director and Executive Vice President
Ronald D. Monson                 48   Director and Senior Vice President
David R. Robertson               39   Director, President and Chief Executive
                                     Officer

Jeffrey Adler has been a Director and an Executive Vice President of the General
Partner since February 2004. Mr. Adler was appointed  Executive Vice  President,
Conventional Property Operations of AIMCO in February 2004. Previously he served
as Senior Vice President of Risk  Management and Marketing of AIMCO from 2002 to
2004.  Prior to joining AIMCO from 2000 to 2002,  Mr. Adler was Vice  President,
Property/Casualty for Channelpoint, a software company.

Ronald D. Monson has been a Director of the General Partner since February 2001.
Beginning in February  2004,  Mr.  Monson  assumed  oversight of four of AIMCO's
regional  operating  centers  and was  appointed  Senior Vice  President  of the
Midwest Division.  From February 2001 to February 2004, Mr. Monson served as the
head of  AIMCO's  conventional  property  operations.  Previously,  he served as
Regional  Vice  President  of AIMCO  from  March  1997 to May 1998,  when he was
appointed to Senior Vice  President of the Midwest  Division until January 1999,
when he was appointed Senior Vice President of the Far West Division, which role
he filled until February 2001.

David R. Robertson has been a Director and President and Chief Executive Officer
of the General Partner since February 2004. Mr.  Robertson has been an Executive
Vice President of AIMCO since  February  2002,  and was appointed  President and
Chief  Executive  Officer of AIMCO  Capital in October  2002.  Mr.  Robertson is
responsible for property operations, asset management and transaction activities
within AIMCO Capital's portfolio of affordable properties, and for redevelopment
and construction  activities for both the  conventional and affordable  property
portfolios.  Since  February  1996,  Mr.  Robertson  has been Chairman and Chief
Executive  Officer of Robeks  Corporation,  a privately  held chain of specialty
food stores.

Officers

The current officers of NCHP and a description of their principal occupations in
recent years are listed below.

Martha L. Long                   45   Senior Vice President
Harry G. Alcock                  42   Executive Vice President
Miles Cortez                     61   Executive Vice President, General Counsel
                                        and Secretary
Patti K. Fielding                41   Executive Vice President
Paul J. McAuliffe                48   Executive Vice President and Chief
                                        Financial Officer
Stephen B. Waters                43   Vice President

Jeffrey Adler                        See "Directors of NCHP".
Ronald D. Monson                     See "Directors of NCHP".
David R. Robertson                   See "Directors of NCHP".

Martha L. Long has been Senior Vice  President  of the General  Partner  since
February  2004.  Ms.  Long has been  with  AIMCO  since  October  1998 and has
served in various  capacities.  From 1998 to 2001,  Ms.  Long served as Senior
Vice  President and Controller of AIMCO and the General  Partner.  During 2002
and 2003, Ms. Long served as Senior Vice  President of Continuous  Improvement
for AIMCO.

Harry G. Alcock was appointed Executive Vice President of the General Partner in
February 2004 and has been Executive Vice President and Chief Investment Officer
of AIMCO since October  1999.  Prior to October 1999 Mr. Alcock served as a Vice
President  of AIMCO  from July 1996 to October  1997,  when he was  promoted  to
Senior Vice  President-Acquisitions  where he served  until  October  1999.  Mr.
Alcock has had responsibility for acquisition and financing  activities of AIMCO
since July 1994.

Miles  Cortez was  appointed  Executive  Vice  President,  General  Counsel  and
Secretary of the General  Partner in February  2004 and of AIMCO in August 2001.
Prior to joining  AIMCO,  Mr. Cortez was the senior  partner of Cortez  Macaulay
Bernhardt  &  Schuetze  LLC,  a Denver  law firm,  from  December  1997  through
September 2001.

