UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

  For the fiscal year ended                     Commission File Number
      December 31, 1997                                333-10635

                      APPLE RESIDENTIAL INCOME TRUST, INC.
             (Exact name of registrant as specified in its charter)

            VIRGINIA                                      54-1816010
 (State or other jurisdiction of                       (I.R.S. Employer
 incorporation or organization)                     Identification Number)

      306 EAST MAIN STREET
          RICHMOND, VA                                      23219
(Address of principal executive offices)                  (Zip Code)

                                 (804) 643-1761
              (Registrant's telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:

                                     (None)

           Securities registered pursuant to Section 12(g) of the Act:

                                     (None)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 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

At March 15,  1998,  there  were  15,401,787  common  shares  of the  registrant
outstanding.

The common shares of the Company are not  currently  being traded in any market.
Therefore,  the common shares did not have either a market  selling price or bid
and  asked  prices  within  60 days  prior to the date of this  filing,  and the
aggregate  market  value of the  common  shares  held by  non-affiliates  of the
registrant is not determinable.

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. Yes No


<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE

The  portions  of the  registrant's  Prospectus  dated  November  19,  1996  and
Supplement  No. 7 dated  February  2,  1998 as filed on  November  20,  1996 and
February 11, 1998,  respectively,  with the  Commission  pursuant to Rule 424(b)
under the  Securities  Act of 1933,  relative to the  registrant's  registration
statement on Form S-11 (File No.  333-10635),  are  incorporated by reference in
Parts I and II of this report.

The registrant's Proxy Statement dated April 3, 1998, referred to in Part III.

INTRODUCTION

This Annual Report  contains  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1993, as amended,  and Section 21E of the
Securities  Exchange Act of 1934, as amended.  Such statements involve known and
unknown  risks,  uncertainties,  and other  factors  which may cause the  actual
results,  performance, or achievements of the Company to be materially different
from  the  results  of  operations  or  plans   expressed  or  implied  by  such
forward-looking   statements.   Such  factors   include,   among  other  things,
unanticipated  adverse  business  developments  affecting  the  Company  or  the
properties,  as the case may be, and adverse  changes in the real estate markets
and general and local  economies and business  conditions.  Although the Company
believes  that  the  assumptions   underlying  the  forward-looking   statements
contained herein are reasonable, any of the assumptions could be inaccurate, and
therefore there can be no assurance that such statements included in this Annual
Report  will prove to be  accurate.  In light of the  significant  uncertainties
inherent in the  forward-looking  statements  included herein,  the inclusion of
such information  should not be regarded as a  representation  by the Company or
any other person that the results or conditions  described in such statements or
the  objectives  and plans of the Company  will be achieved.  In  addition,  the
Company's continued qualification as a real estate investment trust involves the
application of highly  technical and complex  provisions of the Internal Revenue
Code. Readers should carefully review the Company's financial statements and the
notes thereto,  as well as the risk factors  described in the Company's  filings
with the Securities and Exchange Commission.

PART I

Item 1.  Business

Apple Residential Income Trust, Inc. (together with its  subsubsidiaries,  Apple
Limited,  Inc.,  Apple General,  Inc., and Apple REIT Limited  Partnership,  the
"Company"), a Virginia corporation,  was incorporated in August 1996. Operations
of rental property commenced in January, 1997. The business of the Company is to
acquire  existing  residential  apartment  complexes  located  in Texas  and the
southwestern  region of the United States.  The Company owned eleven  properties
comprising 2,776 apartment units within that region as of December 31, 1997. The
complete  investment  objectives and policies of the Company are described under
the caption  "Investment  Objectives and Policies" on pages 26 through 34 of the
Company's  Prospectus dated November 19, 1996 (the "Prospectus")  filed with the
Securities and Exchange  Commission pursuant to Rule 424 (b) (3) on November 20,
1996 relative to the Company's Registration Statement on Form S-11 (Registration
No. 333-10635), which are hereby incorporated herein by reference. The Company's
eleven property  acquisitions in 1997 are described on pages S-4 through S-26 of
Supplement No. 7 dated February 2, 1998  ("Supplement  No. 7") to the Prospectus
(filed  pursuant to Rule 424 (b) (3) on  February  11,  1998),  which are hereby
incorporated by reference. The discussion of the Company's investment objectives
and policies as set forth in the portion of the Prospectus  herein  incorporated
by reference is subject to and  supplemented  by the  developments  described on
pages S-2 through S-26 of Supplement No. 7, which are hereby incorporated herein
by reference.

Originally, the properties were acquired and owned directly by Apple Residential
Income Trust, Inc. without the interposition or use of any subsidiary companies.
Company management  determined that the direct ownership of its properties could
inhibit in certain  respects  the  Company's  flexibility  in  planning  certain
transactions or acquisitions.  For example, the direct-ownership structure makes
it difficult, if not impossible, for potential sellers of properties to exchange
their properties for equity interest in the Company in a manner that could defer
tax  liabilities  for the  sellers.  Company  management  felt that this lack of
flexibility could hinder the Company's  acquisition of desirable properties from
sellers seeking such tax deferral. Furthermore, Company management believed that
the  direct-ownership  structure  tended to maximize the  Company's  exposure to
certain franchise taxes.

Based upon the foregoing, Company management proposed to the Board of Directors,
and  the  Board  of  Directors   adopted  and  submitted  for  approval  by  the
shareholders,  a  proposal  to the  effect  of which  would be to  transfer  the
apartment   properties   of  Apple   Residential   Income   Trust,   Inc.  to  a
newly-organized limited partnership indirectly wholly-owned by Apple Residential
Income Trust, Inc. The shareholders approved this proposal on December 19, 1997.

Apple Residential  Income Trust,  Inc.  transferred the properties to a Virginia
limited partnership,  the partners of which are two newly created,  wholly-owned
subsidiaries of the Company. Apple Residential Income Trust, Inc. formed the two
wholly-owned  subsidiaries,  Apple  Limited,  Inc. and Apple  General,  Inc., as
Virginia corporations.  Apple Residential Income Trust, Inc. then transferred an
undivided 99 percent  interest in the properties to Apple  Limited,  Inc. and an
undivided 1 percent  interest in the  properties to Apple  General,  Inc.  Apple
Limited,  Inc. and Apple General,  Inc. together formed the limited partnership,
Apple REIT  Limited  Partnership  (the  "Partnership"),  as a  Virginia  limited
partnership. Apple Limited, Inc. contributed

                                       2
<PAGE>

its 99%  interest in the  properties  to the  Partnership  in exchange for a 99%
limited partnership interest in the Partnership. Apple General, Inc. contributed
its 1% interest  in the  properties  to the  Partnership  in  exchange  for a 1%
general partnership interest in the Partnership. The properties were transferred
to the  Partnership  on  December  29,  1997.  The  Partnership  now  holds  the
properties and conducts the business  activities of the Company  associated with
the properties.

Shareholders  effectively  continue to hold the same  ownership  interest in the
properties following the transactions described above, through Apple Residential
Income Trust,  Inc.'s 100%  ownership of Apple Limited,  Inc.  (which owns a 99%
interest in the Partnership),  and 100% ownership of Apple General,  Inc. (which
owns 1% interest in the Partnership). Apple General, Inc., as general partner of
the  Partnership,  manages the  affairs of the  Partnership.  Apple  Residential
Income Trust,  Inc. as sole shareholder of Apple General,  Inc. will be entitled
to exercise  the rights of a  100%-shareholder  with  respect to Apple  General,
Inc.,  including the election and removal of directors of that  company.  At the
present time, Glade M. Knight, Chairman of the Board and Chief Executive Officer
of Apple Residential  Income Trust,  Inc., is the sole director and President of
Apple General, Inc.

Information with respect to the Company's  unsecured line of credit used to fund
property acquisitions is hereby incorporated herein by reference to the material
under the caption  "Unsecured Line of Credit" on pages S-3 and S-4 of Supplement
No. 7.

In  connection  with each of its property  acquisitions,  the Company  obtains a
Phase I Environment Report and such additional environmental reports and surveys
as are  necessitated  by such  preliminary  report.  Based on such reports,  the
Company is not aware of any environmental  situations  requiring  remediation at
its  properties,  which have not been or are not currently  being  remediated as
necessary.

The  following  is a summary of the  property  acquisitions  made by the Company
during 1997.

On January 28, 1997, the Company  acquired the Brookfield  Apartments in Dallas,
Texas.  Information with respect to this property is hereby  incorporated herein
by reference from pages S-4 through S-6 of Supplement 7.

On January 30, 1997, the Company  acquired the Eagle Crest Apartments in Irving,
Texas.  Information with respect to this property is hereby  incorporated herein
by reference from pages S-7 through S-9 of Supplement 7.

On January 31, 1997,  the Company  acquired the Tahoe  Apartments  in Arlington,
Texas.  Information with respect to this property is hereby  incorporated herein
by reference from pages S-9 through S-11 of Supplement 7.

On February  21, 1997,  the Company  acquired the Mill  Crossing  Apartments  in
Arlington,   Texas.   Information  with  respect  to  this  property  is  hereby
incorporated herein by reference from pages S-11 through S-13 of Supplement 7.

On March 31, 1997,  the Company  acquired the Polo Run  Apartments in Arlington,
Texas, the Wildwood  Apartments in Euless,  Texas, and the Toscana Apartments in
Dallas,   Texas.   Information  with  respect  to  these  properties  is  hereby
incorporated herein by reference from pages S-13 through S-18 of Supplement 7.

On April 25, 1997,  the Company  acquired The Arbors on Forest Ridge in Bedford,
Texas.  Information with respect to this property is hereby  incorporated herein
by reference from pages S-18 through S-20 of Supplement 7.

On June 24, 1997,  the Company  acquired the Pace's Cove  Apartments  in Dallas,
Texas.  Information with respect to this property is hereby  incorporated herein
by reference from pages S-20 through S-22 of Supplement 7.

On August 6, 1997, the Company  acquired the Chaparosa and Riverhill  Apartments
(which were subsequently combined and renamed "Remington Hills at Las Colinas"),
in  Irving,  Texas.  Information  with  respect  to these  properties  is hereby
incorporated herein by reference from pages S-22 through S-24 of Supplement 7.

