Item 2.  Acquisition or Disposition of Assets

                              THE GABLES APARTMENTS
                               Richmond, Virginia


         On July 2, 1998,  Cornerstone Realty Income Trust, Inc. (the "Company")
purchased The Gables Apartments,  a 224-unit apartment complex having an address
of 4008 Gaelic Lane, Glen Allen (Henrico County), Virginia (the "Property"). The
Property is located in a suburb of Richmond, Virginia.

         The seller, Richmond Gables Associates, a Virginia general partnership,
was unaffiliated with the Company. The purchase price was $11,500,000, which the
Company paid entirely in cash using its unsecured  line of credit.  Title to the
Property was conveyed to the Company by limited warranty deed.

          LOCATION.  The  Property  is located  off of West Broad  Street in the
"West End" section of metropolitan  Richmond,  Virginia,  within Henrico County.
The  following  information  is based in part upon  information  provided by the
Richmond Chamber of Commerce.

         Virginia as a whole has a very  diversified  economy,  with key sectors
including  the  military,  government,  education,  tourism,  tobacco  products,
shipbuilding,  paper products, textiles,  electronics,  chemicals and machinery.
Virginia is the twelfth most  populous  state,  with  approximately  6.7 million
inhabitants.

         Richmond, the state capital, is one of the leading industrial cities in
the South and is the third  largest city in  Virginia.  Richmond is located near
the  center of the  state and the  greater  metropolitan  area has an  estimated
population  in excess of 750,000.  Major  employers  in the area  include  state
government,  CSX,  Circuit City Stores,  Reynolds  Metals,  Dominion  Resources,
Universal  Corp.,  Richfood  Holdings  and  Owens  &  Minor.  There  are two new
semiconductor  manufacturing  plants that have chosen Richmond as their site and
the projects are expected to create an  additional  10,000 to 20,000  direct and
indirect jobs by the end of this century.

         The  Richmond  area is the site of a number of  institutions  of higher
education,  including Virginia Commonwealth  University,  the Medical College of
Virginia, the University of Richmond and Virginia State University.

         Richmond is  situated at the  intersection  of  Interstates  95 and 64.
Interstate 95 is the most important north-south highway on the eastern seaboard.
It connects  Richmond with Washington,  D.C. and the northeast to the north, and
extends to Miami, Florida on the south. Interstate 64 runs east to the Tidewater
area of Virginia  and runs west to  Charlottesville,  Virginia  and beyond. 




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Air transportation is available through Richmond International Airport, which is
served by six major carriers and seven regional airlines.

         The  Property  is located  in the  western  portion of Henrico  County,
within  what is known  as the  "West  End" of  Richmond.  This  area is known to
natives as well as newcomers as a prosperous and  prestigious  location in which
to live, and is convenient to centers of employment, shopping and entertainment.
The  Property  is  located  in a stable,  upper-middle-class  neighborhood  that
includes  single-family  housing,  other multi-family housing and commercial and
retail development. The Property is adjacent to the Innsbrook Office Park, which
provides office and retail space for many businesses.

         The   Property  is   approximately   one  mile  from   Interstate   64,
approximately six miles from Interstate 95, approximately 12 miles from downtown
Richmond,  and an  approximately  25-minute  drive from  Richmond  International
Airport.

         DESCRIPTION OF THE PROPERTY.  The Property consists of 224 garden-style
apartment  units located in 12 two- and three-story  buildings on  approximately
15.4 acres of land. The Property was constructed in 1987.

         The Company  believes that the Property has been well maintained and is
generally in good  condition.  According to information  provided by the seller,
the  seller  invested  approximately  $83,000  in  capital  improvements  to the
property in 1996, which included sealing the parking lot, sandblasting the pool,
sign upgrades,  and interior  improvements  such as carpet,  vinyl and appliance
replacement.  The seller has also stated that it invested approximately $183,000
in  capital  improvements  to  the  Property  in  1997,  which  included  gutter
replacement,  tree removal,  concrete repairs,  resurfacing of the tennis court,
exterior painting, clubhouse upgrading, fitness center upgrading, and additional
interior  improvements.  The Company has  budgeted  approximately  $224,000  for
additional capital improvements to the Property,  including additional clubhouse
renovations and interior upgrades.

         The Property  offers four different unit types.  The unit mix and rents
being charged new tenants as of June 1998 are as follows:

                                           Approximate Interior        Monthly 
Quantity             Type                    Square Footage            Rental
--------             ----                    --------------            ------

  62        One bedroom, one bathroom              471                  $495
  60        One bedroom, one bathroom              681                   570
  40        Two bedrooms, two bathrooms            785                   610
  62        Two bedrooms, two bathrooms            885                   665



          The  apartments  provide a  combined  total of  approximately  156,000
square feet of net rentable area.


