Item 2.  Acquisition or Disposition of Assets

         All references herein to the "Company" include Apple Residential Income
Trust, Inc. and its subsidiaries,  Apple REIT Limited Partnership, Apple REIT II
Limited Partnership,  Apple REIT III Limited Partnership,  Apple REIT IV Limited
Partnership,  Apple  REIT V  Limited  Partnership  and  Apple  REIT  VI  Limited
Partnership.

                         COTTONWOOD CROSSING APARTMENTS
                              Grand Prairie, Texas

         On  July  9,  1998,  Apple  REIT  Limited  Partnership   purchased  the
Cottonwood  Crossing  Apartments  located at 2105 Cottonwood Club, in Arlington,
Texas (the "Property").

          The Property comprises 200 apartment units. The purchase price for the
Property was $5,700,000. The seller was Cottonwood Realty Associates, a New York
general partnership which was not affiliated with the Company, Apple Residential
Advisors, Inc. (the "Advisor") or their affiliates.  The purchase price was paid
using proceeds from the sale of Shares of the Company. Title to the Property was
conveyed to the Company by limited warranty deed.

         LOCATION.  The  Property is located on  Cottonwood  Club off of Pioneer
Parkway (Spur 303), a major  east/west  thoroughfare  in Arlington,  Texas.  The
Property  is  located  within  the  greater   Dallas/Forth   Worth  metropolitan
statistical area, or as it is called locally, "The Metroplex."

         The following information is based in part upon information provided by
the Dallas  Chamber of  Commerce.  The  Dallas/Fort  Worth  Metroplex  is in the
north-central  part  of  Texas  and is  composed  of  nine  counties.  The  1996
population of The Metroplex was approximately 4,400,000. The Dallas metropolitan
area is the second largest in the state, behind Houston.

         The economy of the Dallas/Fort  Worth area is complex and  diversified.
Key economic factors include a large  manufacturing  base (including as products
military hardware,  electronics,  automobiles,  industrial equipment,  oil-field
parts,   food   products   and   chemicals),    banking,   insurance   services,
communications,  oil and gas production and air transportation.  Major employers
in the area include Texas Instruments,  Southwestern Bell, General Motors,  J.C.
Penney, NationsBank and Vought Aircraft Company.

         The  Metroplex  is also an  established  transportation  center for the
nation.  The Dallas/Fort  Worth  International  Airport  occupies  approximately
17,600 acres of land between the two cities. It is the second largest commercial
airport in the United  States in terms of land area,  and is the second  busiest
airport in the world, with more than 2,500 daily arrivals and departures.



<PAGE>



         The area also has a  well-established  system of interstate highway and
supporting  secondary routes. The Metroplex is located at the hub of Interstates
35, 45, 20 and 30. Two outer loops,  Interstate 635 in Dallas and Interstate 820
in Fort Worth, surround the respective cities.

         The many  institutions of higher learning in the area include  Southern
Methodist University, the University of Texas at Dallas, the University of Texas
at Arlington, the University of North Texas, and Texas Christian University.

         The immediate  neighborhood  surrounding the Property consists of other
multi-family and  single-family  housing and commercial and retail  development.
The Property is conveniently located near fine restaurants,  businesses, schools
and  churches  and is readily  available  from  Interstates  360, 20 and 30, the
Arlington area  interstates.  The Property is an approximately  20- minute drive
from Dallas/Fort Worth International  Airport, an approximately  15-minute drive
from  downtown  Fort Worth and an  approximately  30-minute  drive from downtown
Dallas.

         DESCRIPTION  OF THE  PROPERTY.  The Property  consists of 200 apartment
units in 10  buildings  on  approximately  6.8 acres of land.  The  Property was
constructed in 1985.

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

<TABLE>
<CAPTION>
                                                                     APPROXIMATE INTERIOR
     QUANTITY                          TYPE                             SQUARE FOOTAGE              MONTHLY RENTAL
     --------                          ----                             --------------              --------------
<S>     <C>          <C>                                                       <C>                       <C> 
        100          One bedroom, one bathroom                                 628                       $400

         52          One bedroom, one bathroom                                 868                        545
                     w/den

          8          Two  bedrooms, one bathroom                               868                        555

         40          Two bedrooms, two bathrooms                               883                        575
</TABLE>

         The apartments provide a total of approximately  150,200 square feet of
net rentable area.

         The  Company  believes  that  the  Property  has  generally  been  well
maintained  and  is  in  good  condition.  However,  the  Company  has  budgeted
approximately  $300,000 for repairs and capital  improvements to the Property to
include  clubhouse  renovations,  exterior  painting,  landscaping  and interior
upgrades.

          The  following  information was  provided  by  the  seller.   Physical
occupancy at the Property  averaged  approximately 92% in 1993, 94% in 1994, 95%
in 1995,  96% in 1996 and 96% in 1997.  Leases at the Property are generally for
terms of one year or less. Average rental rates


                                       2


<PAGE>



for the past five years have generally increased.  As an example, a one-bedroom,
one- bathroom apartment (868 square feet) rented for $440 in 1993, $455 in 1994,
$455 in 1995, $465 in 1996 and $475 in 1997. The average effective annual rental
per square foot at the Property for 1993,  1994,  1995, 1996 and 1997 was $6.19,
$6.40, $6.40, $6.54, and $6.68, respectively.

          The  Property  has  an  outdoor  swimming pool  with a fountain  and a
clubhouse with a leasing office. The buildings are wood framed construction with
a  combination  of brick  veneer and wood siding on concrete  slab  foundations.
Roofs are pitched composition.

         Each apartment unit has wall-to-wall  carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and  individually  controlled  heating and  air-conditioning  unit. Each
kitchen has a  refrigerator/freezer,  electric  range and oven,  dishwasher  and
garbage  disposal.  All of the units include  ceiling fans,  french patio doors,
full size washer/dryer  connections,  fireplace,  a patio or balcony and outside
storage.  The owner of the Property pays for cold water, sewer charges, gas (for
hot water) and trash  removal.  The tenants pay for their  electricity  service,
which includes cooking, lighting, heating and air-conditioning.