On November 24, 1997,  the Company  acquired the Copper  Crossing  Apartments in
Fort  Worth,  Texas.  Information  with  respect  to  this  property  is  hereby
incorporated herein by reference from pages S-25 through S-26 of Supplement 7.

RECENT DEVELOPMENTS

On February 4, 1998, the Company acquired the Main Park  Apartments,  a 192-unit
apartment  complex in  Duncanville  (southwest of Dallas),  Texas for a purchase
price of $8,000,000.  On February 13, 1998, the Company purchased the Timberglen
Apartments,  a 304-unit apartment complex in Dallas,  Texas for a purchase price
of $12,000,000.

                                       3


<PAGE>



Item 2.  Properties

PROPERTY DESCRIPTIONS AND CHARACTERISTICS

As of December 31, 1997, the Company owned 11 apartment  communities  comprising
2,776 apartment units. The properties are located in Texas.


The following table sets forth specific information regarding the properties:
<TABLE>
<CAPTION>


                                                                                       Total                 December
                                                                                       Investment Average    Average   Year-to Date
                                                      Initial        Total      Number Per        Unit Size  Rent Per  Economic
                         Year        Date of        Acquisition  Investment at  of     Unit at    (Square    Month     Occupancy
 Property     Location   Completed   Acquisition        Cost       12-31-97(1)  Units  12-31-97    Feet)     1997 (2)  1997 (3)
 --------     --------   ---------   -----------     --------      -----------  -----  --------   -------   --------  --------
TEXAS
-----

<S>            <C>        <C>        <C>            <C>            <C>         <C>     <C>        <C>      <C>        <C>
 Mill          Arlington  1979       February 1997  $4,544,121    $5,046,908    184     $27,429    691      $462       96%
 Crossing.....
 Polo Run....  Arlington  1984       March  1997     6,858,974     7,545,163    224      33,684    854       556       97%

 Tahoe.......  Arlington  1979       January 1997    5,690,560     6,641,227    240      27,672    671       460       88%

 The Arbors    Bedford    1986       April 1997      7,748,907     8,315,672    210      39,598    804       588       96%
 on Forest
 Ridge........

 Brookfield..  Dallas     1984       January 1997    5,458,485     5,946,299    232      25,631    714       472       95%

 Paces Cove..  Dallas     1982       June 1997       9,277,355     9,536,559    328      29,075    670       507       92%

 Toscana.....  Dallas     1986       March 1997      5,854,531     6,222,223    192      32,407    601       500       95%

 Wildwood....  Euless     1984       March 1997      3,963,519     4,389,742    120      36,581    755       590       93%

 Copper        Fort       1981       November 1997   4,750,000     4,875,751    200      24,379    739       524       89%
 Crossing.....  Worth
 Eagle Crest.  Irving     1983/1985  January 1997   15,650,000    17,299,740    484      35,743    887       595       93%

 Remington     Irving     1984/1985  August 1997    13,100,000    13,815,064    362      38,163    957       727       94%
   Hills .....                                       -----------   ----------   ---      ------    ---       ---       ---


TOTAL/AVERAGE  ...............                      $82,896,452  $89,634,348   2,776    $32,289    758      $555       93%
                                                    ============ ============  ======   ========   ====     =====      ====

</TABLE>


(1) "Total  Investment"  includes the purchase  price of the property  plus real
estate commissions, closing costs and improvements capitalized since the date of
acquisition.

(2) Average rent per month reflects December's monthly gross potential rent less
concessions divided by the property's number of units.

(3)  Economic  occupancy   reflects   year-to-date  gross  potential  rent  less
concessions  and bad debt expense  divided by the  year-to-date  gross potential
rent.

Item 3. Legal Proceedings

     None.

                                        4

<PAGE>



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

As  described  under  "Business"  in Item 1 of Part I of  this  Report,  Company
management  proposed to the Board of  Directors  a plan for the  transfer of the
apartment  properties  held  by  Apple  Residential  Income  Trust,  Inc.  to  a
newly-organized limited partnership indirectly wholly-owned by Apple Residential
Income Trust, Inc. Based on this proposal,  the Board of Directors  approved and
submitted  to the  shareholders  (with  its  recommendation  for  adoption)  the
following resolutions (collectively, the "Reorganization Proposal"):

         RESOLVED,  that the Company (defined for purposes of these  resolutions
as Apple Residential  Income Trust,  Inc.) transfer any and all of the Company's
multifamily  rental  apartment  communities  (including  all  assets  associated
therewith) to a partnership to be created by the Company,  the partners of which
will be the Company or entities  wholly-owned,  directly or  indirectly,  by the
Company; and

         RESOLVED,  that the  following  be added as a new  Article  XIII to the
Company's Bylaws:

                                  ARTICLE XIII
                    CONDUCT OF BUSINESS THROUGH SUBSIDIARIES

         13.1  Subsidiaries.   To  the  extent  permitted  by  the  Articles  of
         Incorporation,  these Bylaws (excluding  Section 9.1 (i) hereof,  which
         shall  not be  construed  to  prohibit  anything  contemplated  by this
         Article XIII) and applicable law (including any required consent of the
         Directors  and  Shareholders  under  applicable  law),  the Company may
         conduct its business through  subsidiary  companies owned or controlled
         by the Company (or its  subsidiaries).  Any such subsidiary  company is
         referred to as a "Subsidiary  Company and collectively  such subsidiary
         companies  are  referred  to  as  the  "Subsidiary  Companies."  It  is
         specifically  acknowledged  that the conduct of the Company's  business
         through a Subsidiary  Company or  Subsidiary  Companies may be effected
         and  undertaken  by the transfer by the Company of  properties  to, the
         acquisition  of  properties  by, and the  ownership  and  operation  of
         properties in, a partnership  all of whose interest are initially owned
         by the Company  and/or a Subsidiary  Company or  Subsidiary  Companies.
         However,  the transfer  described in the preceding  sentence  shall not
         constitute an event  permitting  conversion  of the  Company's  Class B
         Convertible Shares.

         13.2 Interpretation and Application of Bylaws. If and to the extent (i)
         the Company conducts its business through Subsidiary Companies, or (ii)
         there are  properties  which,  in the absence of Subsidiary  Companies,
         would be owned and  operated  by the Company  but such  properties  are
         instead owned and operated by Subsidiary Companies, restrictions on the
         power of the Company to engage in certain transactions and restrictions
         on the  authority  of  Directors  and  officers of the Company in these
         Bylaws, and in particular the restrictions  contained in Articles VIII,
         IX  and  X of  these  Bylaws,  shall  be  interpreted  and  applied  to
         Subsidiary Companies in the same manner as they apply by their terms to
         the Company to the extent  necessary to ensure that the Bylaw provision
         is  given  the  effect  intended  notwithstanding  that  the  Company's
         business is conducted  through  Subsidiary  Companies instead of by the
         Company  directly.  The Company shall exercise any rights and powers it
         has as an owner or partner  (directly  or  indirectly)  of a Subsidiary
         Company consistently with this provision.

         13.3 Certain  Shareholder  Consents.  If a  transaction  involving  the
         proposed sale or other  transfer,  whether by sale,  exchange,  merger,
         consolidation,  lease,  share  exchange or  otherwise,  by a Subsidiary
         Company  would  require  pursuant  to  applicable  law the  consent  or
         approval  of  Shareholders  if the  Company  owned  directly,  and were
         proposing  the sale or other  transfer  of, the  relevant  assets,  the
         Company shall not approve,  undertake or  effectuate  any such proposed
         sale or other transfer  through such  Subsidiary  Company without first
         obtaining the consent or approval of the Shareholders of the Company.

Pursuant  to notice  duly given,  to all  shareholders  of record on October 31,
1997,  in a Proxy  Statement  dated  November  26,  1997,  a Special  Meeting of
Shareholders  of the Company was held at 3:00 p.m. on  Wednesday,  December  17,
1997, at the offices of McGuire, Woods, Battle & Boothe LLP, Richmond, Virginia.
At the Special  Meeting,  Shareholders  were asked to  consider  and vote on the
Reorganization   Proposal.   There  being  insufficient  votes  to  approve  the
Reorganization  Proposal  at that  time,  the  meeting  was  adjourned  and then
reconvened  after  adjournment on December 19, 1997 at 2:00 p.m. A vote was then
taken  on  the  Reorganization  Proposal.  As of the  record  date,  there  were
10,108,598 common shares  outstanding and entitled to vote. A total of 6,845,381
common  shares were present in person or by proxy.  A total of 6,823,288  common
shares voted in favor of the Reorganization  Proposal.  A total of 11,785 common
shares voted  against the  Reorganization  Proposal and a total of 10,308 common
shares abstained.  The  Reorganization  Proposal was adopted,  as 67.5%, or more
than two-thirds,  of the common shares outstanding and entitled to vote approved
the Reorganization Proposal.

                                        5

<PAGE>



                                     PART II

Item 5.  Market For Registrant's Common Equity and Related Stockholder Matters

There is currently no  established  public market in which the Company's  common
shares are traded.

On March 15,  1998,  there were 6,616  shareholders  of record of the  Company's
common shares.

Distributions  of  $3,249,098,  were  made  to  the  shareholders  during  1997.
Distributions  were  $.20 per  common  share  for the  second,  third  and forth
quarters in 1997.

The  Company's  Registration  Statement  on Form S-11 (File No.  333-10635)  was
originally  declared  effective by the  Securities  and Exchange  Commission  on
November  19,  1996,  and  on  that  date  the  Company  commenced  an  on-going
best-efforts  offering (the Offering") of its Common Shares,  no par value.  The
managing underwriter is David Lerner Associates, Inc. The Offering is continuing
as of the date of filing this Report on Form 10-K.  All of the Common Shares are
being sold for the account of the Company.