Patti K. Fielding was appointed  Executive  Vice President - Securities and Debt
of the General  Partner in  February  2004 and of AIMCO in  February  2003.  Ms.
Fielding  was  appointed  Treasurer  of  AIMCO in  January  2005.  Ms.  Fielding
previously  served as Senior Vice  President - Securities and Debt of AIMCO from
January 2000 to February  2003. Ms.  Fielding is responsible  for debt financing
and the treasury  department.  Ms.  Fielding  joined AIMCO in February 1997 as a
Vice President.

Paul J. McAuliffe has been  Executive Vice President of the General  Partner and
AIMCO since  February  1999 and was  appointed  Chief  Financial  Officer of the
General  Partner and AIMCO in October 1999. From May 1996 until he joined AIMCO,
Mr. McAuliffe was Senior Managing Director of Secured Capital Corp.

Stephen B. Waters was appointed Vice  President of the General  Partner in April
2004. Mr. Waters previously served as a Director of Real Estate Accounting since
joining AIMCO in September 1999. Mr. Waters has responsibilities for real estate
and partnership accounting with AIMCO.

There is no family  relationship  between  any of the  foregoing  directors  and
officers.

The board of  directors of the General  Partner  does not have a separate  audit
committee.  As such, the board of directors of the General Partner  fulfills the
functions of an audit  committee.  The board of directors  has  determined  that
David R.  Robertson  meets  the  requirement  of an "audit  committee  financial
expert".

The  directors  and  officers of the General  Partner  with  authority  over the
Partnership are all employees of subsidiaries of AIMCO. AIMCO has adopted a code
of ethics that applies to such  directors and officers that is posted on AIMCO's
website  (www.AIMCO.com).  AIMCO's  website is not  incorporated by reference to
this filing.

Item 10.    Executive Compensation

National Housing  Partnership  Realty Fund Two has no officers or directors.  No
direct form of compensation  or remuneration  was paid by the Partnership to any
officer or director of the General Partner.  However,  reimbursements  and other
payments have been made to the Partnership's General Partner and its affiliates,
as described in "Item 12. Certain Relationships and Related Transactions."

Item 11.    Security Ownership of Certain Beneficial Owners and Management

1133 Fifteenth  Street Two Associates,  a Maryland  Limited  Partnership,  whose
general partner is NHP and whose limited  partners were employees of NCHP at the
time the partnership was formed, owns a 1% interest in the Partnership.

NHP is also  the sole  general  partner  of NHP  Investment  Partners  I and NHP
Investment Partners III. NHP Investment Partners I, a limited partnership, holds
a 4.5%  limited  partnership  interest  (1% for  allocation  of  losses)  in the
remaining  two  Local  Limited  Partnerships.  Prior  to the  admittance  of the
Partnership into the Local Limited  Partnerships,  NHP Investment Partners I and
NHP  Investment  Partners  III held a 1% general  partnership  interest  and 98%
limited partnership interest in the Local Limited Partnerships.

The following table sets forth certain information regarding limited partnership
units of the Partnership owned by each person or entity known by the Partnership
to own beneficially or exercise voting or dispositive  control over more than 5%
of the Partnership's limited partnership units as of December 31, 2004.

         Name of Beneficial Owner              Number of Units        % of Class

AIMCO and affiliates                                1,949                11.24%
  (affiliates of the General Partner)

The  business  address of AIMCO is 4582 S.  Ulster St.  Parkway,  Suite  1100,
Denver, Colorado 80237.

Item 12.    Certain Relationships and Related Transactions

The Partnership accrued administrative and reporting fees payable to the General
Partner of approximately $11,000 and $13,000 during 2004 and 2003, respectively.
The balance owed to the General Partner for these fees is approximately $448,000
as of December 31, 2004.

If paid at all, the accrued  administrative  and  reporting  fees payable to the
General  Partner  will be  paid  as  cash  flow  permits  or  from  the  sale or
refinancing  of  the  underlying   property  of  the  remaining   Local  Limited
Partnership.  The  Partnership  repaid  approximately  $933,000  to the  General
Partner during the year ended  December 31, 2003,  from the proceeds of the sale
of the property  owned by Caroline  Arms Limited  Partnership.  No payments were
made during 2004 for these fees.

