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                                                                    EXHIBIT 10.1



                               ADVISORY AGREEMENT

                                    BETWEEN

                   INCOME OPPORTUNITY REALTY INVESTORS, INC.

                                      AND

                         BASIC CAPITAL MANAGEMENT, INC.


         THIS AGREEMENT dated as of March 15, 1996, between Income Opportunity
Realty Investors, Inc., a Nevada corporation (the "Company"), and Basic Capital
Management, Inc. (the "Advisor"), a Nevada corporation.

                              W I T N E S S E T H:

         1.     The Company owns a portfolio of real estate and mortgages.

         2.     The Advisor and its employees have extensive experience in
the administration of real estate assets and the origination, structuring and
evaluation of real estate and mortgage investments.

         NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties agree as follows:

         1.     DUTIES OF THE ADVISOR. Subject to the supervision of the Board 
of Directors, the Advisor will be responsible for the day-to-day operations of 
the Company and, subject to Section 17 hereof, shall provide such services and
activities relating to the assets, operations and business plan of the Company
as may be appropriate, including:

                (a)      preparing and submitting an annual budget and
         business plan for approval by the Board of the Company (the
         "Business Plan");

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                (b) using its best efforts to present to the Company a
         continuing and suitable investment program consistent with the
         investment policies and objectives of the Company as set forth in the
         Business Plan;

                (c) using its best efforts to present to the Company investment
         opportunities consistent with the Business Plan and such investment
         program as the Directors may adopt from time to time;

                (d) furnishing or obtaining and supervising the performance of
         the ministerial functions in connection with the administration of the
         day-to-day operations of the Company including the investment of
         reserve funds and surplus cash in short-term money market investments;

                (e) serving as the Company's investment and financial advisor
         and providing research, economic, and statistical data in connection
         with the Company's investments and investment and financial policies;

                (f) on behalf of the Company, investigating, selecting and
         conducting relations with borrowers, lenders, mortgagors, brokers,
         investors, builders, developers and others; provided however, that the
         Advisor shall not retain on the Company's behalf any consultants or
         third party professionals, other than legal counsel, without prior
         Board approval;

                (g) consulting with the Directors and furnishing the Directors
         with advice and recommendations with respect to the making, acquiring
         (by purchase, investment, exchange or otherwise), holding and
         disposition (through sale, exchange, or otherwise) of investments
         consistent with the Business Plan of the Company;

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                (h) obtaining for the Directors such services as may be
         required in acquiring and disposing of investments, disbursing and
         collecting the funds of the Company, paying the debts and fulfilling
         the obligations of the Company, and handling, prosecuting, and
         settling any claims of the Company, including foreclosing and
         otherwise enforcing mortgage and other liens securing investments;

                (i) obtaining for and at the expense of the Company such
         services as may be required for property management, loan
         disbursements, and other activities relating to the investments of the
         Company, provided, however, the compensation for such services shall
         be agreed to by the Company and the service provider;

                (j) advising the Company in connection with public or private
         sales of shares or other securities of the Company, or loans to the
         Company, but in no event in such a way that the Advisor could be
         deemed to be acting as a broker dealer or underwriter;

                (k) quarterly and at any time requested by the Directors,
         making reports to the Directors regarding the Company's performance to
         date in relation to the Company's approved Business Plan and its
         various components, as well as the Advisor's performance of the
         foregoing services;

                (l) making or providing appraisal reports, where appropriate,   
         on investments or contemplated investments of the Company;        
                                                                           
                (m) assisting in preparation of reports and other documents
         necessary to satisfy the reporting and other requirements of any
         governmental bodies or agencies and to maintain effective
         communications with stockholders of the Company; and

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                (n) doing all things necessary to ensure its ability to render
         the services contemplated herein, including providing office space and
         office furnishings and personnel necessary for the performance of the
         foregoing services as Advisor, all at its own  expense, except as
         otherwise expressly provided for herein.
        
         2.     NO PARTNERSHIP OR JOINT VENTURE. The Company and the Advisor
are not partners or joint venturers with each other, and nothing herein shall
be construed so as to make them such partners or joint venturers or impose any
liability as such on either of them.  