          There are at least three  apartment  properties  that compete with the
Property.  All  offer  similar  amenities  and  generally  have  rents  that are
comparable to those of the Property.  Based on a recent  telephone  survey,  the
Advisor  estimates  that  occupancy  at  nearby  competing  properties  averaged
approximately 97% on June 30, 1998.

         As of June 30, 1998, the Property was approximately  89% occupied.  The
tenants are primarily a mix of blue-collar and  white-collar  workers,  students
and retired persons.

         The following  table sets forth the 1997 real estate tax information on
the Property:

<TABLE>
<CAPTION>

         JURISDICTION                       ASSESSED VALUE             RATE             TAX
         ------------                       --------------             ----             ---
<S>                                         <C>                        <C>              <C>       
County of Tarrant . . . . . . . . . . . .   $4,700,000                 $1.9952         $ 93,774.21

City of Arlington . . . . . . . . . . . . . $4,700,000                 $0.6380         $ 29,986.00
                                                                                       -----------

         Total . . . . . . . . . . . . . . . .                                         $123,760.21
</TABLE>

         The basis of the depreciable  residential  real property portion of the
Property  (approximately   $5,248,575  at  the  time  of  acquisition)  will  be
depreciated over 27.5 years on a straight-line  basis. The basis of the personal
property portion will be depreciated in accordance with the modified accelerated
cost  recovery  system of the  Internal  Revenue  Code of 1986,  as amended (the
"Code").  Amounts to be spent by the Company on repairs and improvements will be
treated  for tax  purposes as  permitted  by the Code based on the nature of the
expenditures.


                                       3


<PAGE>



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

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

         1. The Dallas/Fort  Worth area generally and the specific area in which
the Property is located  were  perceived  as being  characterized  by a diverse,
stable and steadily  growing  economy.  Accordingly,  it was believed  that such
economy  and  its  anticipated  growth  and  development  would  support  stable
occupancy rates and reasonable increase in rents at the Property.

         2.  Based  upon an  engineering  report  and its own  inspections,  the
Advisor  believes that the Property has been well maintained and is generally in
good  condition,  although  the Advisor  believes  that the planned  repairs and
improvements will allow an increase in rents at the Property.

         3. The Property has an advantageous  location - between Dallas and Fort
Worth, and near the Dallas/Fort Worth International  Airport - and is located in
a   rapidly-growing   area   proximate  to  centers  of  employment  and  retail
development.

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

          ACQUISITION  AND  MANAGEMENT  SERVICES AND FEES. In  consideration  of
services   rendered  to  the  Company  in  connection  with  the  selection  and
acquisition  of the Property,  Cornerstone  Realty Income Trust,  Inc.  earned a
property  acquisition fee equal to 2% of the purchase price of the property,  or
$114,000.

         Cornerstone  Realty Income Trust,  Inc. will serve as property  manager
for the  Property  and for its  services  will be paid by the  Company a monthly
management  fee  equal  to 5%  of  the  gross  revenues  of  the  Property  plus
reimbursement of certain expenses.

                             PACE'S POINT APARTMENTS
                                Lewisville, Texas

         On July 17, 1998, Apple REIT V Limited Partnership purchased the Pace's
Point Apartments located at 247 East Corporate Drive, in Lewisville,  Texas (the
"Property").

          The Property comprises 300 apartment units. The purchase price for the
Property was $11,405,000.  The seller was Corporate Drive, L.P., a Texas limited
partnership  which was not  affiliated  with the  Company,  the Advisor or their
affiliates.   The  purchase   price  was  paid  through  a  combination  of  (i)
approximately  $3,691,383 in cash using  proceeds from the sale of the Shares of
the Company and (ii) approximately  $7,713,617 by assumption of a mortgage loan.
Title to the Property was conveyed to the Company by special warranty deed.

         The Property was acquired with the assumption of a mortgage loan in the
original  principal amount of $7,836,000 held by the Federal  National  Mortgage
Association ("Fannie Mae"). On July 17, 1998, the outstanding  principal balance
of the mortgage  loan was  $7,713,616.57.  The interest on the mortgage  loan is
8.555% per annum;  amortization  is based on a 30-year  amortization  term;  and
prepayments are permitted upon notice and payment of a prepayment  premium based
on a yield  maintenance  formula  contained in the loan documents.  The maturity
date of the  mortgage  loan is July,  1, 2003,  and the balance due at maturity,
assuming no payment has been made on  principal  in advance of its due date,  is
$7,307,129.73


                                       4


<PAGE>



          LOCATION.   The  Property  is  located  on  East  Corporate  Drive  in
Lewisville,   Texas.  The  Property  is  located  within  "The  Metroplex."  For
information on The Metroplex, see under "Cottonwood Crossing Apartments" above.

         The immediate  neighborhood  surrounding the Property consists of other
multi-family and  single-family  housing and commercial and retail  development.
The  Property  is  an  approximately  15-minute  drive  from  Dallas/Fort  Worth
International Airport, an approximately 25-minute drive from downtown Dallas and
an approximately 20-minute drive from downtown Fort Worth.

         DESCRIPTION  OF THE  PROPERTY.  The Property  consists of 300 apartment
units in 14  buildings  on  approximately  12.6 acres of land.  The Property was
constructed in 1985.

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

<TABLE>
<CAPTION>
                                                                     APPROXIMATE INTERIOR
      QUANTITY                          TYPE                            SQUARE FOOTAGE              MONTHLY RENTAL
      --------                          ----                            --------------              --------------
<S>      <C>          <C>                                                      <C>                   <C>    <C>
         36           One bedroom, one bathroom                                535                   $479 - 499

         24           One bedroom, one bathroom                                581                    499 - 519

         84           One bedroom, one bathroom                                683                    539 - 559

         40           One bedroom, one bathroom                                779                    599 - 619
                      with den

         56           Two bedrooms, two bathrooms                              875                    649 - 669

         60           Two bedrooms, two bathrooms                              966                    689 - 709
</TABLE>

         The apartments provide a total of approximately  229,000 square feet of
net rentable area.