The following tables set forth  information  concerning the Offering and the use
of proceeds from the Offering as of December 31, 1997:
<TABLE>
<CAPTION>


              Common Shares Registered:
              -------------------------
<S>           <C>                  <C>                 <C>                     <C>

               1,666,666.67        Common Shares       $ 9 per Common Share     $  15,000,000
              23,500,000.00        Common Shares       $10 per Common Share     $ 235,000,000

Totals:       25,166,666.67        Common Shares

              Common Shares Sold:
              -------------------

              1,666,666.67         Common Shares       $ 9 per Common Share     $  15,000,000
             10,287,383.33         Common Shares       $10 per Common Share     $ 102,873,833

Totals:      11,954,050.00         Common Shares                                $ 117,873,833
</TABLE>

                                       6

<PAGE>

<TABLE>
<CAPTION>
  Expenses of Issuance and Distribution of Common Shares
<S>      <C>                                                                          <C>
         1.  Underwriting discounts and commission                                    $ 11,787,383
         2.  Expenses of underwriters                                                 $        ---
         3.  Direct or indirect payments to directors or officers
             of the Company or their associates, to ten percent
             shareholders, or to affiliates of the Company                            $        ---
         4.  Fees and expenses of third parties                                       $    755,991
         Total Expenses of Issuance and Distribution of
         Common Shares                                                                $ 12,543,374

         Net Proceeds to the Company                                                  $105,330,459

         1.  Purchase of real estate (including repayment of
              indebtedness incurred to purchase real estate)                          $ 79,136,452
         2.  Interest on indebtedness                                                 $    458,384
         3.  Working capital                                                          $ 24,058,452
         4.  Fees to the following (all affiliates of officers of the Company):
             a.  Apple Advisors, Inc.                                                 $     14,894
             b.  Apple Realty Group, Inc.                                             $    624,382
             c.  Cornerstone Realty Income Trust, Inc.                                   1,037,895
         5.  Fees and expenses of third parties:
             a.  Legal                                                                $        ---
             b.  Accounting                                                           $        ---
         6.  Other (specify ___________)                                              $        ---
         Total of Application of Net Proceeds to the Company                          $105,330,459
</TABLE>

In addition to the foregoing, on April 25, 1997, the Company sold to Cornerstone
Realty Income Trust, Inc. 417,778 Common Shares at $9.00 per Common Share (total
proceeds of  $3,760,000)  in a transaction  not  involving  any public  offering
within the meaning of Section 4 (2) of the Securities Act of 1933. The offer and
sale of  these  Common  Shares  was  effectuated  on a  negotiated  basis  to an
accredited  institutional investor satisfying the standard described in Rule 506
(b) (2) (ii) under the  Securities  Act of 1933.  No  underwriting  discounts or
commissions were paid in connection with this sale of Common Shares.

Item 6.  Selected Financial Data

The following  table sets forth  selected  financial data for the registrant and
should be read in conjunction with the financial statements and related notes of
the Company included under Item 8 of this report.

                                       7


<PAGE>


<TABLE>
<CAPTION>

As of December 31,                                              1997                   1996

<S>                                                         <C>                    <C>
OPERATING RESULTS
Rental Income                                               $   12,005,968               --
Net Income                                                       3,499,194               --
Distributions Declared and Paid                                  3,249,098               --

PER SHARE
Net Income                                                  $          .54               --
Distributions                                               $          .60               --
Distributions Representing Return of Capital                            0%               --
Weighted Average Shares Outstanding                              6,493,114

BALANCE SHEET DATA

Investment in Rental Property                               $   89,634,348               --
Total Assets                                                $  112,485,520             $100
Shareholders' Equity                                        $  109,340,555             $100
Shares Outstanding                                              12,371,829               10

OTHER DATA
Cash Flows from:

     Operating Activities                                   $    7,075,025               --
     Investing Activities                                   $ (88,753,814)
     Financing Activities                                   $  105,841,261               --
Number of Properties Owned at Year-End                                  11               --

FUNDS FROM OPERATIONS CALCULATION

     Net Income                                             $    3,499,194               --
         Depreciation of Real Estate                        $    1,898,003               --
                                                            --------------         ---------
Funds from Operations (a)                                   $    5,397,197               --
----------------------------------------------------------------------------------------------------
</TABLE>


The Company was formed in 1996 and did not commence  operations  until  January,
1997.

(a) "Funds  from  operations"  is defined as income  before  gains  (losses)  on
investments  and  extraordinary  items  (computed in accordance  with  generally
accepted  accounting   principles)  plus  real  estate  depreciation  and  after
adjustment for significant  nonrecurring items, if any. This definition conforms
to the  recommendations  set  forth in a White  Paper  adopted  by the  National
Association of Real Estate  Investment  Trusts (NAREIT).  The Company  considers
funds from  operations in  evaluating  property  acquisitions  and its operating
performance,  and believes that funds from operations should be considered along
with,  but not as an  alternative  to, net income and cash flows as a measure of
the Company's operating performance and liquidity. Funds from operations,  which
may not be comparable to other similarly  titled  measures of other REITs,  does
not represent  cash  generated  from  operating  activities  in accordance  with
generally accepted  accounting  principles and is not necessarily  indicative of
cash available to fund cash needs.

Item 7. Management's  Discussion and Analysis of Financial Condition and Results
        of Operation.

The following  discussion is based on the consolidated  financial  statements of
the  Company  as of  December  31,  1997.  This  information  should  be read in
conjunction  with  the  selected  financial  data  and the  Company's  financial
statements included elsewhere in this annual report. The Company is operated and
has elected to be treated as a real estate  investment  trust (REIT) for federal
income tax purposes.


                                       8

<PAGE>



RESULTS OF OPERATIONS - 1997


INCOME AND OCCUPANCY

As  operations  of the Company  commenced in January  1997, a comparison  of the
years ended December 31, 1996 and December 31, 1997 is not possible. The results
of the  Company's  property  operations  for the year ended  December  31,  1997
include the results of operations  from the 11 properties  acquired in 1997 from
their respective  acquisition dates.  Substantially all of the Company's revenue
is from the rental  operation of its  apartment  communities.  Rental income was
$12,005,968 in 1997.  Overall  average  economic  occupancy was 93% in 1997. The
average rental rate for the portfolio was $555 at December 31, 1997.

EXPENSES

Total expenses were  $8,271,066 in 1997. The operating  expense ratio (the ratio
of   expenses,   excluding   depreciation,   amortization,   and   general   and
administrative  expenses,  to  rental  income)  was  50% in  1997.  The  Company
contracts  its  property  management  to a  third  party  (see  Note  6  to  the
consolidated financial statements).  General and administrative expenses totaled
3% of revenues in 1997. These expenses represent the administrative  expenses of
the Company as  distinguished  from the operations of the Company's  properties.
The percentage of general and administrative expenses is expected to decrease as
the Company's operations grow. Depreciation of real estate was $1,898,003.

INTEREST AND INVESTMENT

The Company  earned  interest  income of $222,676 in 1997 from the investment of
its cash  and cash  reserves.  The  weighted-average  interest  rate  earned  on
short-term investments was 4%. The Company incurred $458,384 of interest expense
in 1997,  associated with short-term borrowings under its line of credit to fund
acquisitions.  The  weighted-average  interest rate on the line of credit during
1997 was 7.8%.

LIQUIDITY AND CAPITAL RESOURCES

Equity There was a significant change in the Company's liquidity during the year
ended  December  31, 1997 as the Company  commenced  operations  and  thereafter
continued to grow. During 1997, the Company sold 12,371,819 shares of its common
stock to its investors (including 417,778 shares purchased by Cornerstone Realty
Income Trust,  Inc.  ("Cornerstone")  and 197,496 common shares sold through the
Company's  additional  share  option),  bringing  the  total  number  of  shares
outstanding  to  12,371,829.  The total gross proceeds from the shares sold were
$121,633,733,  which  netted  $109,090,359  to the Company  after the payment of
brokerage fees and other offering-related costs.

Using  proceeds  from the sale of common shares and  supplemented  by short-term
borrowings  when  necessary,  the Company  acquired 2,776  apartment units in 12
residential rental communities during 1997.  Riverhill  Apartments and Chaparosa
Apartments are adjoining  properties and are operated as one apartment community
(subsequently renamed Remington Hills).

During 1997, the company made the following 12 acquisitions:
<TABLE>
<CAPTION>


                                                              INITIAL              NUMBER           DATE
DESCRIPTION                         LOCATION              ACQUISITION COST         OF UNITS         ACQUIRED

<S>                                 <C>                     <C>                      <C>                    <C>
Brookfield                          Dallas, TX              $5,458,485               232            January 1997
Eagle Crest                         Irving, TX              15,650,000               484            January 1997
Tahoe                               Arlington, TX            5,690,560               240            January 1997
Mill Crossing                       Arlington, TX            4,544,121               184            February 1997
Wildwood                            Euless, TX               3,963,519               120            March 1997
Toscana                             Dallas, TX               5,854,531               192            March 1997
Polo Run                            Arlington, TX            6,858,974               224            March 1997
The Arbors on Forest Ridge          Bedford, TX              7,748,907               210            April 1997
Pace's Cove                         Dallas, TX               9,277,355               328            June 1997
Chaparosa                           Irving, TX               5,825,000               170            August 1997
River Hill                          Irving, TX               7,275,000               192            August 1997
Copper Crossing                     Fort Worth, TX           4,750,000               200            November 1997

</TABLE>
                                       9

<PAGE>


Notes  Payable The Company  seeks to hold all of its  properties on an unsecured
basis.  The  Company  obtained a $20  million  unsecured  line of credit  with a
commercial  bank. The line expires on March 31, 1998. The line bears interest at
LIBOR plus 200 basis points.  The line of credit is used to fund acquisitions on
a short-term  basis and is sought to be repaid,  generally  within 60 days, with
proceeds from the offering. The Company plans to continue to use its $20 million
unsecured line of credit to facilitate the timely acquisition of properties,  if
proceeds from the Company's "best efforts"  offering are unavailable at the time
of a  proposed  acquisition.  It is  anticipated  that  any  borrowings  will be
curtailed  through  the sale of  additional  shares,  although  there  can be no
assurance  that such sales will be sufficient to repay such  borrowings.  If the
future sale  proceeds  were  insufficient,  the Company could seek to extend the
maturity  date or pay the balance of the loan due from its rental  operations or
cash reserves.