The  General  Partner  advanced  approximately  $60,000  during  the year  ended
December 31, 2003.  Interest is charged on borrowings at prime plus 2% (7.25% at
December  31,  2004).  Interest  expense was less than $1,000 for the year ended
December 31, 2003. During 2003, the Partnership repaid approximately  $73,000 of
advances  from the General  Partner.  There were no balances owed or paid during
2004.

An  affiliate  of the General  Partner is the project  management  agent for the
projects.  The  management  agent  and  other  affiliates  earned  approximately
$135,000 and $221,000 for  management  fees and other  services  provided to the
Local Limited Partnerships during 2004 and 2003, respectively.

Item 13.    Exhibits

            See Exhibit Index

Item 14.    Principal Accountant Fees and Services

The General Partner has reappointed Ernst & Young LLP as independent auditors to
audit the financial  statements of the  Partnership for 2005. The aggregate fees
billed  for  services  rendered  by  Ernst & Young  LLP for  2004  and  2003 are
described below.

Audit Fees. Fees for audit services  totaled  approximately  $18,000 and $42,000
for 2004 and 2003,  respectively.  Fees for audit services also include fees for
the reviews of the Partnership's Quarterly Reports on Form 10-QSB.

Tax Fees. Fees for tax services totaled  approximately  $3,000 for both 2004 and
2003.



<PAGE>

                                   SIGNATURES



In accordance with the  requirements of the Exchange Act, the Registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


                                    NATIONAL HOUSING  PARTNERSHIP  REALTY FUND
                                       TWO
                                    (Registrant)


                                    By:   The National Housing Partnership,
                                          Its sole General Partner


                                    By:   National Corporation for Housing
                                          Partnerships,   its   sole   General
                                          Partner


                                    By:   /s/David R. Robertson
                                          David R. Robertson
                                          Director, President and Chief
                                          Executive Officer

                                          /s/Stephen B. Waters
                                    By:   Stephen B. Waters
                                          Vice President


                                    Date: March 30, 2005


In accordance with the  requirements of the Exchange Act, the Registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


/s/Ronald D. Monson           Director and Senior           Date: March 30, 2005
Ronald D. Monson              Vice President


/s/David R. Robertson         Director, President and       Date: March 30, 2005
David R. Robertson            Chief Executive Officer


/s/Stephen B. Waters          Vice President                Date: March 30, 2005
Stephen B. Waters


<PAGE>


                                  EXHIBIT INDEX


Exhibit

 31.1             Certification  of  equivalent  of  Chief  Executive  Officer
                  pursuant     to     Securities     Exchange     Act    Rules
                  13a-14(a)/15d-14(a),  as Adopted  Pursuant to Section 302 of
                  the Sarbanes-Oxley Act of 2002.

 31.2             Certification  of  equivalent  of  Chief  Financial  Officer
                  pursuant     to     Securities     Exchange     Act    Rules
                  13a-14(a)/15d-14(a),  as Adopted  Pursuant to Section 302 of
                  the Sarbanes-Oxley Act of 2002.

 32.1             Certification   Pursuant  to  18  U.S.C.  Section  1350,  as
                  Adopted  Pursuant to Section 906 of the  Sarbanes-Oxley  Act
                  of 2002.

 99.1             Independent   Auditors   Report  for  San  Juan  Del  Centro
 Apartments.


<PAGE>




Exhibit 31.1


                                  CERTIFICATION


I, David R. Robertson, certify that:


1.    I have  reviewed  this annual  report on Form  10-KSB of National  Housing
      Partnership Realty Fund Two;

2.    Based on my knowledge,  this report does not contain any untrue  statement
      of a material fact or omit to state a material fact  necessary to make the
      statements made, in light of the circumstances under which such statements
      were made,  not  misleading  with  respect  to the period  covered by this
      report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  report,  fairly  present  in all  material
      respects the financial condition,  results of operations and cash flows of
      the small  business  issuer as of, and for, the periods  presented in this
      report;

