EXHIBIT 10.7


                          PROPERTY MANAGEMENT AGREEMENT

         This  Agreement (the  "Agreement")  is made as of March 23, 2001 by and
between CRIT-NC III, LLC, a Delaware  limited  liability  company (the "Owner"),
and  Cornerstone  Realty  Income  Trust,  Inc.,  a  Virginia   corporation  (the
"Manager").

                                    RECITALS:

         Owner is the owner of the  apartment  communities  listed on Schedule A
hereto  (collectively,  the "Properties").  Owner has selected Manager to manage
the Properties on the terms and conditions set forth in this Agreement.

         NOW  THEREFORE,  for  good  and  valuable  consideration,  receipt  and
sufficiency  of which are  hereby  acknowledged,  the  parties  hereto  agree as
follows:

     1.  Designation of Property  Manager.  Owner hereby engages  Manager as the
sole and exclusive manager to rent, manage and operate the Properties,  upon the
conditions and for the term and compensation  herein set forth. All or a portion
of the services being performed by Manager may be contracted or subcontracted to
another  property  management  company,  provided  that such  company  agrees in
writing to be bound by the terms of this Agreement.

     2. Term of Agreement.  This Agreement shall be valid for an initial term of
two (2)  years.  In the event  Owner  sells its  interest  in a  Property,  this
Agreement  will  terminate as to such Property upon the date of such sale.  This
Agreement shall renew  automatically  for successive  terms of two (2) years, on
the same terms and  conditions  as set forth in this  Agreement,  unless a party
elects not to renew this  Agreement by  delivering  written  notice to the other
party at least sixty (60) calendar days before the end of any two-year term.

     3.  Acceptance of Engagement.  Manager hereby accepts its engagement as the
manager of the Properties  and agrees to perform all services  necessary for the
care, protection,  maintenance and operation of the Properties. Without limiting
the scope of the foregoing:

         (a)  Manager  shall  collect  all  rents  and  other  income  from  the
Properties,  provided that nothing herein contained shall constitute a guarantee
by Manager of the payment of rent by tenants.

         (b) Manager shall  purchase,  at the expense of Owner,  all  equipment,
tools,   appliances,   materials,   supplies  and  uniforms  necessary  for  the
maintenance or operation of the Properties.

         (c)  Manager  shall  contract  on  behalf  of  Owner  for  water,  gas,
electricity  and other services  necessary for the operation and  maintenance of
the Properties.

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         (d) Manager shall  advertise for the rental of units at the Properties,
the cost of which shall be paid by Owner.

         (e) Manager  shall use all  reasonable  efforts to keep the  Properties
rented by procuring  tenants for the Properties and negotiating and executing on
behalf of Owner all leases for units at the Properties.

         (f) Manager  shall hire,  evaluate,  supervise,  discharge  and pay all
employees or  contractors  necessary  for the  management  and  operation of the
Properties.  Owner agrees that all wages and compensation (and federal and state
unemployment  insurance  and  other  required  charges)  with  respect  to  such
employees and contractors shall be paid from Owner's funds.

         (g) Manager  shall  prepare  and file all  returns and other  documents
(other than promissory  notes,  mortgages,  deeds of trust or other documents or
instruments  which would  encumber the  Properties)  required  under the Federal
Insurance Contributions Act and the Federal Unemployment Tax Act, or any similar
federal or state legislation.  Manager also shall file returns and reports,  and
pay from  Owner's  funds,  all sums as may be required  from time to time by the
states or localities in which the Properties are located.

         (h) Manager shall maintain  accurate and complete books of account with
entries for all receipts and  expenditures,  and such books of account  shall be
the property of Owner and shall at all times be open to the inspection of Owner,
or any of its employees or duly authorized agents.