         3.     RECORDS. At all times, the Advisor shall keep proper books of
account and records of the Company's affairs which shall be accessible for
inspection by the Company at any time during ordinary business hours.

         4.     ADDITIONAL OBLIGATIONS OF THE ADVISOR. The Advisor shall
refrain from any action (including, without limitation, furnishing or rendering
services to tenants of property or managing or operating real property) that
would (a) adversely affect the status of the Company as a real estate
investment trust, as defined and limited in Sections 856-860 of the Internal
Revenue Code, (b) violate any law, rule, regulation, or statement of policy of
any governmental body or agency having jurisdiction over the Company or over
its securities, (c) cause the Company to be required to register as an
investment company under the Investment Company Act of 1940, or (d) otherwise
not be permitted by the Articles of Incorporation of the Company.              

         5.     BANK ACCOUNTS. The Advisor may establish and maintain one
or more bank accounts in its own name, and may collect and deposit into any
such account or accounts, and disburse from any such account or accounts, any
money on behalf of the Company, under such

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terms and conditions as the Directors may approve, provided that no funds in
any such account shall be commingled with funds of the Advisor; and the Advisor
shall from time to time render appropriate accounting of such collections and
payments to the Directors and to the auditors of the Company.

         6.     BOND. The Advisor shall maintain a fidelity bond with a 
responsible surety company in such amount as may be required by the Directors
from time to time, covering all directors, officers, employees, and agents of
the Advisor handling funds of the Company and any investment documents or
records pertaining to investments of the Company. Such bond shall inure to the
benefit of the Company in respect to losses of any such property from acts of
such directors, officers, employees, and agents through theft, embezzlement,
fraud, negligence, error, or omission or otherwise, the premium for said bond
to be at the expense of the Company.

         7.     INFORMATION FURNISHED ADVISOR. The Directors shall have the 
right to change the Business Plan at any time, effective upon receipt by the
Advisor of notice of such change. The Company shall furnish the Advisor with a
certified copy of all financial statements, a signed copy of each report
prepared by independent certified public accountants, and such other
information with regard to the Company's affairs as the Advisor may from time
to time reasonably request. 

         8.     CONSULTATION AND ADVICE. In addition to the described above, 
the Advisor shall consult with the Directors, and shall, at the request of the
Directors or the officers of the Company, furnish advice and recommendations
with respect to any aspect of the business and affairs of the Company,
including any factors that in the Advisor's best judgment should influence the
policies of the Company.

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         9.     ANNUAL BUSINESS PLAN AND BUDGET. No later than January 15th of
each year, the Advisor shall submit to the Directors a written Business Plan
for the current Fiscal Year of the Company. Such Business Plan shall include a
twelve-month forecast of operations and cash flow with explicit assumptions and
a general plan for asset sales or acquisitions, lending, foreclosure and
borrowing activity, other investments or ventures and proposed securities
offerings or repurchases or any proposed restructuring of the Company. To the
extent possible, the Business Plan shall set forth the Advisor's
recommendations and the basis therefor with respect to all material investments
of the Company. Upon approval by the Board of Directors, the Advisor shall be
authorized to conduct the business of the Company in accordance with the
explicit provisions of the Business Plan, specifically including the borrowing,
leasing, maintenance, capital improvements, renovations and sale of investments
set forth in the Business Plan. Any transaction or investment not explicitly
provided for in the approved Business Plan shall require the prior approval of
the Board of Directors unless made pursuant to authority expressly delegated to
the Advisor. Within sixty (60) days of the end of each calendar quarter, the
Advisor shall provide the Board of Directors with a report comparing the
Company's actual performance for such quarter against the Business Plan. 

        10.     DEFINITIONS. As used herein, the following terms shall have 
the meanings set forth below: 

                (a) "Affiliate" shall mean, as to any Person, any
        other Person who owns beneficially, directly, or indirectly, 1% or more
        of the outstanding capital stock, shares or equity interests of such
        Person or of any other Person which controls, is controlled by, or is 
        under common control with such Person or is an officer, retired officer,
        director,

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         employee, partner, or trustee (excluding noninterested trustees not
         otherwise affiliated with the entity) of such Person or of any other
         Person which controls, is controlled by, or is under common control
         with, such Person.