At  year-end,  there were no  outstanding  balances on the  acquisition  line of
credit.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents  totaled  $24,162,572 at December 31, 1997. During the
year,  the  Company  distributed  $3,249,098  to  its  shareholders,   of  which
$1,974,949 was reinvested in additional  shares under the terms of the Company's
Additional  Share Option.  The  reinvested  funds netted the company  $1,777,454
after  payment of  brokerage  fees.  During the year,  the  Company  distributed
$168,364 to Cornerstone on shares that had been purchased by Cornerstone.

CAPITAL REQUIREMENTS

The Company has an ongoing capital commitment to fund its renovation program for
acquired properties.  In addition, the Company expects to acquire new properties
during the year. The Company  anticipates that it will continue to operate as it
did in 1997 and fund  these  cash  needs  from a variety  of  sources  including
equity, cash reserves, and debt provided by its line of credit.

The Company  continues  to renovate its  properties.  In  connection  with these
renovations,  the  Company  capitalized  improvements  of $3.6  million in 1997.
Approximately  $5 million of additional  capital  improvements  are budgeted for
1998 on the existing property  portfolio which are expected to be funded through
cash reserves and dividend reinvestment.

The Company has short-term  cash flow needs in order to conduct the operation of
its properties.  The rental income generated from the properties  supplies ample
cash to provide for the payment of these  operating  expenses and the payment of
distributions to  shareholders.  The Company is operated as, and annually elects
to be taxed as, a real estate  investment trust under the Internal Revenue Code.
As a result, the Company has no provision for taxes, and thus there is no effect
on the Company's liquidity.

Capital  resources  are  expected to grow with the future sale of its shares and
from cash flow from operations. Approximately 61% of all 1997 distributions were
reinvested in additional common shares. In general,  the Company's liquidity and
capital  resources  are  believed  to be more  than  adequate  to meet  its cash
requirements during 1998.

The Company is expecting to continue with  significant  growth during 1998.  The
company  plans to have monthly  equity  closings in 1998,  until the offering is
fully funded, or until such time as the Company may opt to discontinue it. It is
anticipated  that the equity  funds will be  invested  in  additional  apartment
communities. Since year-end 1997, the Company purchased two additional apartment
properties,  using  share  sale  proceeds,  and is  evaluating  other  potential
acquisitions.

In addition  to shares sold in the public  offering,  as of December  31,  1997,
Cornerstone  owned 417,778  common shares of the Company at a cost of $3,760,000
which represents  approximately 3% of the Company's common shares outstanding at
December 31, 1997.  These shares are purchased  outside of the  above-referenced
public offering.  In 1997, the Company granted Cornerstone a continuing right to
own up to 9.8% of the common shares of Apple at the market price, net of selling
commissions.

The Company also has granted  Cornerstone a "first right of refusal" to purchase
the  properties  or  business  of Apple.  Cornerstone  has  stated in its public
filings its intent to make periodic evaluations on the feasibility of purchasing
the Company.

IMPACT OF YEAR 2000

Some computer  programs were written using two digits rather than four to define
the applicable year. As a result,  those computer  programs have  time-sensitive
software that  recognize a date using "00" as the year 1900 rather than the year
2000.  This  could  cause  a  system   miscalculation   causing  disruptions  of
operations.  The Company has  completed  an  assessment  of its programs and has
begun to  modify or  replace  portions  of its  software,  so that its  computer
systems  will  function  properly  with  respect  to dates in the year  2000 and
thereafter. The total Year 2000 project cost will be expensed as incurred and is
not  expected  to have a  material  effect on the  results of  operations.  This
project is estimated to be completed by December 31, 1998, which is prior to any
impact on the Company's systems.

                                       10

<PAGE>


IMPACT OF INFLATION

The Company does not believe that  inflation had any  significant  impact on the
operation of the Company in 1997. Future  inflation,  if any, would likely cause
increased  operating  expenses,  but the  company  believes  that  increases  in
expenses  would be more than offset by increases in rental  revenues.  Continued
inflation may also cause capital  appreciation of the Company's  properties over
time, as rental rates and replacement costs increase.

Item 8.  Financial  Statements and Supplementary Data

                         Report of Independent Auditors

The Board of Directors and Shareholders
Apple Residential Income Trust, Inc.

We  have  audited  the  accompanying   consolidated   balance  sheets  of  Apple
Residential Income Trust, Inc. (the "company") as of December 31, 1997 and 1996,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for the year ended  December 31, 1997.  Our audits also  included the
financial  statement schedule listed in the Index at Item 14(a). These financial
statements and schedule are the responsibility of the company's management.  Our
responsibility  is to  express  an opinion  on these  financial  statements  and
schedule based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  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 audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the consolidated  financial position of Apple
Residential  Income  Trust,  Inc.  at  December  31,  1997  and  1996,  and  the
consolidated  results  of its  operations  and its cash flows for the year ended
December 31, 1997, in conformity with generally accepted accounting  principles.
Also, in our opinion, the related financial statement schedule,  when considered
in relation to the basic financial  statements taken as a whole,  present fairly
in all material respects the information set forth therein.

                                            /s/ Ernst & Young LLP
                                            ---------------------
                                              Ernst & Young LLP

Richmond, Virginia
February 13, 1998

                                       11


<PAGE>


<TABLE>
<CAPTION>

Consolidated Balance Sheets

As of December 31,                                                            1997                           1996
------------------------------------------------------------------- ------------------------- ----- -----------------------

<S>                                                                         <C>                           <C>
Assets

Investment in rental property
      Land                                                                   $15,396,823
      Building and improvements                                               73,113,886                             --
      Furniture and fixtures                                                   1,123,639                             --
                                                                    -------------------------       -----------------------
                                                                                                                     --
                                                                              89,634,348
Less accumulated depreciation                                                 (1,898,003)                            --
                                                                    -------------------------       -----------------------
                                                                                                                     --
                                                                              87,736,345

Cash and cash equivalents                                                     24,162,572                           $100
Prepaid expenses                                                                 142,581                             --
Other assets                                                                     444,022                             --
                                                                    -------------------------       -----------------------
                                                                              24,749,175                            100
                                                                    -------------------------       -----------------------
Total Assets                                                                $112,485,520                           $100
                                                                    =========================        ======================



Liabilities and Shareholders' Equity
Accounts payable                                                                $536,324                             --
Accrued expenses                                                               2,143,888                             --
Rents received in advance                                                         70,051                             --
Tenant security deposits                                                         394,702                             --
                                                                    -------------------------       -----------------------

Total Liabilities                                                              3,144,965                             --


Shareholders' Equity

Common stock, no par value, authorized 50,000,000 shares;                   109,090,459                           $100
issued and outstanding 12,371,829 shares and 10 shares,
    respectively
Class B convertible stock, no par value,                                         20,000                         20,000
authorized 200,000 shares; issued
 and outstanding 200,000 shares
Receivable from officer-shareholder                                             (20,000)                       (20,000)
Net income greater than distributions                                            250,096                             --
                                                                    -------------------------       -----------------------

                                                                             109,340,555                            100
                                                                    -------------------------       -----------------------

Total Liabilities and Shareholders' Equity                                  $112,485,520                           $100
                                                                    =========================        ======================
</TABLE>


See accompanying notes.

                                       12

<PAGE>



Consolidated Statement of Operations

For the Year Ended December 31,                               1997
------------------------------------------------------ -------------------
Revenue

    Rental Income                                            $12,005,968
Expenses
    Property and maintenance                                   3,571,484
    Taxes and insurance                                        1,765,741
    Property management                                          656,267
    General and administrative                                   351,081
    Amortization                                                  28,490
    Depreciation of rental property                            1,898,003
                                                       -------------------
Total expenses                                                 8,271,066

Income before interest income (expense)                        3,734,902
    Interest income                                              222,676
    Interest expense                                            (458,384)
                                                       -------------------

Net income                                                   $ 3,499,194
                                                       ===================

Basic and diluted earnings per common share              $          0.54
                                                       ===================


See accompanying notes.

                                       13



<PAGE>

<TABLE>
<CAPTION>



Consolidated Statement of Shareholders' Equity

                                      Common Stock       Convertible Class B Stock

----------------------------------------------------------------------------------
                                                                                     Receivable    Net Income     Total
                                   Number                   Number                      From      Greater Than  Shareholders'
                                 Of Shares     Amount     Of Shares      Amount      Principal    Distributions   Equity
                                                                                    Shareholder
-----------------------------------------------------------------------------------------------------------------------------
<S>                                   <C>  <C>             <C>          <C>          <C>        <C>
Balance at December 31, 1996           10  $       100     200,000      $20,000      $(20,000)  $        0    $        100
Net proceeds from the sale     11,756,545  103,552,905          --           --            --           --     103,552,905
    of shares

Net income                             --           --          --           --            --    3,499,194       3,499,194
Cash distributions declared to
  shareholders ($.60 per share)        --           --          --           --            --   (3,249,098)     (3,249,098)
Shares issued to Cornerstone
   Realty Income Trust, Inc.      417,778    3,760,000          --           --            --           --       3,760,000
Shares issued through
   Additional Share Option        197,496    1,777,454          --           --            --                    1,777,454
                                ---------------------------------------------------------------------------------------------


Balance  December 31, 1997     12,371,829 $109,090,459     200,000      $20,000      $(20,000)   $ 250,096    $109,340,555
=============================================================================================================================
</TABLE>


See accompanying notes.