         (i) Manager  shall  deliver to Owner of all  lenders'  annual  property
inspection  letters regarding repairs necessary to avoid mortgage loan defaults.
Manager  shall  deliver  a  detailed  monthly  statement  of  all  receipts  and
disbursements  on or before the 20th day of each month for the preceding  month.
Such  statement  shall show the status of  collections,  shall be  supported  by
cancelled  checks,  vouchers,   duplicate  invoices  and  similar  documentation
covering all items of income and expense,  and shall be kept in Manager's office
and shall be available for inspection by Owner's  representatives  at all times.
Manager also shall deliver a monthly operating  statement showing the income and
expense  for the  month,  for the  year-to-date  and for the  same  month of the
preceding  year.  The cost of performing the  accounting  functions  outlined in
paragraph  (h) and this  paragraph  (i) shall be paid by Owner  pursuant  to the
terms of this Agreement.

         (j)  Manager  shall  deliver  to  Owner  annual  reports  containing  a
composite financial report of the monthly statements provided in accordance with
paragraph  (i),  plus  a  statement  by  Manager  as to  the  operations  of the
Properties during the previous year and recommendations, if any, as to necessary
policy  changes or  improvements  for the  forthcoming  year,  accompanied by an
estimated budget for such items.

         (k)  Manager  shall  deliver to Owner  from time to time,  and at least
semi-annually, a tentative budget of expenses.

         (l)  Manager  shall  deliver to Owner  from time to time,  and at least
annually,  the following schedules with respect to the Properties:  (1) forecast
of rental and occupancy changes;


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(2)  review of lease  negotiations;  (3)  annual  analysis  of  leases;  and (4)
schedule of capital improvements and method of financing such improvements.

         (m)  Manager  shall  deliver to Owner,  on a regular  basis,  all forms
necessary  to  operate  and lease  the  Properties  and  manage  the  personnel,
including but not limited to form leases, contracts and management policies.

         (n) During the initial term of this Agreement,  Manager shall supervise
the transition from the former owners of the Properties and shall, to the extent
necessary, implement new management systems with respect to the operation of the
Properties.

     4. Deposits of Rent and Other Income. All sums received from rents,  tenant
security deposits or other deposits on units at the Properties, deposits on keys
and other income from the Properties, shall be deposited as collected by Manager
to the credit of Owner in such bank or banks as may be  designated by Owner from
time to time. Such funds shall be disbursed only in accordance with the terms of
each  particular  lease  and  any  applicable  federal,  state  or  local  laws,
regulations or ordinances.

     5. Insurance.  Owner shall place all insurance policies with respect to the
Properties and their  operation.  Manager shall be included as an insured in the
policies covering general liability,  public liability and workers' compensation
insurance.  In the  event  Manager  is  authorized  by Owner to place  insurance
policies,  the companies,  the general  agents,  the amounts of coverage and the
risks insured shall be subject to the approval of Owner.

     6.  Indemnification.  Owner hereby agrees to indemnify Manager against, and
to hold Manager harmless from, any loss, cost or expense  (including  reasonable
investigative  expenses  and legal fees),  judgment,  award,  settlement,  fine,
penalty and  liability of any kind  incurred by or asserted  against  Manager by
reason of, or in  connection  with,  the  engagement of Manager  hereunder,  the
performance  by Manager of the services  described  herein or the  occurrence or
existence  of any event or  circumstance  which  results  or is  alleged to have
resulted in any death or injury to any person, any destruction of, or damage to,
any of the Properties,  or any suit, action or proceeding  (whether  threatened,
initiated or completed) arising from any of the foregoing.  Notwithstanding  the
preceding,  however,  no such  indemnification  of  Manager  shall be made,  and
Manager shall indemnify  Owner against,  and shall hold Owner harmless from, any
loss  that  a  court  of  competent  jurisdiction  shall  determine,   by  final
adjudication,  to have resulted  from willful  misconduct,  gross  negligence or
fraud by or on the part of Manager.