                (b) "Appraised Value" shall mean the value of a Real Property
         according to an appraisal made by an independent qualified appraiser
         who is a member in good standing of the American Institute of Real
         Estate Appraisers and is duly licensed to perform such services in
         accordance with the applicable state law, or, when pertaining to
         Mortgage Loans, the value of the underlying property as determined by
         the Advisor.

                (c) "Book Value" of an asset or assets shall mean the value of
         such asset or assets on the books of the Company, before provision for
         amortization, depreciation, depletion or valuation reserves and before
         deducting any indebtedness or other liability in respect thereof,
         except that no asset shall be valued at more than its fair market
         value as determined by the Directors.

                (d) "Book Value of Invested Assets" shall mean the Book Value
         of the Company's total assets (without deduction of any liabilities),
         but excluding (i) goodwill and other intangible assets, (ii) cash, and
         (iii) cash equivalent investments with terms which mature in one year
         or less.

                (e) "Business Plan" shall mean the Company's investment
         policies and objectives and the capital and operating budget based
         thereon, approved by the Board as thereafter modified or amended.

                (f) "Fiscal Year" shall mean any period for which an income tax
         return is submitted to the Internal Revenue Service

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                and which is treated by the Internal Revenue Service as a
         reporting period.

                (g) "Gross Asset Value" shall mean the total assets of the
         Company after deduction of allowance for amortization, depreciation or
         depletion and valuation reserves.

                (h) "Mortgage Loans" shall mean notes, debentures, bonds, and
         other evidences of indebtedness or obligations, whether negotiable or
         non-negotiable, and which are secured or collateralized by mortgages,
         including first, wraparound, construction and development, and junior
         mortgages.

                (i) "Net Asset Value" shall mean the Book Value of all
         the assets of the Company minus all the liabilities of the
         Company.

                (j) "Net Income" for any period shall mean the Net Income of
         the Company for such period computed in accordance with generally
         accepted accounting principles after deduction of the Gross Asset Fee,
         but before deduction of the Net Income Fee, as set forth in Sections
         11(a) and 11(b), respectively, herein, and inclusive of gain or loss
         of the sale of assets.

                (k) "Net Operating Income" shall mean rental income less
         property operating expenses.

                (l) "Operating Expenses" shall mean the aggregate annual
         expenses regarded as operating expenses in accordance with generally
         accepted accounting principles as determined by the independent
         auditors selected by the Directors and including the Gross Asset Fee
         payable to the Advisor and fees and expenses paid to the Directors who
         are not employees or Affiliates of the Advisor.

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                (m)  The operating expenses shall exclude, however, the
         following:

                     (i)      the cost of money borrowed by the Company;

                    (ii) income taxes, taxes and assessments on real
                property and all other taxes applicable to the Company;

                   (iii) expenses and taxes incurred in connection with
                the issuance, distribution, transfer, registration and stock
                exchange listing of the Company's securities (including legal,
                auditing, accounting, underwriting, brokerage, printing,
                engraving and other fees);

                    (iv) fees and expenses paid to independent mortgage
                servicers, contractors, consultants, managers and other agents
                retained by or on behalf of the Company;

                     (v) expenses directly connected with the purchase,
                origination, ownership and disposition of Real Properties or
                Mortgage Loans (including the costs of foreclosure, insurance,
                legal, protective, brokerage, maintenance, repair and property
                improvement services) other than expenses with respect thereto
                of employees of the Advisor, except legal, internal auditing,
                foreclosure and transfer agent services performed by employees
                of the Advisor;

                    (vi) expenses of maintaining and managing real estate
                equity interests and processing and servicing mortgage and
                other loans;

                   (vii) expenses connected with payments of dividends,
                interest or distributions by the Company to shareholders;

                  (viii) expenses connected with communications to
                shareholders and bookkeeping and clerical expenses for

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                maintaining shareholder relations, including the cost of
                printing and mailing share certificates, proxy
                solicitation materials and reports;

                    (ix) transfer agent's, registrar's and indenture
                trustee's fees and charges; and

                     (x) the cost of any accounting, statistical,
                bookkeeping or computer equipment necessary for the
                maintenance of books and records of the Company.