                                       14
<PAGE>

<TABLE>
<CAPTION>



Consolidated Statement of Cash Flows

For the Year Ended December 31,                                                            1997
-----------------------------------------------------------------------------------------------
From operating activities:

<S>                                                                              <C>
   Net income                                                                    $    3,499,194
   Adjustments to reconcile net income
    to net cash provided by operating activities:

      Depreciation and amortization                                                   1,926,493
      Amortization of deferred loan costs                                                60,490

   Changes in operating assets and liabilities:

         Prepaid expenses                                                              (142,581)
         Other assets                                                                  (533,002)
         Accounts payable                                                               536,324
         Accrued expenses                                                             1,631,776
         Rent received in advance                                                        70,051
         Tenant security deposits                                                        26,280
                                                                                 --------------
            Net cash provided by operating  activities                                7,075,025
 From investing activities:

   Acquisitions of rental property, net of liabilities assumed                      (85,147,726)
   Capital improvements                                                              (3,606,088)
                                                                                 --------------
            Net cash used in investing  activities                                  (88,753,814)
  From financing activities:

   Proceeds from short-term borrowings                                               39,640,000
   Repayments of short-term borrowings                                              (39,640,000)
   Net proceeds from issuance of shares                                             109,090,359
   Cash distributions paid to shareholders                                           (3,249,098)
                                                                                 --------------
            Net cash provided by financing activities                               105,841,261
            Increase in cash and cash equivalents                                    24,162,472

Cash and cash equivalents, beginning of year                                                100
                                                                                 --------------

Cash and cash equivalents, end of year                                              $24,162,572
                                                                                 ==============
</TABLE>


See accompanying notes.

                                       15


<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1     General Information and Summary of Significant Accounting Policies

BUSINESS Apple Residential  Income Trust,  Inc.,  together with its subsidiaries
Apple Limited,  Inc., Apple General,  Inc., and Apple REIT Limited  Partnership,
(the "company"), is an externally advised real estate investment trust formed on
August 7, 1996 as a Virginia corporation. The company is an owner of residential
apartment  communities in Texas. All of the company's apartment  communities are
located in the Dallas/  Fort Worth,  Texas  metropolitan  area.  All  operations
commenced in January, 1997; therefore, no statements of operations or cash flows
are presented for periods prior to January 1997. The  accompanying  consolidated
financial  statements  include the accounts of the company and its subsidiaries.
All significant  inter-company accounts and transactions have been eliminated in
consolidation.

CASH AND CASH  EQUIVALENTS Cash  equivalents  include highly liquid  investments
with original  maturities of three months or less. The fair market value of cash
and cash equivalents approximate their carrying value.

INVESTMENT IN REAL ESTATE The  investment in rental  property is recorded at the
depreciated  cost and includes real estate  brokerage  commissions paid to Apple
Realty Group,  Inc. and Cornerstone  Realty Income Trust,  Inc.  ("Cornerstone")
(See Note 6 to the consolidated financial statements).

The company records  impairment losses on rental property used in the operations
if  indicators  of  impairment  are  present  and the  undiscounted  cash  flows
estimated  to be  generated  by the  respective  properties  are less than their
carrying amount.  Impairment  losses are measured as the difference  between the
asset's fair value and its carrying value.

Repairs and  maintenance  costs are  expensed  as  incurred,  while  significant
improvements,  renovations and  replacements  are  capitalized.  Depreciation is
computed on a straight-line basis over the estimated useful lives of the related
assets which are 27.5 years for  buildings  and major  improvements  and a range
from five to ten years for furniture and fixtures.

INCOME RECOGNITION Rental, interest, and other income are recorded on an accrual
basis.  The  company's  properties  are  leased  under  operating  leases  that,
typically, have terms that do not exceed one year.

DEFERRED FINANCING COSTS Deferred financing costs are generally amortized over a
period not to exceed the term of the  related  debt.  Amortization  of  deferred
financing costs is classified as interest expense in the consolidated statements
of operations.

USE OF ESTIMATES The  preparation  of financial  statements  in accordance  with
generally accepted  accounting  principles  requires  management to make certain
estimates  and  assumptions  that  affect  amounts  reported  in  the  financial
statements  and  accompanying  notes.  Actual  results  may  differ  from  those
estimates.

STOCK  INCENTIVE PLANS The company has elected to follow  Accounting  Principles
Board Opinion No. 25,  "Accounting for Stock Issued to Employees" ("APB 25") and
related  Interpretations  in  accounting  for its  employee  stock  options.  As
discussed in Note 5, the alternative  fair value  accounting  provided for under
FASB Statement No. 123, "Accounting for Stock-Based  Compensation," ("FASB 123")
requires use of option  valuation  models that were developed for use in valuing
employee  stock  options.  Under  APB 25,  because  the  exercise  price  of the
company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation expense is recognized.

ADVERTISING  COSTS  Costs  incurred  for  the  production  and  distribution  of
advertising are expensed as incurred.

INCOME  PER SHARE In 1997,  the  Financial  Accounting  Standards  Board  issued
Statement No. 128,  "Earnings per Share." Statement 128 replaced the calculation
of primary and fully diluted  earnings per share with basic and diluted earnings
per share.  Unlike primary earnings per share, basic earnings per share excludes
any dilutive effects of options,  warrants and convertible  securities.  Diluted
earnings per share are very similar to the  previously  reported  fully  diluted
earnings per share.  All  earnings  per share  amounts for all periods that have
been presented conform to the requirements of Statement 128.

FEDERAL  INCOME TAX The company is operated as, and annually  elects to be taxed
as, a real estate  investment  trust under the Internal Revenue Code of 1986, as
amended (the "Code").  Generally, a real estate investment trust, which complies
with the  provisions  of the Code and  distributes  at least 95% of its  taxable
income to its shareholders, does not pay federal income taxes on its distributed
income. Accordingly, no provision has been made for federal income taxes.

For income tax purposes,  distributions paid to shareholders consist of ordinary
income and return of capital or a combination  thereof.  Distributions per share
were $.60 for the year ended December 31, 1997. In 1997, the total  distribution
was taxable as ordinary income.


                                       16


<PAGE>




NOTE 2            Investment in Rental Property
<TABLE>
<CAPTION>

The following is a summary of rental property owned at December 31, 1997:

                                Initial                  Total     Accumulated             Date
Description             Acquisition Cost           Investment*    Depreciation         Acquired

--------------------------------------------------------------------------------------------------

<S>                           <C>                  <C>                <C>                  <C>
Brookfield                    $5,458,485            $5,946,299        $166,694     January 1997

Eagle Crest                   15,650,000            17,299,740         483,740     January 1997

Tahoe                          5,690,560             6,641,227         199,049     January 1997

Mill Crossing                  4,544,121             5,046,908         136,519    February 1997

Polo Run                       6,858,974             7,545,163         191,302       March 1997

Wildwood                       3,963,519             4,389,742          98,645       March 1997

Toscana                        5,854,531             6,222,223         147,776       March 1997

The Arbors on Forest Ridge     7,748,907             8,315,672         187,034       April 1997

Pace's Cove                    9,277,355             9,536,559         141,850        June 1997

Remington at Las Colinas      13,100,000            13,815,064         133,271      August 1997

Copper Crossing                4,750,000             4,875,751          12,123    November 1997
                               ---------             ---------          ------

                             $82,896,452           $89,634,348      $1,898,003
--------------------------------------------------------------------------------------------------
</TABLE>

* Includes real estate commissions,  closing costs, and improvements capitalized
since the date of acquisition.

NOTE 3            Notes Payable

During 1997,  the company  entered into an agreement  with a commercial  bank to
obtain an  unsecured,  revolving  line of credit  not to exceed  $20  million to
facilitate the timely  acquisition  of properties.  The unsecured line of credit
expires on March 31, 1998.  Borrowings  under the  agreement are evidenced by an
unsecured  promissory  note and bear interest at one-month  LIBOR plus 200 basis
points.  The company  also  obtained a $1 million  unsecured  line of credit for
general corporate  purposes.  The terms of such borrowings are the same as under
the unsecured line of credit for  acquisitions.  No interest was  capitalized in
1997. The company paid interest of $458,384 in 1997. At December 31, 1997, there
were no outstanding  borrowings under the lines of credit. The  weighted-average
interest rate incurred under the lines of credit was 7.8% in 1997.

NOTE 4            Shareholders' Equity

The  company is raising  equity  capital  through a "best  efforts"  offering of
shares by David Lerner  Associates,  Inc. (the  "Managing  Dealer"),  which will
receive selling  commissions and a marketing expense allowance based on proceeds
of the shares sold. The company received gross proceeds of $121,633,733 from the
sale of 2,084,445 shares at $9 per share and 10,287,384 shares at $10 per share,
including  shares sold through the  reinvestment of  distributions  for the year
ended December 31, 1997. The  underwriter  received  selling  commissions  and a
marketing expense allowance equal to 7.5% and 2.5%,  respectively,  of the gross
proceeds of shares sold. During 1997, the underwriter  earned  $11,787,399.  The
net proceeds of the offering,  after  deducting  selling  commissions  and other
offering  expenses,  were  $109,090,359.  These totals  include  417,778  shares
purchased by Cornerstone  for $3.76  million.  Cornerstone  owned  approximately
3.38% of the  company's  outstanding  shares on December 31, 1997 (See Note 6 to
the consolidated financial statements).

On November 14, 1996,  the company  issued 200,000 shares of Class B Convertible
Shares to Mr. Glade Knight,  president and chairman of the board of the company,
for $.10 per share or $20,000 in aggregate.

There are no dividends payable on the Class B Convertible Shares. On liquidation
of the company,  the holder of the Class B  Convertible  Shares is entitled to a
liquidation   payment  of  $.10  per  Class  B  Convertible   Share  before  any
distribution  of  liquidation  proceeds  to the  holders of the  common  shares.
Holders of more than  two-thirds of the Class B Convertible  Shares must approve
any proposed  amendment to the Articles of  Incorporation  that would  adversely
affect the Class B Convertible  Shares or create a new class of stock senior to,
or on a parity with,  the Class B  Convertible  Shares.  The Class B Convertible
Shares are  convertible  into common shares upon and for 180 days  following the
occurrence  of either of the  following  events:  (1)  Substantially  all of the
company's assets, stock, or business is sold or otherwise  transferred,  whether
through  sale,  exchange,  merger,  consolidation,  lease,  share  exchange,  or
otherwise;  or (2) The Advisory  Agreement with the Advisor is terminated or not
renewed, and the company ceases to use Apple Residential  Management Group, Inc.
to provide  substantially  all of its  property  management  services.  Upon the
occurrence  of  either  triggering  event,  each  Class B  Convertible  Share is
convertible  into a number of common shares based upon the gross proceeds raised
through the date of conversion in the "best efforts"  offering  according to the
following formula:

                                       17

<PAGE>


   Gross Proceeds Raised from          Number of Common Shares
   Sales of Common Shares through       Through Conversion of One
   Date of Conversion                  Class B Convertible Share

--------------------------------------------------------------------------------
     $50 million                               1.0
     $100 million                              2.4
     $150 million                              4.2
     $200 million                              6.4
     $250 million                              8.0
--------------------------------------------------------------------------------

No  additional  consideration  is  due  upon  the  conversion  of  the  Class  B
Convertible  Shares.  Upon the probable  occurrence of a triggering  event,  the
company will record  expense in the statement of operations  based on conversion
of the Class B Convertible Shares.

