<PAGE>

                                                                    EXHIBIT 10.3

                          PROPERTY MANAGEMENT AGREEMENT


         This Agreement (the "Agreement") is made as of June 20, 2001 by and
between CRIT-VA III, Inc., a Virginia corporation (the "Owner"), and Cornerstone
Realty Income Trust, Inc., a Virginia corporation (the "Manager").

                                    RECITALS:

         Owner is the owner of the apartment community listed on Schedule A
                                                                 ----------
hereto (the "Property"). Owner has selected Manager to manage the Property 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 Property, 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 the Property,
this Agreement will terminate 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 Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property. Without limiting
the scope of the foregoing:

             (a)  Manager shall collect all rents and other income from the
Property, 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 Property.

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

<PAGE>


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

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

          (f) Manager shall hire, evaluate, supervise, discharge and pay all
employees or contractors necessary for the management and operation of the
Property. 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 Property) 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
state or locality in which the Property is 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 Property
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 Property: (1) forecast of
rental and occupancy changes; (2)

                                       -2-

<PAGE>

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 Property 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 Property and shall, to the extent
necessary, implement new management systems with respect to the operation of the
Property.

     4.  Deposits of Rent and Other Income. All sums received from rents, tenant
         ---------------------------------
security deposits or other deposits on units at the Property, deposits on keys
and other income from the Property, 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
         ---------
Property and its 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,
the Property, 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 Property. Owner shall pay to
         -------------------------------------------------
Manager a "Property Management Fee" for management of the Property pursuant to
this Agreement in an amount equal to five percent (5%) of the monthly gross
revenues from the Property. 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 Property received by Owner (for such month) by such date. If additional
income from the Property 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.

                                       -3-

<PAGE>

     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
Property.

     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 Property
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 Property) 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)

                                       -4-

<PAGE>

WITNESS the following signatures:


OWNER:                              CRIT-VA III, Inc.
-----                               a Virginia corporation

                                    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

                                       -5-

<PAGE>

                                   Schedule A

                                    Property

The Property consists of that real property, together with all improvements
thereon, which is located at the following address:

         Tradewinds Apartments
         255 Floyd Thompson Blvd.
         Hampton, Virginia  23666

                                       -6-