                Additionally, the following expenses of the Advisor shall
         be excluded:

                     (i) employment expenses of the Advisor's personnel
                (including Directors, officers and employees of the Company who
                are directors, officers or employees of the Advisor or its
                Affiliates), other than the expenses of those employee services
                listed at (v) above.

                    (ii) rent, telephone, utilities and office furnishings and
                other office expenses of the Advisor (except those relating to
                a separate office, if any, maintained by the Company); and

                   (iii) the Advisor's overhead directly related to
                performance of its functions under this Agreement.

                (n) "Person" shall mean and include individuals, corporations,
         limited partnerships, general partnerships, joint stock companies or
         associations, joint ventures, associations, companies, trusts, banks,
         trust companies, land trusts, business trusts, or other entities and
         governments and agencies and political subdivisions thereof. 

                (o) "Real Property" shall mean and include land, rights in
         land, leasehold interests (including but not limited to interests of a
         lessor or lessee therein), and any buildings, structures,
         improvements, fixtures, and equipment located on

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         or used in connection with land, leasehold interests, and
         rights in land or interests therein.

         All calculations made pursuant to this Agreement shall be
based on statements (which may be unaudited, except as provided herein)
prepared on an accrual basis consistent with generally accepted accounting
principles, regardless of whether the Company may also prepare statements on a
different basis. All other terms shall have the same meaning as set forth in
the Company's Articles of Incorporation and Bylaws.

         11.    ADVISORY COMPENSATION.

                (a) Gross Asset Fee. On or before the twenty-eighth day of each
         month during the term hereof, the Company shall pay to the Advisor, as
         compensation for the basic management and advisory services rendered
         to the Company hereunder, a fee at the rate of .0625% per month of the
         average of the Gross Asset Value of the Company at the beginning and
         at the end of the next preceding calendar month. Without negating the
         provisions of Sections 18, 19, 22 and 23 hereof, the annual rate of
         the Gross Asset Fee shall be .75% per annum.

                (b) Net Income Fee. As an incentive for successful investment
         and management of the Company's assets, the Advisor will be entitled
         to receive a fee equal to 7.5% per annum of the Company's Net Income
         for each Fiscal Year or portion thereof for which the Advisor provides
         services. To the extent the Company has Net Income in a quarter, the
         7.5% Net Income fee is to be paid quarterly on or after the third
         business day following the filing of the report on Form 10-Q with the
         Securities and Exchange Commission, except for the payment for the
         fourth quarter, ended December 31, which is to

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         be paid on or after the third business day following the filing of the
         report on Form 10-K with the Securities and Exchange Commission.

                The 7.5% Net Income Fee is to be cumulative within any Fiscal
         Year, such that if the Company has a loss in any quarter during the
         Fiscal Year, each subsequent quarter's payment during such Fiscal Year
         shall be adjusted to maintain the 7.5% per annum rate, with final
         settlement being made with the fourth quarter payment and in
         accordance with audited results for the Fiscal Year. The 7.5% Net
         Income Fee is not cumulative from year to year.

                (c) Acquisition Commission. For supervising the acquisition,
         purchase or long term lease of Real Property for the Company, the
         Advisor is to receive an Acquisition Commission equal to the lesser of
         (i) up to 1% of the cost of acquisition, inclusive of commissions, if
         any, paid to nonaffiliated brokers; or (ii) the compensation
         customarily charged in arm's-length transactions by others rendering
         similar property acquisition services as an ongoing public activity in
         the same geographical location and for comparable property. The
         aggregate of each purchase price of each property (including the
         Acquisition Commissions and all real estate brokerage fees) may not
         exceed such property's Appraised Value at acquisition.