         The  Company  believes  that  the  Property  has  generally  been  well
maintained  and  is  in  good  condition.  However,  the  Company  has  budgeted
approximately  $225,000 for repairs and capital  improvements to the Property to
include clubhouse renovations, additional landscaping and interior upgrades.

          The  following  information was  provided  by  the  seller.   Physical
occupancy at the Property  averaged  approximately 94% in 1993, 95% in 1994, 96%
in 1995,  96% in 1996 and 96% in 1997.  Leases at the Property are generally for
terms of one year or less.  Average  rental  rates for the past five  years have
generally increased. As an example, a one-bedroom,  one- bathroom apartment (581
square feet) rented for $400 in 1993,  $449 in 1994,  $449 in 1995, $449 in 1996
and $469 in 1997. The average effective annual rental per square foot at


                                       5


<PAGE>

the  Property for 1993,  1994,  1995,  1996 and  1997 was  $7.36,  $8.26, $8.26,
$8.26, and $8.63, respectively.

         The  Property  has  two  outdoor  swimming  pools,  a  jacuzzi,  a sand
volleyball  court,  a fitness  center,  a sauna,  23  carports  and two  laundry
facilities. The Property also has a clubhouse with a leasing office.

         The buildings are wood framed  construction with a combination of brick
veneer and painted horizonal wood siding on concrete slab foundations. Roofs are
pitched and covered with fiberglass shingled on plywood.

         Each apartment unit has wall-to-wall  carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and  individually  controlled  heating and  air-conditioning  unit. Each
kitchen has a  refrigerator/freezer,  electric  range and oven,  dishwasher  and
garbage disposal. All units have full-sized  washer/dryer  connections.  Some of
the units have wood-burning fireplaces, vaulted ceilings and alarm systems. Each
unit has  walk-in  closets,  outside  storage,  a covered  balcony  or patio and
ceiling fans. The owner of the Property pays for cold water, sewer charges,  gas
(for hot  water)  and trash  removal.  The  tenants  pay for  their  electricity
service, which includes cooking, lighting, heating and air-conditioning.

          There  are at least 15  apartment  properties  that  compete  with the
Property.  All  offer  similar  amenities  and  generally  have  rents  that are
comparable to those of the Property.  Based on a recent  telephone  survey,  the
Advisor  estimates  that  occupancy  at  nearby  competing  properties  averaged
approximately 95% on June 30, 1998.

         As of June 30, 1998, the Property was approximately  95% occupied.  The
tenants are primarily a mix of white-collar  and blue-collar  workers,  students
and retired persons.

         The following  table sets forth the 1997 real estate tax information on
the Property:

         JURISDICTION           ASSESSED VALUE         RATE          TAX
         ------------           --------------         ----          ---

County of Denton............... $9,389,517             $0.25590     $ 24,027.77

City of Lewisville............. $9,389,517             $1.51600     $142,345.08

Lewisville I.S.D............... $9,389,517             $0.48949     $ 45,960.75
                                                                   -------------
         Total.................                                     $212,333.60

         The basis of the depreciable  residential  real property portion of the
Property  (approximately   $9,633,257  at  the  time  of  acquisition)  will  be
depreciated over 27.5 years on a straight-line  basis. The basis of the personal
property portion will be depreciated in accordance with the modified accelerated
cost recovery system of the Code.  Amounts to be spent by the Company on repairs
and improvements will be treated for tax purposes as permitted by the Code based
on the nature of the expenditures.


                                       6


<PAGE>

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

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

         1. The Dallas/Fort  Worth area generally and the specific area in which
the Property is located  were  perceived  as being  characterized  by a diverse,
stable and steadily  growing  economy.  Accordingly,  it was believed  that such
economy  and  its  anticipated  growth  and  development  would  support  stable
occupancy rates and reasonable increases in rents at the Property.

         2.  Based  upon an  engineering  report  and its own  inspections,  the
Advisor  believes that the Property has been well maintained and is generally in
good  condition,  although  the Advisor  believes  that the planned  repairs and
improvements will allow an increase in rents at the Property.

         3. The  Property  has an  advantageous  location  -  convenient  to the
Dallas/Fort Worth International Airport, downtown Dallas and downtown Fort Worth
- and is located in a rapidly  growing area  proximate to centers of  employment
and retail development.

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

          ACQUISITION  AND  MANAGEMENT  SERVICES AND FEES. In  consideration  of
services   rendered  to  the  Company  in  connection  with  the  selection  and
acquisition  of the Property,  Cornerstone  Realty Income Trust,  Inc.  earned a
property  acquisition fee equal to 2% of the purchase price of the property,  or
$228,100.  At closing,  Cornerstone Realty Income Trust, Inc. was paid a portion
of the property  acquisition  fee  corresponding  to the portion of the purchase
price of the  property  paid in cash by the  Company.  The cash  portion  of the
purchase  price  was  approximately  $3,691,383,  and  2%  of  that  amount  was
approximately  $73,828. The balance of the property acquisition fee will be paid
if, when and as the  indebtedness  taken  subject to at closing is repaid by the
Company.

         Cornerstone  Realty Income Trust,  Inc. will serve as property  manager
for the  Property  and for its  services  will be paid by the  Company a monthly
management  fee  equal  to 5%  of  the  gross  revenues  of  the  Property  plus
reimbursement of certain expenses.

                            PEPPER SQUARE APARTMENTS
                               North Dallas, Texas

         On July 17,  1998,  Apple REIT VI  Limited  Partnership  purchased  the
Pepper Square Apartments  located at 6069 Beltline Road, in North Dallas,  Texas
(the "Property").