     7. Compensation of Manager for Managing the Properties.  Owner shall pay to
Manager a "Property Management Fee" for management of the Properties pursuant to
this  Agreement in an amount  equal to five  percent  (5%) of the monthly  gross
revenues  from the  Properties.  The  Property  Management  Fee shall be paid to
Manager  on or before  the 10th day of each  month  and shall be based  upon the
income from the  Properties  received by Owner (for such month) by such date. If
additional  income from the Properties is received by Owner after such date, the
sum due to Manager  with  respect  to such  additional  income  shall be paid to
Manager when Manager is paid its fees for the next succeeding month.

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     8.  Reimbursement of Expenses.  Owner shall reimburse Manager for Manager's
expenses,  including  salaries and related  overhead  expenses,  associated with
bookkeeping,  accounting  and  financial  reporting  services  pertaining to the
Properties.

     9.  Reserves  for  Capital  Items.  Owner  acknowledges  that the budget of
expenses  prepared  by Manager,  pursuant to  paragraph  3(k),  shall  contain a
category  labeled  "Reserve for Capital  Items." Owner agrees to place rents and
other income in a bank account,  or to permit Manager to transfer  Owner's funds
to such  account,  in  sufficient  amounts to meet the needs  reflected  in such
budget.  Such  funds  shall be  placed  in the  account  on a  monthly  basis as
reflected in the budget.

     10. Cash Flow. Owner  acknowledges  that the budget of expenses prepared by
Manager,  pursuant to paragraph  3(k),  shall  contain a category  labeled "Cash
Flow." Owner agrees, in the event that the budgeted cash flow for the Properties
is negative in any month covered by the budget,  to place  sufficient funds in a
bank account, or to permit Manager to transfer Owner's funds to such account, to
correct  the  budgeted  operating  deficit.  Such funds  shall be placed in such
account at least forty-five (45) calendar days before the budgeted deficit is to
occur.

     11. Power of Attorney. Owner hereby makes, constitutes and appoints Manager
as Owner's true and lawful  attorney-in-fact,  for Owner and in its name,  place
and  stead  and for its use and  benefit,  to  sign,  acknowledge  and  file all
documents and agreements (other than promissory notes, mortgages, deeds of trust
or other documents or instruments which would encumber the Properties) necessary
to perform or effect the duties and  obligations  of Manager  under the terms of
this  Agreement.  The foregoing power of attorney is a special power of attorney
coupled with an interest, and may only be terminated by canceling this Agreement
as provided herein.

     12. Relationship of Parties. The parties agree and acknowledge that Manager
is, and shall operate as, an  independent  contractor  in performing  duties and
services under this  Agreement,  and shall not be deemed an employee or agent of
Owner.

     13. Entire Agreement.  This Agreement  represents the entire  understanding
between the parties hereto with regard to the transactions  described herein and
may only be amended by a written  instrument  signed by the party  against  whom
enforcement is sought.

     14.  Governing Law. This Agreement  shall be construed in accordance  with,
and be governed by, the laws of the Commonwealth of Virginia,  without regard to
any rules or principles thereof regarding choice or conflicts of laws.


                          (next page is signature page)

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WITNESS the following signatures:


OWNER:                            CRIT-NC III, LLC
                                  a Delaware limited liability company

                                  By:    CRIT Special II, Inc.
                                         a Virginia corporation

                                  Title: Sole Member

                                  By:      /s/ Stanley J. Olander, Jr.
                                           ---------------------------
                                           Stanley J. Olander, Jr.,
                                           Vice President





MANAGER:                            Cornerstone Realty Income Trust, Inc.
                                    a Virginia corporation

                                    By:      /s/ Stanley J. Olander, Jr.
                                             ---------------------------
                                             Stanley J. Olander, Jr.,
                                             Executive Vice President



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                                   SCHEDULE A

                              (List of Properties)

The Properties consist of those real properties,  together with all improvements
thereon, that are located at the following addresses:

         Highland Hills Apartments
         180 BPW Club Road
         Carrboro, North Carolina  27510


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