                (d) Incentive Sales Compensation. To encourage periodic sales
         of appreciated Real Property at optimum value and to reward the
         Advisor for improved performance of the Company's Real Property, the
         Company shall pay to the Advisor, on or before the 45th day after the
         close of each Fiscal Year, an incentive fee equal to 10% of the
         amount, if any, by which the aggregate sales consideration for all
         Real Property sold by

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         the Company during such Fiscal Year exceeds the sum of: (i) the cost
         of each such Real Property as originally recorded in the Company's
         books for tax purposes (without deduction for depreciation,
         amortization or reserve for losses), (ii) capital improvements made to
         such assets during the period owned by the Company, and (iii) all
         closing costs, (including real estate commissions) incurred in the
         sale of such Real Property; provided however, no incentive fee shall
         be paid unless (a) such Real Property sold in such Fiscal Year, in the
         aggregate, has produced an 8% simple annual return on the Company's
         net investment, including capital improvements, calculated over the
         Company's holding period before depreciation and inclusive of
         operating income and sales consideration and (b) the aggregate Net
         Operating Income from all Real Property owned by the Company for all
         of the prior Fiscal Year and the current Fiscal Year shall be at least
         5% higher in the current Fiscal Year than in the prior Fiscal Year.

                (e) Mortgage or Loan Acquisition Fees. For the acquisition or
         purchase from an unaffiliated party of any existing mortgage or loan
         by the Company, the Advisor or an Affiliate is to receive a Mortgage
         or Loan Acquisition Fee equal to the lesser of (a) 1% of the amount of
         the mortgage or loan purchased by the Company or (b) a brokerage or
         commitment fee which is reasonable and fair under the circumstances.
         Such fee will not be paid in connection with the origination or
         funding by the Company of any mortgage loan.

                (f) Mortgage Brokerage and Equity Refinancing Fees.  For
         obtaining loans to the Company or refinancing on Company properties,
         the Advisor or an Affiliate is to receive a Mortgage Brokerage and
         Equity Refinancing Fee equal to the
        
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         lesser of (a) 1% of the amount of the loan or the amount refinanced or
         (b) a brokerage or refinancing fee which is reasonable and fair under
         the circumstances; provided, however that no such fee shall be paid on
         loans from the Advisor or an Affiliate without the approval of the
         Board of Directors.  No fee shall be paid on loan extensions.

         12.    LIMITATION ON THIRD PARTY MORTGAGE PLACEMENT FEES. The Advisor
or any of its Affiliates shall pay to the Company, one-half of any compensation
received by the Advisor or any such Affiliate from third parties with respect
to the origination, placement or brokerage of any loan made by the Company,
provided, however, the compensation retained by the Advisor or Affiliate shall
not exceed the lesser of (a) 2% of the amount of the loan committed by the
Company or (b) a loan brokerage and commitment fee which is reasonable and fair
under the circumstances.

         13.    STATEMENTS. The Advisor shall furnish to the Company not later
than the tenth day of each calendar month, beginning with the second calendar
month of the term of this Agreement, a statement showing the computation of the
fees, if any, payable in respect to the next preceding calendar month (or, in
the case of incentive compensation, for the preceding Fiscal Year, as
appropriate) under the Agreement. The final settlement of incentive
compensation for each Fiscal Year shall be subject to adjustment in accordance
with, and upon completion of, the annual audit of the Company's financial
statements; any payment by the Company or repayment by the Advisor that shall
be indicated to be necessary in accordance therewith shall be made promptly
after the completion of such audit and shall be reflected in the audited
statements to be published by the Company.
        

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         14. COMPENSATION FOR ADDITIONAL SERVICES. If and to the extent that
the Company shall request the Advisor or any director, officer, partner, or
employee of the Advisor to render services for the Company other than those
required to be rendered by the Advisor hereunder, such additional services, if
performed, will be compensated separately on terms to be agreed upon between
such party and the Company from time to time. In particular, but without
limitation, if the Company shall request that the Advisor perform property
management, leasing, loan disbursement or similar functions, the Company and
the Advisor shall enter into a separate agreement specifying the obligations of
the parties and providing for reasonable additional compensation to the Advisor
for performing such services.