         The Property  comprises 144 apartment units. The purchase price for the
Property was $5,205,000. The seller was Pepper Square Associates,  Ltd., a Texas
limited  partnership  which was not affiliated with the Company,  the Advisor or
their  affiliates.  The  purchase  price was paid through a  combination  of (i)
approximately  $1,561,576 in cash using  proceeds from the sale of the Shares of
the Company and (ii) approximately  $3,643,424 by assumption of a mortgage loan.
Title to the Property was conveyed to the Company by special warranty deed.

         The Property was acquired with the assumption of a mortgage loan in the
original  principal  amount of $3,701,000  held by Fannie Mae. On July 17, 1998,
the outstanding  principal balance of the mortgage loan was  $3,643,423.53.  The
interest on the mortgage  loan is 8.575% per annum;  amortization  is based on a
30-year amortization term; and prepayments are permitted upon notice and payment
of a prepayment  premium based on a yield  maintenance  formula contained in the
loan documents.  The maturity date of the mortgage loan is July 1, 2006, and the
balance  due at  maturity,  assuming no payment  has been made on  principal  in
advance of its due date, is $3,312,543.23.


                                       7


<PAGE>




         LOCATION.  The  Property is located on Beltline  Road in North  Dallas,
Texas.  The Property is located within "The  Metroplex."  For information on The
Metroplex, see under "Cottonwood Crossing Apartments" above.

         The immediate  neighborhood  surrounding the Property consists of other
multi-family and  single-family  housing and commercial and retail  development.
The  Property is an  approximately  five-minute  drive from  Preston  Mall,  the
Galleria Mall and Valley View Mall. The Property is an  approximately  25-minute
drive from Dallas/Fort Worth International Airport.

         DESCRIPTION  OF THE  PROPERTY.  The Property  consists of 144 apartment
units in 15  buildings  on  approximately  5.9 acres of land.  The  Property was
constructed in 1978.

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


<TABLE>
<CAPTION>
                                                                 APPROXIMATE
      QUANTITY                 TYPE                            INTERIOR SQUARE                MONTHLY
      --------                 ----                               FOOTAGE                      RENTAL
                                                                  -------                  -------------
<S>      <C>          <C>                                            <C>                       <C> 
         24           One bedroom, one bathroom                      622                       $449

         32           One bedroom, one bathroom                      777                        499

         24           One bedroom, one bathroom                      888                        559

         32           Two bedrooms, two bathrooms                    948                        659

         30           Two bedrooms, two bathrooms                  1,044                        679

          2           Two bedrooms, two bathrooms                  1,185                        799
                      with sun room
</TABLE>

         The apartments provide a total of approximately  126,090 square feet of
net rentable area.

         The  Company  believes  that  the  Property  has  generally  been  well
maintained  and  is  in  good  condition.  However,  the  Company  has  budgeted
approximately  $288,000 for repairs and capital  improvements to the Property to
include clubhouse renovations, siding repair and replacement, exterior painting,
landscaping and interior upgrades.

          The  following  information was  provided  by  the  seller.   Physical
occupancy at the Property  averaged  approximately 94% in 1993, 93% in 1994, 95%
in 1995,  93% in 1996 and 95% in 1997.  Leases at the Property are generally for
terms of one year or less.  Average  rental  rates for the past five  years have
generally increased.  As an example, a one-bedroom,  one-bathroom apartment (777
square feet) rented for $459 in 1993,  $479 in 1994,  $489 in 1995, $489 in 1996
and $499 in 1997. The average effective annual rental per square foot at


                                       8


<PAGE>



the  Property  for 1993,  1994,  1995,  1996 and 1997 was $7.30,  $7.61,  $7.77,
$7.77, and $7.93, respectively.

         The  Property  has an outdoor  swimming  pool, a weight room, a jogging
trail,  63 carports and a laundry  facility.  The Property  also has a clubhouse
with a leasing office.

         The buildings are wood framed  construction with a combination of brick
veneer and painted  stucco and shingled  wood  exterior  walls on concrete  slab
foundations. Roofs are pitched and covered with fiberglass shingled on plywood.

         Each apartment unit has wall-to-wall  carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and  individually  controlled  heating and  air-conditioning  unit. Each
kitchen has a  refrigerator/freezer,  electric  range and oven,  dishwasher  and
garbage  disposal.  Some  units  have a wood  burning  fireplace  or  full-sized
washer/dryer  connections.  Each unit has walk-in closets,  outside  storage,  a
covered  balcony or patio and ceiling  fans.  The owner of the Property pays for
cold water,  sewer charges,  gas (for hot water) and trash removal.  The tenants
pay for their electricity service, which includes cooking, lighting, heating and
air-conditioning.

         There  are at least  13  apartment  properties  that  compete  with the
Property.  All  offer  similar  amenities  and  generally  have  rents  that are
comparable to those of the Property.  Based on a recent  telephone  survey,  the
Advisor  estimates  that  occupancy  at  nearby  competing  properties  averaged
approximately 94% on June 30, 1998.

         As of June 30, 1998, the Property was approximately  94% occupied.  The
tenants are  primarily a mix of white-collar and blue-collar  workers,  students
and retired persons.

         The following  table sets forth the 1997 real estate tax information on
the Property:

         JURISDICTION            ASSESSED VALUE     RATE           TAX
         ------------            --------------     ----           ---

County of Dallas...................$4,059,090       $0.44307      $ 17,984.61

City of Dallas.....................$4,059,090       $0.65160      $ 26,449.03

Dallas I.S.D.......................$4,059,090       $1.46053      $ 59,284.23
                                                                  ------------
         Total.....................                               $103,717.87

         The basis of the depreciable  residential  real property portion of the
Property  (approximately   $3,607,225  at  the  time  of  acquisition)  will  be
depreciated over 27.5 years on a straight-line  basis. The basis of the personal
property portion will be depreciated in accordance with the modified accelerated
cost recovery system of the Code.  Amounts to be spent by the Company on repairs
and improvements will be treated for tax purposes as permitted by the Code based
on the nature of the expenditures.