4.    The  small  business  issuer's  other  certifying  officer(s)  and  I  are
      responsible  for  establishing  and  maintaining  disclosure  controls and
      procedures (as defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) for
      the small business issuer and have:

      (a)   Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            small business issuer, including its consolidated  subsidiaries,  is
            made  known to us by  others  within  those  entities,  particularly
            during the period in which this report is being prepared;

      (b)   Evaluated  the   effectiveness   of  the  small  business   issuer's
            disclosure  controls and procedures and presented in this report our
            conclusions about the  effectiveness of the disclosure  controls and
            procedures, as of the end of the period covered by this report based
            on such evaluation; and

      (c)   Disclosed in this report any change in the small  business  issuer's
            internal  control over financial  reporting that occurred during the
            small  business  issuer's  most  recent  fiscal  quarter  (the small
            business  issuer's  fourth  fiscal  quarter in the case of an annual
            report) that has  materially  affected,  or is reasonably  likely to
            materially affect, the small business issuer's internal control over
            financial reporting; and

5.    The  small  business  issuer's  other  certifying  officer(s)  and I  have
      disclosed,  based on our most recent  evaluation of internal  control over
      financial reporting, to the small business issuer's auditors and the audit
      committee of the small  business  issuer's  board of directors (or persons
      performing the equivalent functions):

      (a)   All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely  affect the small business  issuer's
            ability  to  record,   process,   summarize  and  report   financial
            information; and

      (b)   Any fraud,  whether or not  material,  that  involves  management or
            other  employees who have a significant  role in the small  business
            issuer's internal control over financial reporting.

Date:  March 30, 2005

                                    /s/David R. Robertson
                                    David R. Robertson
                                    President and Chief  Executive  Officer of
                                    National     Corporation    for    Housing
                                    Partnerships,   equivalent  of  the  chief
                                    executive officer of the Partnership


<PAGE>



Exhibit 31.2


                                  CERTIFICATION


I, Stephen B. Waters, certify that:


1.    I have  reviewed  this annual  report on Form  10-KSB of National  Housing
      Partnership Realty Fund Two;

2.    Based on my knowledge,  this report does not contain any untrue  statement
      of a material fact or omit to state a material fact  necessary to make the
      statements made, in light of the circumstances under which such statements
      were made,  not  misleading  with  respect  to the period  covered by this
      report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  report,  fairly  present  in all  material
      respects the financial condition,  results of operations and cash flows of
      the small  business  issuer as of, and for, the periods  presented in this
      report;

4.    The  small  business  issuer's  other  certifying  officer(s)  and  I  are
      responsible  for  establishing  and  maintaining  disclosure  controls and
      procedures (as defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) for
      the small business issuer and have:

      (a)   Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            small business issuer, including its consolidated  subsidiaries,  is
            made  known to us by  others  within  those  entities,  particularly
            during the period in which this report is being prepared;

      (b)   Evaluated  the   effectiveness   of  the  small  business   issuer's
            disclosure  controls and procedures and presented in this report our
            conclusions about the  effectiveness of the disclosure  controls and
            procedures, as of the end of the period covered by this report based
            on such evaluation; and

      (c)   Disclosed in this report any change in the small  business  issuer's
            internal  control over financial  reporting that occurred during the
            small  business  issuer's  most  recent  fiscal  quarter  (the small
            business  issuer's  fourth  fiscal  quarter in the case of an annual
            report) that has  materially  affected,  or is reasonably  likely to
            materially affect, the small business issuer's internal control over
            financial reporting; and

5.    The  small  business  issuer's  other  certifying  officer(s)  and I  have
      disclosed,  based on our most recent  evaluation of internal  control over
      financial reporting, to the small business issuer's auditors and the audit
      committee of the small  business  issuer's  board of directors (or persons
      performing the equivalent functions):

      (a)   All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely  affect the small business  issuer's
            ability  to  record,   process,   summarize  and  report   financial
            information; and

      (b)   Any fraud,  whether or not  material,  that  involves  management or
            other  employees who have a significant  role in the small  business
            issuer's internal control over financial reporting.