         15.    EXPENSES OF THE ADVISOR. Without regard to the amount of
compensation or reimbursement received hereunder by the Advisor,
the Advisor shall bear the following expenses:

                (a)      employment expenses of the personnel employed by the
         Advisor (including Directors, officers, and employees of the Company
         who are directors, officers, or employees of the Advisor or of any
         company that controls, is controlled by, or is under common control
         with the Advisor), including, but not limited to, fees, salaries,
         wages, payroll taxes, travel expenses, and the cost of employee
         benefit plans and temporary help expenses except for those personnel
         expenses described in Sections 16(e) and (p);

                (b)      advertising and promotional expenses incurred in
         seeking investments for the Company;

                (c)      rent, telephone, utilities, office furniture and
         furnishings, and other office expenses of the Advisor and the
         Company, except as any of such expenses relates to an office

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         maintained by the Company separate from the office of the
         Advisor; and

                (d)      miscellaneous administrative expenses relating to
         performance by the Advisor of its functions hereunder.

         16.    Expenses of the Company. The Company shall pay all of its
expenses not assumed by the Advisor, including without limitation,
the following expenses:

                (a)      the cost of money borrowed by the Company;

                (b)      income taxes, taxes and assessments on real property,
         and all other taxes applicable to the Company;

                (c)      legal, auditing, accounting, underwriting, brokerage,
         listing, registration and other fees, printing, and engraving and
         other expenses, and taxes incurred in connection with the issuance,
         distribution, transfer, registration, and stock exchange listing of
         the Company's securities:

                (d)      fees, salaries, and expenses paid to officers, and
         employees of the Company who are not directors, officers or employees
         of the Advisor, or of any company that controls, is controlled by, or
         is under common control with the Advisor;

                (e)      expenses directly connected with the origination or
         purchase of Mortgage Loans and with the acquisition, disposition and
         ownership of real estate equity interests or other property (including
         the costs of foreclosure, insurance, legal, protective, brokerage,
         maintenance, repair, and property improvement services) and including
         all compensation, traveling expenses, and other direct costs
         associated with the Advisor's employees or other personnel engaged in
         (i) real estate transaction legal services, (ii) internal auditing,
         (iii) foreclosure and other mortgage finance services, (iv)

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         sale or solicitation for sale of mortgages, (v) engineering and
         appraisal services, and (vi) transfer agent services.

                (f)      expenses of maintaining and managing real estate
         equity interests;

                (g)      insurance, as required by the Directors (including
         Directors' liability insurance);

                (h)      the expenses of organizing, revising, amending,
         converting, modifying, or terminating the Company;

                (i)      expenses connected with payments of dividends or 
         interest or distributions in cash or any other form made or caused to 
         be made by the Directors to holders of securities of the Company;

                (j)      all expenses connected with communications to holders 
         of securities of the Company and the other bookkeeping and clerical 
         work necessary in maintaining relations with holders of securities,
         including the cost of printing and mailing certificates for securities
         and proxy solicitation materials and reports to holders of the
         Company's securities;

                (k)      the cost of any accounting, statistical, bookkeeping or
         computer equipment or computer time necessary for maintaining the
         books and records of the Company and for preparing and filing Federal,
         State and Local tax returns;

                (l)      transfer agent's, registrar's, and indenture
         trustee's fees and charges;

                (m)      legal, accounting, investment banking, and auditing 
         fees and expenses charged by independent parties performing these 
         services not otherwise included in clauses (c) and (e) of this Section
         16;

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                (n)      expenses incurred by the Advisor, arising from the
         sales of Company properties, including those expenses related
         to carrying out foreclosure proceedings;

                (o)      commercially reasonable fees paid to the Advisor for
         efforts to liquidate mortgages before maturity, such as the
         solicitation of offers and negotiation of terms of sale;

                (p)      costs and expenses connected with computer services,
         including but not limited to employee or other personnel compensation,
         hardware and software costs, and related development and installation
         costs associated therewith;

                (q)      costs and expenses associated with risk management
         (i.e. insurance relating to the Company's assets);

                (r)      loan refinancing compensation; and

                (s)      expenses associated with special services requested
         by the Directors pursuant to Section 14 hereof.