                                       9


<PAGE>



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

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

         1. The Dallas/Fort  Worth area generally and the specific area in which
the Property is located  were  perceived  as being  characterized  by a diverse,
stable and steadily  growing  economy.  Accordingly,  it was believed  that such
economy  and  its  anticipated  growth  and  development  would  support  stable
occupancy rates and reasonable increases in rents at the Property.

         2.  Based  upon an  engineering  report  and its own  inspections,  the
Advisor  believes that the Property has been well maintained and is generally in
good  condition,  although  the Advisor  believes  that the planned  repairs and
improvements will allow an increase in rents at the Property.

         3.  The  Property  is  strategically  located  near the  Preston  Mall,
Galleria Mall and Valley View Mall, and is convenient to the  Dallas/Fort  Worth
International Airport.

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

          ACQUISITION  AND  MANAGEMENT  SERVICES AND FEES. In  consideration  of
services   rendered  to  the  Company  in  connection  with  the  selection  and
acquisition  of the Property,  Cornerstone  Realty Income Trust,  Inc.  earned a
property  acquisition fee equal to 2% of the purchase price of the property,  or
$104,100.  At closing,  Cornerstone Realty Income Trust, Inc. was paid a portion
of the property  acquisition  fee  corresponding  to the portion of the purchase
price of the  property  paid in cash by the  Company.  The cash  portion  of the
purchase  price  was  approximately  $1,561,576,  and  2%  of  that  amount  was
approximately  $31,232. The balance of the property acquisition fee will be paid
if, when and as the  indebtedness  taken  subject to at closing is repaid by the
Company.

         Cornerstone  Realty Income Trust,  Inc. will serve as property  manager
for the  Property  and for its  services  will be paid by the  Company a monthly
management  fee  equal  to 5%  of  the  gross  revenues  of  the  Property  plus
reimbursement of certain expenses.

                             EMERALD OAKS APARTMENTS
                                Grapevine, Texas

         On July 24,  1998,  Apple REIT II  Limited  Partnership  purchased  the
Emerald Oaks Apartments located at 2100 Grayson Drive, in Grapevine,  Texas (the
"Property").

         The Property  comprises 250 apartment units. The purchase price for the
Property was $10,930,000. The seller was Newemerald Texas, Ltd., a Texas limited
partnership  which was not  affiliated  with the  Company,  the Advisor or their
affiliates.   The  purchase   price  was  paid  through  a  combination  of  (i)
approximately  $4,244,294 in cash using  proceeds from the sale of the Shares of
the Company and (ii) approximately  $6,685,706 by assumption of a mortgage loan.
Title to the Property was conveyed to the Company by special warranty deed.

         The Property was acquired with the assumption of a mortgage loan in the
original  principal  amount of $9,650,000  held by Fannie Mae. On July 24, 1998,
the outstanding  principal balance of the mortgage loan was  $6,685,706.08.  The
interest on the  mortgage  loan is 6.75% per annum;  amortization  is based on a
30-year  amortization  term; and  prepayments  are permitted under the following
circumstances:  after  May 1, 2001 to April  30,  2002 at 102% of the  principal
balance of the mortgage  loan,  from May 1,2002 to April 30, 2003 at 101% of the
principal balance,  and from May 1, 2003 and thereafter at 100% of the principal
balance.  The  maturity  date of the  mortgage  loan is April 1,  2007,  and the
balance  due at  maturity,  assuming no payment  has been made on  principal  in
advance of its due date, is $5,509,607.59.

         In connection with the original financing of the Property, the previous
owner of the Property agreed to certain  restrictions on the use of the Property
set forth in a special warranty deed and deed  restrictions.  In connection with
the purchase of the  Property  and the  assumption  of the  mortgage  loan,  the
Company  entered  into an  assumption  of the  special  warranty  deed  and deed
restrictions. Among the restrictions agreed to by the Company is at least 20% of
the apartment  units must be occupied by persons who, at the time of the initial
occupancy of the apartment units, are "low or moderate income tenants." The term
low or moderate income tenants is defined, generally, as one or more persons who
occupy an apartment unit whose aggregate  anticipated income does not exceed 80%
of the median income for the area where the Property is located.


                                       10


<PAGE>





         LOCATION.  The  Property is located on Grayson  Drive,  within  Tarrant
County,  northwest  of the  City  of  Dallas  and  near  the  Dallas/Fort  Worth
International  Airport.  The  Property is located  within "The  Metroplex."  For
Information on The Metroplex, see under "Cottonwood Crossing Apartments" above.

         The immediate  neighborhood  surrounding the Property consists of other
multi-family and  single-family  housing and commercial and retail  development.
The  Property  is  an  approximately  10-minute  drive  from  Dallas/Fort  Worth
International  Airport,  an approximately  25-minute drive from downtown Dallas,
and an approximately 15-minute drive from downtown Fort Worth.

         DESCRIPTION  OF THE  PROPERTY.  The Property  consists of 250 apartment
units in 19  buildings  on  approximately  13.5 acres of land.  The Property was
constructed in 1986.

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

<TABLE>
<CAPTION>
                                                           APPROXIMATE INTERIOR
    QUANTITY               TYPE                               SQUARE FOOTAGE              MONTHLY RENTAL
    --------               ----                               --------------              --------------
<S>    <C>       <C>                                                 <C>                       <C> 
       28        One bedroom, one bathroom                           600                       $479

       92        One bedroom, one bathroom                           750                        569

       70        One bedroom, one bathroom with                      900                        669
                 den

       44        Two bedrooms, two bathrooms                       1,018                        779

       16        Three bedrooms, two bathrooms                     1,186                        899
</TABLE>

         The apartments provide a total of approximately  213,000 square feet of
net rentable area.