The company provides a plan which allows shareholders to reinvest  distributions
in the purchase of additional  shares of the company  ("Additional  Share Option
Plan").  Of the total  proceeds  raised from common shares during the year ended
December  31,  1997,  $1,974,949  (net  $1,777,454)  was  provided  through  the
reinvestment of distributions.


NOTE 5            Stock Incentive Plans

Based on the outstanding shares, under the 1997 Incentive Option Plan, a maximum
of  1,121,875  options  could be  granted,  at the  discretion  of the  Board of
Directors,  to certain officers and key employees of the company. Also under the
Directors  Plan, a maximum of 468,000  options could be granted to the directors
of the company.

In 1997,  the  company  granted  20,550  options to  purchase  shares  under the
Directors  Plan and no  options  under  the  Incentive  Plan.  Both of the plans
generally  provide,  among  other  things,  that  options be granted at exercise
prices not lower than the market value of the shares on the date of grant. Under
the Incentive Plan, at the earliest,  options become  exercisable at the date of
grant.  The optionee has up to 10 years from the date on which the options first
become  exercisable  during  which to  exercise  the  options.  Activity  in the
company's  share  option  plans  during  the year  ended  December  31,  1997 is
summarized in the following table:

                                                    1997

--------------------------------------------------------------------------------
                                              Weighted-Average
                                           Options   Exercise Price
--------------------------------------------------------------------------------
   Outstanding, beginning of year

   Granted                                  20,550    $ 10.00
   Exercised                                    --         --
   Forfeited                                    --         --
--------------------------------------------------------------------------------
   Outstanding, end of year                 20,550    $ 10.00
   Exercisable at end of year               20,550    $ 10.00
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
   Weighted-average fair value of

   options granted during the year              --   $    .83
--------------------------------------------------------------------------------

Pro forma information regarding net income and earnings per share is required by
FASB 123 under the fair value method described in that statement. The fair value
for these  options  was  estimated  at the date of grant  using a  Black-Scholes
option pricing model with the following weighted-average  assumptions, for 1997:
risk-free interest rates of 6.7%; a dividend yield of 7.0%; volatility factor of
the  expected  market  price  of the  company's  common  stock  of  .161;  and a
weighted-average expected life of the option of 10 years.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options which have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective assumptions including the expected stock price volatility.

Because the company's employee stock options have characteristics  significantly
different from those of traded  options,  and because  changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion,  the  existing  models do not  necessarily  provide a  reliable  single
measure of the fair value of its employee stock options.

For purposes of FASB 123 pro forma disclosures,  the estimated fair value of the
options is amortized to expense over the options' vesting period. As the options
are  immediately  exercisable,  the full  impact of the pro  forma is  disclosed
below:

                                       18

<PAGE>


                                                  1997
--------------------------------------------------------------------------------
Pro forma FASB 123 net income               $3,482,138
As reported net income                       3,499,194
Pro forma FASB 123 earnings per share              .54
As reported net income per share                   .54

NOTE 6            Related-Party Transactions

The company had contracted with Apple  Residential  Management  Group, Inc. (the
"Management  Company")  to manage the  acquired  properties;  Apple  Residential
Advisors, Inc. (the "Advisor") to advise and provide the company with day-to-day
management;  and Apple Realty Group,  Inc. to acquire and dispose of real estate
assets held by the company.  The Management Company,  Advisor,  and Apple Realty
Group,  Inc. were initially owned by Glade M. Knight.  Mr. Knight also serves as
chairman  of  the  board  and  chief  executive   officer  of  the  company  and
Cornerstone.  Before the transaction  described below,  during 1997, the company
paid the  Management  Company a management fee equal to 5% of rental income plus
reimbursement of certain expenses in the amount of $52,375. The company paid the
Advisor  a fee  equal  to .1% to .25% of  total  contributions  received  by the
company in the amount of $14,894.  The company paid Apple Realty  Group,  Inc. a
fee of 2% of the  purchase  price of the  acquired  properties  in the amount of
$624,382.

During  1997,  with  the  approval  of the  company,  Cornerstone  entered  into
subcontract  agreements  with the  Management  Company and the Advisor,  whereby
Cornerstone  will  provide  advisory  and  property  management  services to the
company  in  exchange  for  fees and  expense  reimbursement  on the same  terms
described  above.  As of December  31,  1997,  the company had paid  Cornerstone
$822,934 in management  and advisory fees and $214,961 for certain  reimbursable
items.

During  1997,  with the consent of the  company,  Cornerstone  acquired  all the
assets of Apple  Realty  Group,  Inc.  The sole  material  asset of Apple Realty
Group,  Inc.  was  the  acquisition/disposition   agreement  with  the  company.
Cornerstone  paid $350,000 in cash and issued  150,000 common shares in exchange
for the  assignment  of the  rights  to the  acquisition/disposition  agreement.
Cornerstone  is  entitled,  under  the  terms  of  the   acquisition/disposition
agreement,  to a real estate  commission equal to 2% of the gross purchase price
of the  company's  properties  plus  reimbursement  of certain  expenses.  As of
December 31, 1997,  Cornerstone had earned  approximately  $1,116,566  under the
agreement.

During the first quarter of 1997, the company  granted  Cornerstone a continuing
right to acquire up to 9.8% of the common shares of the company at market price,
net of selling commissions.  In April 1997, Cornerstone purchased 417,778 shares
of the company for approximately  $3.76 million.  Cornerstone owns approximately
3.38% of the total  common  shares of the company  outstanding  on December  31,
1997.

The company also has granted  Cornerstone a "first right of refusal" to purchase
the  properties  or  business  of Apple.  Cornerstone  has  stated in its public
filings its intent to make periodic evaluations of the feasibility of purchasing
the company.

NOTE 7            Quarterly Financial Data (unaudited)

The first three  quarters of 1997  earnings per share amounts have been restated
to comply with Statement of Financial  Accounting  Standards No. 128,  "Earnings
Per Share".  The following is a summary of quarterly  results of operations  for
the year ended December 31, 1997:

                          First         Second         Third          Fourth
   1997                   Quarter       Quarter        Quarter        Quarter
--------------------------------------------------------------------------------

Revenue                 $1,155,766    $2,826,712     $3,789,266    $ 4,234,224
Income before interest
   income (expense)        471,321       971,198      1,070,504      1,221,879
Net income                 556,255       831,469        856,729      1,254,741
Basic and diluted
   earnings per share          .16          . 15           . 12           . 12
Distributions per share         --           .20           . 20           . 20
--------------------------------------------------------------------------------


                                       19

<PAGE>


NOTE 8            Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per
share:

                                                    1997
--------------------------------------------------------------------------------
   Numerator:
      Net income numerator for basic
      and diluted earnings                   $  3,499,194
   Denominator:
      Denominator for basic earnings per
         share-weighted-average shares          6,493,114
      Effect of dilutive securities:
         stock options                                 --

--------------------------------------------------------------------------------
Denominator for diluted earnings per
   share-adjusted weighted-average
   shares and assumed conversions               6,493,114
                                                ---------
Basic and diluted earnings per share                  .54

--------------------------------------------------------------------------------


NOTE 9            Subsequent Event

In  January  1998,  the  company  declared  and  paid  a cash  distributions  to
shareholders  of $1,953,243,  of which  $1,246,809  was  reinvested  through the
Additional  Share  Option.  The  company  also closed the sale to  investors  of
2,905,289  shares at $10 per share,  representing  net proceeds after payment of
brokerage  fees to the company of  $26,147,598.  In February  1998,  the company
purchased Main Park Apartments,  a 192-unit apartment community,  and Timberglen
Apartments,  a 304-unit  apartment  community.  Both  properties  are located in
Dallas,   Texas.  Their  purchase  prices  were  $8  million  and  $12  million,
respectively.

NOTE 10  Pro Forma Information (unaudited)

The following  unaudited pro forma  information  for the year ended December 31,
1997 is presented as if (a) The company had qualified as a REIT, distributed all
of its taxable  income and,  therefore,  incurred no federal  income tax expense
during the period;  and (b) The company had used  proceeds from its best efforts
offering to acquire the properties.  The pro forma  information does not purport
to represent  what the company's  results of operations  would have been if such
transactions,  in fact,  had occurred on January 1, 1997, nor does it purport to
represent the results of operations for future periods.

   Unaudited Pro Forma Totals                    1997
--------------------------------------------------------------------------------
   Revenue                                  $17,398,526
   Net income                                 5,047,475
   Basic earnings per share                         .53
--------------------------------------------------------------------------------

The pro forma information  reflects adjustments for the actual rental income and
rental expenses of all the 1997  acquisitions for the respective  period in 1997
prior to  acquisition  by the company.  Net income has been adjusted as follows:
(1) Property  management  and advisory  expenses have been adjusted based on the
company's contractual arrangements; and (2) Depreciation has been adjusted based
on the company's basis in the properties.


                                       20

<PAGE>


Item 9.  Changes  In  And  Disagreements  With  Accountants  On  Accounting  And
         Financial Disclosure.

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

For information  with respect to the Company's  directors and director  nominees
see the  information  under  "Ownership of Equity  Securities"  and "Election of
Directors"  in  the  Company's  Proxy  Statement  dated  April  3,  1998,  which
information is hereby  incorporated  herein by reference.  For information  with
respect to the  Company's  executive  officers see  "Executive  Officers" in the
Company's  Proxy  Statement  dated April 3, 1998,  which  information  is hereby
incorporated herein by reference.