         17.    Other Activities of Advisor. The Advisor, its officers,
directors, or employees or any of its Affiliates may engage in other business
activities related to real estate investments or act as advisor to any other
person or entity (including another real estate investment trust), including
those with investment policies similar to the Company, and the Advisor and its
officers, directors, or employees and any of its Affiliates shall be free from
any obligation to present to the Company any particular investment opportunity
that comes to the Advisor or such persons, regardless of whether such
opportunity is in accordance with the Company's Business Plan. However, to
minimize any possible conflict, the Advisor shall consider the respective
investment objectives of, and the appropriateness of a particular investment to
each such entity in determining to which entity a particular investment
opportunity should be presented. If appropriate to more

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than one entity, the Advisor shall present the investment opportunity to the
entity that has had sufficient uninvested funds for the longest period of time.

         18.    LIMITATION ON OPERATING EXPENSES. To the extent that the 
Operating Expenses of the Company for any Fiscal Year exceed the lesser of (a)
1.5% of the average of the Book Values of Invested Assets of the Company at the
end of each calendar month of such Fiscal Year, or (b) the greater of 1.5% of
the average of the Net Asset Value of the Company at the end of each calendar
month of such Fiscal Year or 25% of the Company's Net Income, the Advisor shall
refund to the Company from the fees paid to the Advisor the amount, if any, by
which the Operating Expenses so exceed the applicable amount, provided,
however, that the Advisor shall not be required to refund to the Company, with
respect to any Fiscal Year, any amount which exceeds the aggregate of the Gross
Asset Fees paid to the Advisor under this Agreement with respect to such Fiscal
Year.

         19.    TERM; TERMINATION OF AGREEMENT. This Agreement shall continue 
in force until the next Annual Meeting of Stockholders of the Company, and,
thereafter, it may be renewed from year to year, subject to any required
approval of the Stockholders of the Company and, if any Director is an
Affiliate of the Advisor, the approval of a majority of the Directors who are
not so affiliated. Notice of renewal shall be given in writing by the Directors
to the Advisor not less than 60 days before the expiration of this Agreement or
of any extension thereof. This Agreement may be terminated for any reason
without penalty upon 60 days' written notice by the Company to the Advisor or
120 days' written notice by the Advisor to the Company, in the former case by
the vote of a majority of the Directors who are not Affiliates of the Advisor
or by the vote of holders of a majority of the outstanding shares of the
Company.

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Notwithstanding the foregoing, however, in the event of any material change in
the ownership, control or management of the Advisor, the Company may terminate
this Agreement without penalty and without advance notice to the Advisor.

         20.    AMENDMENTS. This Agreement shall not be changed, modified,
terminated or discharged in whole or in part except by an instrument in writing
signed by both parties hereto, or their respective successors or assigns, or
otherwise as provided herein.

         21.    ASSIGNMENT. This Agreement shall not be assigned by the Advisor
without the prior consent of the Company. The Company may terminate this
Agreement in the event of its assignment by the Advisor without the prior
consent of the Company. Such an assignment or any other assignment of this
Agreement shall bind the assignee hereunder in the same manner as the Advisor
is bound hereunder. This Agreement shall not be assignable by the Company
without the consent of the Advisor, except in the case of assignment by the
Company to a corporation, association, trust, or other organization that is a
successor to the Company. Such successor shall be bound hereunder and by the
terms of said assignment in the same manner as the Company is bound hereunder.

         22.    DEFAULT, BANKRUPTCY, ETC. At the option solely of the Directors,
this Agreement shall be and become terminated immediately upon written notice
of termination from the Directors to the Advisor if any of the following events
shall occur:

                (a)      If the Advisor shall violate any provision of this
         Agreement, and after notice of such violation shall not cure such
         default within 30 days; or

                (b)       If the Advisor shall be adjudged bankrupt or insolvent
         by a court of competent jurisdiction, or an order shall be made by a 
         court of competent jurisdiction for the appointment of a receiver,
         liquidator, or trustee of the

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<PAGE>   21



         Advisor or of all or substantially all of its property by reason of
         the foregoing, or approving any petition filed against the Advisor for
         its reorganization, and such adjudication or order shall remain in
         force or unstayed for a period of 30 days; or