         The  Company  believes  that  the  Property  has  generally  been  well
maintained  and  is  in  good  condition.  However,  the  Company  has  budgeted
approximately  $250,000 for repairs and capital  improvements to the Property to
include clubhouse  renovations,  exterior painting,  installation of new gutters
and downspouts and paving repairs.

          The  following  information was  provided  by  the  seller.   Physical
occupancy at the Property  averaged  approximately 90% in 1993, 94% in 1994, 94%
in 1995,  92% in 1996 and 93% in 1997.  Leases at the Property are generally for
terms of one year or less.  Average  rental  rates for the past five  years have
generally increased.  As an example, a one-bedroom,  one-bathroom apartment (750
square feet) rented for $425 in 1993,  $450 in 1994,  $480 in 1995, $519 in 1996
and $549 in 1997. The average effective annual rental per square foot at


                                       11


<PAGE>



the Property for  1993,  1994,  1995,  1996 and 1997 was  $6.76,  $7.16,  $7.64,
$8.26, and $8.74, respectively.

         The  Property  has two outdoor  swimming  pools with  picnic  areas and
grills,  a  jacuzzi,  a sand  volleyball  court,  19  carports  and two  laundry
facilities. The Property also has a clubhouse with a leasing office.

         The buildings are wood framed  construction with a combination of brick
veneer,  stucco and painted wood siding on concrete slab foundations.  Roofs are
pitched and covered with fiberglass shingled on plywood.

         Each apartment unit has wall-to-wall  carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and  individually  controlled  heating and  air-conditioning  unit. Each
kitchen has a  refrigerator/freezer,  electric range and oven,  dishwasher,  and
garbage  disposal.  All units  (except for the smallest  one-bedroom  unit) have
full-sized washer/dryer connections. Each upstairs unit has a fireplace and each
downstairs unit has a built-in bookcase and nine-foot ceilings. The owner of the
Property  pays for cold  water,  sewer  charges,  gas (for hot  water) and trash
removal. The tenants pay for their electricity service,  which includes cooking,
lighting, heating and air-conditioning.

          There are at least three  apartment  properties  that compete with the
Property.  All  offer  similar  amenities  and  generally  have  rents  that are
comparable to those of the Property.  Based on a recent  telephone  survey,  the
Advisor  estimates  that  occupancy  at  nearby  competing  properties  averaged
approximately 96% on June 30, 1998.

         As of June 30, 1998, the Property was approximately  92% occupied.  The
tenants  are  primarily  a mix of  white-collar  workers,  students  and retired
persons.

         The following  table sets forth the 1997 real estate tax information on
the Property:

         JURISDICTION            ASSESSED VALUE          RATE        TAX
         ------------            --------------          ----        ---

County of Tarrant...............  $7,850,000            $0.5566      $ 43,692.79

City of Grapevine...............  $7,850,000            $1.9427      $152,501.95
                                                                     -----------
         Total..................                                     $196,194.74

         The basis of the depreciable  residential  real property portion of the
Property  (approximately  $10,224,983  at  the  time  of  acquisition)  will  be
depreciated over 27.5 years on a straight-line  basis. The basis of the personal
property portion will be depreciated in accordance with the modified accelerated
cost recovery system of the Code.  Amounts to be spent by the Company on repairs
and improvements will be treated for tax purposes as permitted by the Code based
on the nature of the expenditures.

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


                                       12


<PAGE>



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

         1. The Dallas/Fort  Worth area generally and the specific area in which
the Property is located  were  perceived  as being  characterized  by a diverse,
stable and steadily  growing  economy.  Accordingly,  it was believed  that such
economy  and  its  anticipated  growth  and  development  would  support  stable
occupancy rates and reasonable increase in rents at the Property.

         2.  Based  upon an  engineering  report  and its own  inspections,  the
Advisor  believes that the Property has been well maintained and is generally in
good  condition,  although  the Advisor  believes  that the planned  repairs and
improvements will allow an increase in rents at the Property.

         3. The  Property  has an  advantageous  location  -  convenient  to the
Dallas/Fort Worth International Airport, downtown Dallas and downtown Fort Worth
- and is located in a rapidly  growing area  proximate to centers of  employment
and retail development.

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

          ACQUISITION  AND  MANAGEMENT  SERVICES AND FEES. In  consideration  of
services   rendered  to  the  Company  in  connection  with  the  selection  and
acquisition  of the Property,  Cornerstone  Realty Income Trust,  Inc.  earned a
property  acquisition fee equal to 2% of the purchase price of the property,  or
$218,600.  At closing,  Cornerstone Realty Income Trust, Inc. was paid a portion
of the property  acquisition  fee  corresponding  to the portion of the purchase
price of the  property  paid in cash by the  Company.  The cash  portion  of the
purchase  price  was  approximately  $4,244,294,  and  2%  of  that  amount  was
approximately  $84,886. The balance of the property acquisition fee will be paid
if, when and as the  indebtedness  taken  subject to at closing is repaid by the
Company.

         Cornerstone  Realty Income Trust,  Inc. will serve as property  manager
for the  Property  and for its  services  will be paid by the  Company a monthly
management  fee  equal  to 5%  of  the  gross  revenues  of  the  Property  plus
reimbursement of certain expenses.

                          HAYDEN'S CROSSING APARTMENTS
                              Grand Prairie, Texas

         On July 24,  1998,  Apple REIT III Limited  Partnership  purchased  the
Hayden's Crossing  Apartments  located at 2802 South State Highway 360, in Grand
Prairie, Texas (the "Property").

          The Property comprises 170 apartment units. The purchase price for the
Property was $4,705,000. The seller was Hayden's Crossing, Ltd., a Texas limited
partnership  which was not  affiliated  with the  Company,  the Advisor or their
affiliates.   The  purchase   price  was  paid  through  a  combination  of  (i)
approximately  $1,632,601 in cash using  proceeds from the sale of the Shares of
the Company and (ii) approximately  $3,072,399 by assumption of a mortgage loan.
Title to the Property was conveyed to the Company by special warranty deed.