Item 11. Executive Compensation

For information with respect to compensation of the Company's executive officers
and directors,  see the information under  "Compensation of Executive  Officers"
and  "Compensation of Directors" in the Company's Proxy Statement Dated April 3,
1998, which information is hereby incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management

See the  information  under  "Ownership of Equity  Securities"  in the Company's
Proxy Statement dated April 3, 1998,  which  information is hereby  incorporated
herein by reference.

Item 13. Certain Relationships and Related Transactions

For  information  on certain  relationships  and related  transactions,  see the
information under "Certain  Relationships and Agreements" in the Company's Proxy
Statement dated April 3, 1998, which information is hereby  incorporated  herein
by reference.


                                       21

<PAGE>



                                     PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K

   (a) Documents filed as part of the report

            1.       Financial Statements

                     The   following    consolidated    financial
                     statements of the registrant are included in
                     Item 8:

                     Independent Auditors' Report
                                      Ernst & Young LLP

                     Consolidated Balance Sheets
                                      December 31, 1997 and 1996

                     Consolidated Statement of Operations
                                      Year Ended December 31, 1997

                     Consolidated Statement of Shareholders' Equity
                                      Year Ended December 31, 1997

                     Consolidated Statement of Cash Flows
                                      Year Ended December 31, 1997

                     Notes to Consolidated Financial Statements

            2.       Financial Statement Schedule

                     Schedule  III - Real Estate and  Accumulated
                     Depreciation  (Included  on  page 23 of this
                     Form 10-K Report)

                     All other financial statement schedules have
                     been omitted because they are not applicable
                     or not  required  or  because  the  required
                     information  is  included  elsewhere  in the
                     financial statements or notes thereto.

            3.       Exhibits

                     Incorporated  herein  by  reference  are the
                     exhibits  listed under  "Exhibits  Index" on
                     pages  26  through  28  of  this  Form  10-K
                     Report.

     (b) Reports on Form 8-K

                     During the last quarter of 1997, the Company
                     filed the following  Current Reports on Form
                     8-K:

                     On October 20, 1997, the registrant  filed a
                     Report on Form 8-K/A to a Report on Form 8-K
                     dated August 6, 1997.  The item reported was
                     Item 7. The financial  statements filed were
                     Statements  of Income and  Direct  Operating
                     Expenses  (exclusive  of certain  items) for
                     Chaparosa and Riverhill  Apartments  for the
                     twelve  months  ended  June 30,  1997.  Also
                     included  were  a  Pro  Forma  Statement  of
                     Operations for the six months ended June 30,
                     1997, Pro Forma Balance Sheet as of June 30,
                     1997, and Pro Forma  Statement of Operations
                     for the year ended December 31, 1996.

                     On December 8, 1997, the registrant  filed a
                     Report on Form 8-K.  The item  reported  was
                     Item  2  (the   acquisition  of  the  Copper
                     Crossing Apartments).

                                       22


<PAGE>

SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION (As of December 31, 1997)
<TABLE>
<CAPTION>
                                                                                                                Subsequently
                                                                   Initial Cost                                 Capitalized
                                                 Encum-            -----------------------------------------------------------------
                     Description                 brances               Land                 Bldg. & Impr.             Impr.
------------------------------------------------------------------------------------------------------------------------------------
<S>                    <C>                       <C>                 <C>                  <C>                    <C>
                   1) Brookfield                 $0                  $1,146,282            $4,312,203              $487,814
                   * Dallas, TX
                   * Multi-family housing


                   2) Eagle Crest                $0                  $2,973,500           $12,676,500            $1,649,740
                   * Irving, TX
                   * Multi-family housing

                   3) Tahoe Apartments           $0                  $1,081,206            $4,609,354              $950,667
                   * Arlington, TX
                   * Multi-family housing

                   4) Mill Crossing              $0                    $772,501            $3,771,620              $502,787
                   * Arlington, TX
                   * Multi-family housing

                   5) Polo Run                   $0                    $891,667            $5,967,307              $686,189
                   * Arlington, TX
                   * Multi-family housing

                   6) Wildwood Apartments        $0                    $832,339            $3,131,180              $426,223
                   * Euless, TX
                   * Multi-family housing

                   7) Toscana Apartments         $0                    $819,634            $5,034,897              $367,692
                   * Dallas, TX
                   * Multi-family housing

                   8) Arbors on Forest Ridge     $0                    $697,402            $7,051,505              $566,766
                   * Bedford, TX
                   * Multi-family housing

                   9) Paces Cove                 $0                  $1,948,245            $7,329,110              $259,204
                   * Dallas, TX
                   * Multi-family housing

                  10) Remington Hills            $0                  $3,144,000            $9,956,000              $715,064
                   * Irving, TX
                   * Multi-family housing

                  11) Copper Crossing            $0                    $855,000            $3,895,000              $125,750
                   * Fort Worth, TX
                   * Multi-family housing
                                                                    $15,161,775           $67,734,677            $6,737,896   (2)
                                                    ================================================================================

<CAPTION>
                                         Gross Amount Carried
                             -------------------------------------------------               Date of    Date
 Description                        Land      Bldg. & Impr.      Total       Acc. Dep.       Const.     Acquired        Dep. Life
------------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>            <C>            <C>             <C>            <C>          <C> <C>      <C>
   1) Brookfield                $1,203,420     $4,742,879     $5,946,299      $166,694       1984    Jan. 28, 1997     27.5 yrs.
   * Dallas, TX
   * Multi-family housing

   2) Eagle Crest               $3,077,332    $14,222,408    $17,299,740      $483,740       1983    Jan. 30, 1997     27.5 yrs.
   * Irving, TX                                                                    1985
   * Multi-family housing

   3) Tahoe Apartments          $1,128,570     $5,512,657     $6,641,227      $199,049       1979    Jan. 31, 1997     27.5 yrs.
   * Arlington, TX
   * Multi-family housing

   4) Mill Crossing               $802,354     $4,244,554     $5,046,908      $136,519       1979    Feb. 21, 1997     27.5 yrs.
   * Arlington, TX
   * Multi-family housing

   5) Polo Run                    $935,852     $6,609,311     $7,545,163      $191,302       1984    Mar. 31, 1997     27.5 yrs.
   * Arlington, TX
   * Multi-family housing

   6) Wildwood Apartments         $880,841     $3,508,901     $4,389,742       $98,645       1984    Mar. 31, 1997     27.5 yrs.
   * Euless, TX
   * Multi-family housing

   7) Toscana Apartments          $858,233     $5,363,990     $6,222,223      $147,777       1986    Mar. 31, 1997     27.5 yrs.
   * Dallas, TX
   * Multi-family housing

   8) Arbors on Forest Ridge      $727,692     $7,587,981     $8,315,673      $187,034       1986    Apr. 25, 1997     27.5 yrs.
   * Bedford, TX
   * Multi-family housing

   9) Paces Cove                $1,838,745     $7,697,814     $9,536,559      $141,850       1982    June 24, 1997     27.5 yrs.
   * Dallas, TX
   * Multi-family housing

  10) Remington Hills           $3,061,324    $10,753,740    $13,815,064      $133,270       1984    Aug. 6, 1997      27.5 yrs.
   * Irving, TX                                                                              1985    Aug. 6, 1997
   * Multi-family housing

  11) Copper Crossing             $882,460     $3,993,290     $4,875,750       $12,123       1981    Nov. 25, 1997     27.5 yrs.
   * Fort Worth, TX
   * Multi-family housing


                               $15,396,823    $74,237,525    $89,634,348(1) $1,898,003
                             =======================================================================
</TABLE>

(1)  Represents the aggregate cost for Federal Income tax purposes.
(2)  Included  real  estate   commissions,   closing   costs  and   improvements
     capitalized since the date of acquisition.
(3)  The  following is a  reconciliation  of the carrying  amount of real estate
     owned:

<TABLE>
<CAPTION>
<S>                         <C>                                   <C>
         Balance at  January 1, 1997                               $           0
         Real estate purchased                                        84,147,726
         Improvements, furniture and fixtures                          3,606,088
                                                              --------------------

         Balance at December 31, 1997                             $  87,753,814
                                                              ====================

  (4) The following is a reconciliation of accumulated depreciation:

         Balance at January 1, 1997                                  $           0
         Depreciation  expense                                           1,898,003
                                                              --------------------
         Balance at December 31,1997                                 $   1,898,003
                                                              ====================
</TABLE>

                                       23

<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized this 30th day of March,
1998.

                              APPLE RESIDENTIAL INCOME TRUST, INC.

                              By:      /s/ Glade M. Knight
                                      --------------------
                                       Glade M. Knight,
                                       President

                  Pursuant to the  requirements  of the Securities  Exchange Act
1934,  this report has been signed below by the  following  persons on behalf of
the registrant and in the capacities and on the dates indicated.

         SIGNATURE               CAPACITY                   DATE

/s/ Glade M. Knight              Director, President,       March  30, 1998
----------------------------     Chief Executive
Glade M. Knight                  Officer, Chief
                                 Financial Officer
                                 (and Principal
                                 Accounting Officer)

/s/ Penelope W. Kyle             Director                   March  30, 1998
----------------------------
Penelope W. Kyle

/s/ Bruce H. Matson              Director                   March  30, 1998
----------------------------
Bruce H. Matson

/s/ Lisa B. Kern                 Director                   March  30, 1998
----------------------------
Lisa B. Kern

                                       24


<PAGE>




                    Supplemental Information to Be Furnished
                  With Reports Filed Pursuant to Section 15 (d)
                    Of the Act by Registrants Which Have Not
                        Registered Securities Pursuant To
                              Section 12 of the Act

The Company's  Definitive Proxy Statement  incorporated by reference in response
to certain  items in this Form 10-K Annual  Report will be furnished to security
holders  after the date of the filing of this  Annual  Report.  Such  Definitive
Proxy Statement will be furnished to the Securities and Exchange Commission when
it is sent to the security holders.