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          Leases  at the  Property  are for  terms of one year or less.  Average
rental rates for the past five years have generally increased.  As an example, a
one-bedroom,  one-bathroom  apartment  unit (681 square feet) rented for $495 in
1993,  $510 in 1994,  $520 in 1995,  $537 in 1996, and $555 in 1997. The average
effective  annual rental per square foot at the Property for 1993,  1994,  1995,
1996 and 1997 was $8.87, $8.96, $9.14, $9.44 and $9.75, respectively.

         The  buildings  are  wood-frame  construction  on  concrete  slabs with
pitched roofs covered with asphalt shingles.  The exteriors of the buildings are
a combination of brick veneer and cedar siding.

         The  Property  has an outdoor  swimming  pool with  heated  Jacuzzi,  a
lighted tennis court, a fitness center, a car vacuum area, a barbecue and picnic
area, 25 carports and two laundry facilities.  There is also a clubhouse with an
entertainment area, kitchenette and leasing office. There is ample paved parking
at the Property.

         Apartment  units have  wall-to-wall  carpeting  in the living areas and
vinyl  floors  in the  kitchen  and  baths.  Each  apartment  unit  has a  cable
television  hook-up and an individually  controlled heating and air conditioning
unit. Each apartment unit has  mini-blinds,  a linen closet and walk-in closets.
Each kitchen has a refrigerator/freezer, electric range and oven, dishwasher and
garbage disposal.  Some units are available with amenities such as window seats,
bay windows, a fireplace,  washer/dryer  connections and washer/dryer units. All
of the large one-bedroom and two-bedroom units include washer/dryer connections.
All of the  first-floor  units have window seats,  all of the  second-floor  and
third-floor  units have bay windows and all third-floor  units have a fireplace.
The owner of the Property provides cold water,  sewer service and trash removal.
Tenants are responsible for their electricity usage, which includes heating, air
conditioning, cooking, hot water and lights.

         There are at seven  apartment  properties in the area that compete with
the  Property.  All offer similar  amenities  and generally  have rents that are
comparable when compared to those of the Property.  Based on a recent  telephone
survey,  the Company  estimates  that  occupancy  in nearby  competing  projects
averaged approximately 94% on June 30, 1998.

         According to information provided by the seller,  physical occupancy at
the Property  averaged  approximately 92% in 1993, 93% in 1994, 94% in 1995, 95%
in 1996 and 94% in 1997. On June 24, 1998,  the Property was 96%  occupied.  The
tenants are mostly  white-collar  workers,  with a smaller number of blue-collar
workers, students and retired persons.

         The 1997 real estate taxes  applicable to the Property were  calculated
as assessed value of $8,715,900 multiplied by a tax rate of $.94, for total real
estate  taxes of  $81,929.46.  The  basis of the  depreciable  residential  real
property portion of the Property (currently  estimated at about $9,353,451) will
be  depreciated  over 27.5  years on a  straight  line  basis.  The basis of the
personal  property  portion will be depreciated in accordance  with the modified
accelerated  cost  recovery  system of the  Internal  Revenue  Code of 1986,  as
amended.


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          The Company  believes  that the  Property  is and will  continue to be
adequately covered by property and liability insurance.

         MATERIAL  FACTORS  CONSIDERED IN ASSESSING  THE  PROPERTY.  The factors
considered  by the  Company  to be  relevant  in  evaluating  the  Property  for
acquisition by the Company included the following:

         1. The Company believes that the Richmond,  Virginia  metropolitan area
will enjoy continued economic  development and steady population  increase,  and
that such  development  and increase  will support  stable  occupancy  rates and
reasonable increases in rents at the Property.  The economy of the Richmond area
is diversified and the unemployment  rate in the Richmond  metropolitan area has
historically been consistently below the national average.

         2. The Company  already owns several other  apartment  complexes in the
Richmond area and has its corporate headquarters in Richmond.  Thus, the Company
believes  that  it is  knowledgeable  and  experienced  regarding  the  Richmond
apartment rental market.

         3.  Based  upon an  engineering  report  and its own  inspections,  the
Company believes that the Property is in very good condition. The seller reports
that it expended significant amounts for Property improvements in 1996 and 1997,
and the Company believes that its planned  expenditures  will permit  additional
rental increases at the Property.

         4. The Property is located in a prestigious  area of suburban  Richmond
and is near major employers.  Its location adjacent to the Innsbrook Office Park
is particularly advantageous.

         The Company is not aware of any material  adverse  factors  relating to
the  Property  not set forth in this  report  that  would  cause  the  financial
information  contained in this report not to be indicative  of future  operating
results.


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