          The Property was acquired  with the  assumption  of a mortgage loan in
the original principal amount of $5,550,00 held by Fannie Mae. On July 24, 1998,
the outstanding  principal  amount of the mortgage loan was  $3,072,399.07.  The
interest on the  mortgage  loan is 6.47% per annum;  amortization  is based on a
30-year  amortization  term; and  prepayments  are permitted under the following
circumstances:  after  May 1, 2001 to April  30,  2002 at 102% of the  principal
balance of the mortgage loan,  from May 1, 2002 to April 30, 2003 at 101% of the
principal balance,  and from may 1, 2003 and thereafter at 100% of the principal
balance.  The  maturity  date of the  mortgage  loan is April 1,  2004,  and the
balance  due at  maturity,  assuming no payment  has been made on  principal  in
advance of its due date, is $2,743,814.97.

         In connection with the original financing of the Property, the previous
owner of the Property agreed to certain  restrictions on the use of the Property
set forth in a special warranty deed and deed  restrictions.  In connection with
the purchase of the  Property  and the  assumption  of the  mortgage  loan,  the
Company  entered  into an  assumption  of the  special  warranty  deed  and deed
restrictions.  Among the restrictions  agreed to by the Company is that at least
20% of the  apartment  units must be  occupied  by persons  who,  at the time of
initial  occupancy of the apartment units, are "low or moderate income tenants."
The term low or moderate  income tenants is defined,  generally,  as one or more
persons who occupy an apartment unit whose aggregate anticipated income does not
exceed 80% of the median income for the area where the Property is located.


                                       13


<PAGE>

         LOCATION.  The Property is located on South State  Highway 360 in Grand
Prairie, Texas and is adjacent to Bitter Creek Apartments which were purchase by
the Company on May 8, 1998. The Property is located within "The  Metroplex." For
information on The Metroplex, see under "Cottonwood Crossing Apartments" above.

         The immediate  neighborhood  surrounding the Property consists of other
multi-family and  single-family  housing and commercial and retail  development.
The  Property  is  an  approximately  10-minute  drive  from  Dallas/Fort  Worth
International Airport and an approximately  20-minute drive from either downtown
Dallas or downtown Fort Worth.

         DESCRIPTION  OF THE  PROPERTY.  The Property  consists of 170 apartment
units in 12  buildings  on  approximately  7.1 acres of land.  The  Property was
constructed in 1984.

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

<TABLE>
<CAPTION>
                                                             APPROXIMATE INTERIOR
     QUANTITY                          TYPE                     SQUARE FOOTAGE              MONTHLY RENTAL
     --------                          ----                     --------------              --------------
<S>     <C>          <C>                                              <C>                      <C> 
        56           One bedroom, one bathroom                        556                      $429
                                                                                                   
        52           One bedroom, one bathroom                        716                       469
                                                                                                   
        36           Two bedrooms, two bathrooms                      878                       549
                                                                                                   
        26           Two bedrooms, two bathrooms                    1,000                       620
</TABLE>

         All unit  types are  available  with a  fireplace  for an extra $10 per
month. The apartments  provide a total of  approximately  126,000 square feet of
net rentable area.

          The  Company  believes  that the  Property  has  generally  been  well
maintained  and  is  in  good  condition.  However,  the  Company  has  budgeted
approximately  $340,000 for repairs and capital  improvements to the Property to
include clubhouse  renovations,  exterior  painting,  wood replacement and a new
fitness center.

          The  following  information was  provided  by  the  seller.   Physical
occupancy at the Property  averaged  approximately 93% in 1993, 92% in 1994, 96%
in 1995,  96% in 1996 and 95% in 1997.  Leases at the Property are generally for
terms of one year or less.  Average  rental  rates for the past five  years have
generally increased.  As an example, a two-bedroom,  two-bathroom apartment (878
square feet) rented for $449 in 1993,  $474 in 1994,  $484 in 1995, $489 in 1996
and $509 in 1997.  The average  effective  annual  rental per square foot at the
Property for 1993, 1994, 1995, 1996 and 1997 was $6.54, $6.91, $7.05, $7.13, and
$7.42, respectively.

         The Property has an outdoor  swimming  pool, a jacuzzi,  a tennis court
and a  laundry  facility. The  Property  also has a  clubhouse  with a  kitchen,
entertainment area and leasing office.


                                       14


<PAGE>



         The buildings are wood framed  construction with a combination of brick
veneer and hardboard  ship-lap  siding on concrete slab  foundations.  Roofs are
pitched and covered with fiberglass shingled on plywood.

          Each apartment unit has wall-to-wall carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and  individually  controlled  heating and  air-conditioning  unit. Each
kitchen has a  refrigerator/freezer,  electric  range and oven,  dishwasher  and
garbage disposal. The largest one-bedroom and the largest two-bedroom units have
full-sized  washer/dryer  connections.  A total of 92 units have a  wood-burning
fireplace and each second-floor unit has vaulted ceilings. Each unit has walk-in
closets,  outside  storage,  a covered  balcony or patio,  and ceiling fans. The
owner of the Property pays for cold water,  sewer  charges,  gas (for hot water)
and trash removal. The tenants pay for their electricity service, which includes
cooking, lighting, heating and air-conditioning.

         There are at least eight  apartment  properties  that  compete with the
Property.  All  offer  similar  amenities  and  generally  have  rents  that are
comparable to those of the Property.  Based on a recent  telephone  survey,  the
Advisor  estimates  that  occupancy  at  nearby  competing  properties  averaged
approximately 95% on June 30, 1998.

         As of June 30, 1998, the Property was approximately  89% occupied.  The
tenants are primarily a mix of white-collar  and blue-collar  workers,  students
and retired persons.