                                       25


<PAGE>



                                  EXHIBIT INDEX

Exhibit Number             Description

3.1            Articles of Incorporation of Apple Residential Income Trust, Inc.
               (Incorporated   by   reference   to  Exhibit  3.1  filed  in  the
               registrant's  registration  statement  on  Form  S-11;  File  No.
               333-10635).

3.2            Articles of Amendment to the Articles of  Incorporation  of Apple
               Residential  Income  Trust,  Inc.  (Incorporated  by reference to
               Exhibit 3.3 filed in the registrant's  registration  statement on
               Form S-11; File No. 333-10635).

3.3            Articles of Amendment to the Articles of  Incorporation  of Apple
               Residential  Income  Trust,  Inc.  (Incorporated  by reference to
               Exhibit 3.4 filed in the registrant's  registration  statement on
               Form S-11; File No. 33-10635).

3.4            Amended and Restated  Bylaws of Apple  Residential  Income Trust,
               Inc.   (Amended  and  Restated   Through   December  19,   1997).
               (Incorporated   by   reference   to  Exhibit  3.5  filed  in  the
               registrant's  registration  statement  on  Form  S-11;  File  No.
               333-10635).

4.1            Loan  Agreement  dated as of March 1, 1997,  by and between Apple
               Residential  Income Trust,  Inc. and First Union National Bank of
               Virginia.  (Incorporated by reference to Exhibit 4.1 filed in the
               registrant's  registration  statement  on  Form  S-11;  File  No.
               333-10635).

4.2            Amendment to Loan  Agreement  dated as of August 1, 1997,  by and
               between  Apple  Residential  Income  Trust,  Inc. and First Union
               National Bank of Virginia.  (Incorporated by reference to Exhibit
               4.2  filed in the  registrant's  registration  statement  on Form
               S-11; File No. 333-10635).

4.3            Amended and Restated  Promissory  Note dated August 1, 1997, from
               Apple Residential  Income Trust, Inc. to the order of First Union
               National Bank of Virginia.  (Incorporated by reference to Exhibit
               4.3  filed in the  registrant's  registration  statement  on Form
               S-11; File No. 333-10635).

10.1           Advisory  Agreement between Apple Residential  Income Trust, Inc.
               and Apple Residential Advisors,  Inc.  (Incorporated by reference
               to Exhibit 10.1 filed in the registrant's  registration Statement
               on Form S-11; File No. 333-10635).

10.2           Form of Property  Management  Agreement between Apple Residential
               Income Trust, Inc. and Apple  Residential  Management Group, Inc.
               (Incorporated   by   reference  to  Exhibit  10.2  filed  in  the
               registrant's  registration  statement  on  Form  S-11;  File  No.
               333-10635.)

10.3           Property   Acquisition/Disposition    Agreement   between   Apple
               Residential  Income  Trust,  Inc.  and Apple Realty  Group,  Inc.
               (Incorporated   by   reference  to  Exhibit  10.3  filed  in  the
               registrant's  registration  statement  on  Form  S-11;  File  No.
               333-10635).

10.4           Apple   Residential   Income  Trust,  Inc.  1996  Incentive  Plan
               (Incorporated   by   reference  to  Exhibit  10.4  filed  in  the
               registrant's  registration  statement  on  Form  S-11;  File  No.
               333-10635).

10.5           Apple Residential Income Trust, Inc. 1996 Non-Employee  Directors
               Stock  Option  Plan.  (Incorporated  by reference to Exhibit 10.5
               filed in the  registrant's  registration  statement on Form S-11;
               File No. 333-10635).

10.6           Right of First Refusal  Agreement.  (Incorporated by reference to
               Exhibit 10.6 filed in the registrant's  registration statement on
               Form S-11; File No. 333-10635).

                                       26

<PAGE>



Exhibit Number             Description

10.7           Advisory  Agreement  Subcontract among Apple  Residential  Income
               Trust,  Inc., Apple  Residential  Advisors,  Inc. and Cornerstone
               Realty Income Trust,  Inc.  (Incorporated by reference to Exhibit
               10.4 to Form S-3 of Cornerstone  Realty Income Trust,  Inc. (File
               No. 333-23693) filed on March 20, 1997).

10.8           Property Management Agreement Subcontract among Apple Residential
               Income Trust, Inc., Apple Residential  Management Group, Inc. and
               Cornerstone Realty Income Trust, Inc.  (Incorporated by reference
               to Exhibit 10.5 to Form S-3 of  Cornerstone  Realty Income Trust,
               Inc. (File No. 333-23693) filed on March 20, 1997).

10.9           Agreement  and  Bill  of  Transfer  and  Assignment  among  Apple
               Residential  Income Trust,  Inc.,  Apple Realty  Group,  Inc. and
               Cornerstone Realty Income Trust, Inc.  (Incorporated by reference
               to Exhibit 10.6 to Form S-3 of  Cornerstone  Realty Income Trust,
               Inc. (File No. 333-23693) filed on March 20, 1997).

10.10          Common Share Purchase Option Agreement  between Apple Residential
               Income Trust,  Inc. and  Cornerstone  Realty  Income Trust,  Inc.
               (Incorporated  herein by  reference to Exhibit 10.8 filed to Form
               S-3 of Cornerstone Realty Income Trust, Inc. (File No. 333-23693)
               filed on March 20, 1997).

10.11          Articles of Incorporation of Apple Limited, Inc. (Incorporated by
               reference to Exhibit 10.12 filed in the registrant's registration
               statement on Form S-11; File No. 333-10635).

10.12          Bylaws of Apple  Limited,  Inc.  (Incorporated  by  reference  to
               Exhibit 10.13 filed in the registrant's registration statement on
               Form S-11; File No. 333-10635).

10.13          Articles of Incorporation of Apple General, Inc. (Incorporated by
               reference to Exhibit 10.l4 filed in the registrant's registration
               statement on Form S-11; File No. 333-10635).

10.14          Bylaws of Apple  General,  Inc.  (Incorporated  by  reference  to
               Exhibit 10.15 filed in the registrant's registration statement on
               Form S-11; File No. 333-10635).

10.15          Certificate   of  Limited   Partnership  of  Apple  REIT  Limited
               Partnership. (Incorporated by reference to Exhibit 10.16 filed in
               the  registrant's  registration  statement on Form S-11; File No.
               333-10635).

10.16          Limited Partnership  Agreement of Apple REIT Limited Partnership.
               (Incorporated   by  reference  to  Exhibit  10.17  filed  in  the
               registrant's  registration  statement  on  Form  S-11;  File  No.
               333-10635).

10.17          Property   Management   Agreement  for   Brookfield   Apartments.
               (Incorporated  by reference to Exhibit 10.7 to Current  Report on
               Form 8-K  dated  January  28,  1997 of Apple  Residential  Income
               Trust, Inc.; File No. 333-10635).

10.18          Property Management  Agreement for Eagle Crest I & II Apartments.
               (Incorporated  by reference to Exhibit 10.8 to Current  Report on
               Form 8-K  dated  January  28,  1997 of Apple  Residential  Income
               Trust, Inc.; File No. 333-10635).

10.19          Property Management Agreement for Tahoe Apartments. (Incorporated
               by reference to Exhibit 10.9 to Current  Report on Form 8-K dated
               January 28, 1997 of Apple  Residential  Income Trust,  Inc.; File
               No. 333-10635).

10.20          Property  Management  Agreement  for  Mill  Crossing  Apartments.
               (Incorporated  by reference to Exhibit 10.3 to Current  Report on
               From 8-K dated  February  21,  1997 of Apple  Residential  Income
               Trust, Inc.; File No. 333-10635).

                                       27

<PAGE>



Exhibit Number                      Description

10.21          Property   Management   Agreement   for  Polo   Run   Apartments.
               (Incorporated  by reference to Exhibit 10.4 to Current  Report on
               Form 8-K dated March 31, 1997 of Apple Residential  Income Trust,
               Inc.; File No. 333-10635).

10.22          Property   Management    Agreement   for   Wildwood   Apartments.
               (Incorporated  by reference to Exhibit 10.6 to Current  Report on
               Form 8-K dated March 31, 1997 of Apple Residential  Income Trust,
               Inc.; File No. 333-10635)

10.23          Property    Management    Agreement   for   Toscana   Apartments.
               (Incorporated  by reference to Exhibit 10.6 to Current  Report on
               Form 8-K dated March 31, 1997 of Apple Residential  Income Trust,
               Inc.; File No. 333-10635).

10.24          Property  Management  Agreement  for the  Arbors on Forest  Ridge
               Apartments. (Incorporated by reference to Exhibit 10.2 to Current
               Report on From 8-K  dated  April  25,  1997 of Apple  Residential
               Income Trust, Inc.; File No. 333-10635).

10.25          Property   Management   Agreement  for  Pace's  Cove  Apartments.
               (Incorporated  by reference to Exhibit 10.2 to Current  Report on
               Form 8-K dated June 24, 1997 of Apple  Residential  Income Trust,
               Inc.; File No. 333-10635).

10.26          Property Management  Agreement for Remington Hills at Las Colinas
               (formerly Chaparosa and Riverhill)  Apartments.  (Incorporated by
               reference  to Exhibit  10.3 to  Current  Report on Form 8-K dated
               August 6, 1997 of Apple Residential  Income Trust, Inc.; File No.
               333-10635).

10.27          Property  Management  Agreement for Copper  Crossing  Apartments.
               (Incorporated  by reference to Exhibit 10.2 to Current  Report on
               Form 8-K dated  November  24,  1997 of Apple  Residential  Income
               Trust, Inc.; File No. 333-10635).

21             Subsidiaries  of  Apple  Residential   Income  Trust,  Inc.  FILE
               HEREWITH.

27             Financial Data Schedule. FILE HEREWITH

99.1           Portions of pages 26 through 34, of the Prospectus dated November
               19, 1996 of Apple Residential Income Trust, Inc. FILED HEREWITH.

99.2           Portions  of pages S-3  through  S-26 of  Supplement  No. 7 dated
               February 2, 1998 to the  Prospectus  dated  November  19, 1996 of
               Apple Residential Income Trust, Inc. FILED HEREWITH.

                                       28