                (c)      If the Advisor shall institute proceedings for 
         voluntary bankruptcy or shall file a petition seeking reorganization 
         under the Federal bankruptcy laws, or for relief under any law for the
         relief of debtors, or shall consent to the appointment of a receiver of
         itself or of all or substantially all its property, or shall make a
         general assignment for the benefit of its creditors, or shall admit in 
         writing its inability to pay its debts generally, as they become due. 
         The Advisor agrees that if any of the events specified in subsections 
         (b) and (c) of this Section 22 shall occur, it will give written
         notice thereof to the Directors within seven days after the occurrence
         of such event.

         23.    ACTION UPON TERMINATION. From and after the effective date of
termination of this Agreement, pursuant to Sections 19, 21 or 22 hereof, the
Advisor shall not be entitled to compensation for further services hereunder
but shall be paid all compensation accruing to the date of termination. The
Advisor shall forthwith upon such termination:

                (a)      pay over to the Company all monies collected and held
         for the account of the Company pursuant to this Agreement;

                (b)      deliver to the Directors a full accounting, including
         a statement showing all payments collected by it and a
         statement of any monies held by it, covering the period

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<PAGE>   22


           following the date of the last accounting furnished to the
           Directors; and

                (c)      deliver to the Directors all property and documents
           of the Company then in the custody of the Advisor.

           24.   MISCELLANEOUS. The Advisor shall be deemed to be in a
fiduciary relationship to the stockholders of the Company. The Advisor assumes
no responsibility under this Agreement other than to render the services called
for hereunder in good faith, and shall not be responsible for any action of the
Directors in following or declining to follow any advice or recommendations of
the Advisor. Neither the Advisor nor any of its shareholders, directors,
officers, or employees shall be liable to the Company, the Directors, the
holders of securities of the Company or to any successor or assign of the
Company for any losses arising from the operation of the Company if the Advisor
had determined, in good faith, that the course of conduct which caused the loss
or liability was in the best interests of the Company and the liability or loss
was not the result of negligence or misconduct by the Advisor. However, in no
event will the directors, officers or employees of the Advisor be personally
liable for any act or failure to act unless it was the result of such person's
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.

         25.    NOTICES. Any notice, report, or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving such notice, report, or other communication is accepted by the party to
whom it is given, and shall be given by being delivered at the following
addresses of the parties hereto:

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<PAGE>   23



         The Directors and/or the Company:

                Income Opportunity Realty Investors, Inc.
                10670 North Central Expressway
                Suite 600
                Dallas, Texas 75231
                Attention:  President

         The Advisor:

                Basic Capital Management, Inc.
                10670 North Central Expressway
                Suite 600
                Dallas, Texas 75231
                Attention:  Executive Vice President and Chief
                            Financial Officer

         Either party may at any time give notice in writing to the other party
of a change of its address for the purpose of this Section 25.

         26.    HEADINGS. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction, or effect of this Agreement.

         27.    GOVERNING LAW. This Agreement has been prepared, negotiated and
executed in the State of Texas. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of Texas
applicable to agreements made and to be performed entirely in the State of
Texas.

         28.    EXECUTION. This instrument is executed and made on behalf of the
Company by an officer of the Company, not individually but solely as an
Officer, and the obligations under this Agreement are not binding upon, nor
shall resort be had to the private property of, any of the Directors,
stockholders, officers, employees, or agents of the Company personally, but
bind only the Company property.

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     IN WITNESS WHEREOF, INCOME OPPORTUNITY REALTY INVESTORS, INC. and BASIC
CAPITAL MANAGEMENT, INC., by their duly authorized officers, have signed these
presents all as of the day and year first above written.

                                         INCOME OPPORTUNITY REALTY
                                         INVESTORS, INC.



                                         By:   /s/ Randall M. Paulson
                                            --------------------------------
                                            Randall M. Paulson
                                            President



                                         BASIC CAPITAL MANAGEMENT, INC.



                                         By:   /s/ Thomas A. Holland
                                            --------------------------------
                                            Thomas A. Holland
                                            Executive Vice President






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