Date:  March 30, 2005

                                    /s/Stephen B. Waters
                                    Stephen B. Waters
                                    Vice President of National
                                    Corporation for Housing
                                    Partnerships, equivalent of the
                                    chief financial officer of the
                                    Partnership


<PAGE>


Exhibit 32.1


                          Certification of CEO and CFO
                       Pursuant to 18 U.S.C. Section 1350,
                             As Adopted Pursuant to
                Section 906 of the Sarbanes-Oxley Act of 2002



In  connection  with the  Annual  Report  on Form  10-KSB  of  National  Housing
Partnership Realty Fund Two (the "Partnership"), for the year ended December 31,
2004 as filed with the  Securities  and Exchange  Commission  on the date hereof
(the  "Report"),  David R.  Robertson,  as the equivalent of the Chief Executive
Officer of the  Partnership,  and Stephen B. Waters,  as the  equivalent  of the
Chief Financial Officer of the Partnership,  each hereby certifies,  pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002, that, to the best of his knowledge:

      (1)   The Report fully complies with the  requirements of Section 13(a) or
            15(d) of the Securities Exchange Act of 1934; and

      (2)   The  information  contained in the Report  fairly  presents,  in all
            material respects, the financial condition and results of operations
            of the Partnership.


                                           /s/David R. Robertson
                                    Name:  David R. Robertson
                                    Date:  March 30, 2005


                                           /s/Stephen B. Waters
                                    Name:  Stephen B. Waters
                                    Date:  March 30, 2005

This  certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley  Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.


<PAGE>


Exhibit 99.1
Carter & Company
 Certified Public Accountants, LLC
                                                             543 Highway 98 East
                                                                       Suite 201
                                                         Destin, Florida 32541
                                                          Phone:  850-650-0125
                                                              Fax:  850-650-0126

                          Independent Auditors' Report

To the Partners
San Juan Del Centro Limited Partnership

We have audited the  accompanying  balance sheet of San Juan Del Centro  Limited
Partnership, a Limited Partnership, Project Number 101-44018, as of December 31,
2004, and the related statements of profit and loss, changes in partners' equity
(deficit) and cash flows for the year then ended. These financial statements are
the  responsibility of the Partnership's  management.  Our  responsibility is to
express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of
the United States. Those standards require that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting  the amounts and  disclosures in the financial  statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by  management,  as well as  evaluating  the  overall  financial  statement
presentation.  We believe  that our audit  provides a  reasonable  basis for our
opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the financial  position of San Juan Del Centro  Limited
Partnership  as of December 31, 2004,  and the results of its operations and its
cash  flows for the year then ended in  conformity  with  accounting  principles
generally accepted in the United States of America.

In accordance with Government  Auditing  Standards,  we have also issued reports
dated  January  15,  2005 on our  consideration  of San Juan Del Centro  Limited
Partnership's  internal control over financial reporting and on our tests of its
compliance with certain provisions of laws,  regulations,  contracts,  and grant
agreements  and other  matters.  The purpose of those reports is to describe the
scope of our testing of internal control over financial reporting and compliance
and the results of that  testing  and not to provide an opinion on the  internal
control over financial reporting or on compliance. Those reports are an integral
part of an audit performed in accordance with Government  Auditing Standards and
should be read in conjunction with this report in considering the results of our
audit.

Our audit was  conducted  for the  purpose  of  forming  an opinion on the basic
financial statements taken as a whole. The accompanying supplemental information
shown on pages 14-18 is presented for the purpose of additional  analysis and is
not a required part of the basic financial  statements of the Partnership.  Such
information has been subjected to the auditing  procedures  applied in the audit
of the basic financial  statements and, in our opinion,  is fairly stated in all
material respects in relation to the financial statements taken as a whole.

Destin, Florida
January 15, 2005