         The following  table sets forth the 1997 real estate tax information on
the Property:

         JURISDICTION         ASSESSED VALUE      RATE           TAX
         ------------         --------------      ----           ---

County of Tarrant..........   $3,150,000          $1.9952       $62,848.67

City of Grand Prairie......   $3,312,080          $0.6800       $22,522.08
                                                                ------------
         Total ............                                     $85,370.75 

         The basis of the depreciable  residential  real property portion of the
Property  (approximately   $3,739,211  at  the  time  of  acquisition)  will  be
depreciated over 27.5 years on a straight-line  basis. The basis of the personal
property portion will be depreciated in accordance with the modified accelerated
cost recovery system of the Code.  Amounts to be spent by the Company on repairs
and improvements will be treated for tax purposes as permitted by the Code based
on the nature of the expenditures.

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

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


                                       15


<PAGE>



         1. The Dallas/Fort  Worth area generally and the specific area in which
the Property is located  were  perceived  as being  characterized  by a diverse,
stable and steadily  growing  economy.  Accordingly,  it was believed  that such
economy  and  its  anticipated  growth  and  development  would  support  stable
occupancy rates and reasonable increase in rents at the Property.

         2.  Based  upon an  engineering  report  and its own  inspections,  the
Advisor  believes that the Property has been well maintained and is generally in
good  condition,  although  the Advisor  believes  that the planned  repairs and
improvements will allow an increase in rents at the Property.

         3. The Property has an advantageous  location -  approximately  mid-way
between  Dallas  and Fort  Worth and near the  Dallas/Fort  Worth  International
Airport - and is located  in a rapidly-  growing  area  proximate  to centers of
employment  and retail  development.  In  addition,  the Company and the Advisor
believe that the  combination  and  operation of the Property  with the adjacent
Bitter Creek  Apartments  will offer  operational  efficiencies  and competitive
advantages.

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

          ACQUISITION  AND  MANAGEMENT  SERVICES AND FEES. In  consideration  of
services   rendered  to  the  Company  in  connection  with  the  selection  and
acquisition  of the Property,  Cornerstone  Realty Income Trust,  Inc.  earned a
property  acquisition fee equal to 2% of the purchase price of the property,  or
$94,100. At closing, Cornerstone Realty Income Trust, Inc. was paid a portion of
the property  acquisition fee corresponding to the portion of the purchase price
of the property  paid in cash by the  Company.  The cash portion of the purchase
price was  approximately  $1,632,601,  and 2% of that  amount was  approximately
$32,652.  The balance of the property  acquisition fee will be paid if, when and
as the indebtedness taken subject to at closing is repaid by the Company.

         Cornerstone  Realty Income Trust,  Inc. will serve as property  manager
for the  Property  and for its  services  will be paid by the  Company a monthly
management  fee  equal  to 5%  of  the  gross  revenues  of  the  Property  plus
reimbursement of certain expenses.

                               NEWPORT APARTMENTS
                                  Austin, Texas

         On July 24,  1998,  Apple REIT IV  Limited  Partnership  purchased  the
Newport  Apartments  located at 1930 West Rundberg  Lane, in Austin,  Texas (the
"Property").

         The Property  comprises 200 apartment units. The purchase price for the
Property was $6,330,000.  The seller was Newemerald Texas, Ltd., a Texas limited
partnership  which was not  affiliated  with the  Company,  the Advisor or their
affiliates.   The  purchase   price  was  paid  through  a  combination  of  (i)
approximately  $ 3,286,127 in cash using proceeds from the sale of the Shares of
the Company and (ii) approximately $ 3,043,873 by assumption of a mortgage loan.
Title to the Property was conveyed to the Company by special warranty deed.

          The Property was acquired  with the  assumption  of a mortgage loan in
the  original  principal  amount of  $6,275,000  held by Fannie Mae. On July 24,
1998, the outstanding  principal balance of the mortgage loan was $3,043,873.04.
The interest on the mortgage loan is 6.675% per annum;  amortization is based on
a 30-year  amortization  term; and prepayments are permitted under the following
circumstance:  after  May 1,  2001 to April  30,  2002 at 102% of the  principal
balance of the mortgage loan,  from May 1, 2002 to April 30, 2003 at 101% of the
principal balance,  and from May 1, 2003 and thereafter at 100% of the principal
balance.  The maturity  date of the mortgage  loan is December 1, 2005,  and the
balance  due at  maturity,  assuming no payment  has been made on  principal  in
advance of its due date, is $2,614,373.31.

         In connection with the original financing of the Property, the previous
owner of the Property agreed to certain  restrictions on the use of the Property
set forth in a special warranty deed and deed  restrictions.  In connection with
the purchase of the  Property  and the  assumption  of the  mortgage  loan,  the
Company  entered  into an  assumption  of the  special  warranty  deed  and deed
restrictions.  Among the restrictions  agreed to by the Company is that at least
20% of the  apartment  units must be occupied by the persons who, at the time of
initial occupancy of the apartments units, are "low or moderate income tenants."
The term low or moderate  income tenants is defined,  generally,  as one or more
persons who occupy an apartment unit whose aggregate anticipated income does not
exceed 80% of the median income for the area where the Property is located.


                                       16


<PAGE>



          LOCATION.  The  Property is located on West  Rundberg  Lane in Austin,
Texas,  which is the capital of Texas.  The following  information  on Austin is
based in part on information provided by the greater Austin Chamber of Commerce.

         The economy of the greater  Austin  metropolitan  area is  diversified,
with key economic  factors  being the  semiconductor  and  computer  industries,
manufacturing,  real estate and higher  education.  The rapid development of the
semiconductor and computer industries has been accompanied by rapid developments
in  the  transportation,   finance,  insurance,   communications  and  utilities
capabilities of the area.

         The  Metropolitan  Statistical  Area that  includes  Austin  had a 1995
population  that  exceeded one million and is expected to have a  population  of
approximately  1.1  million by the end of 1998.  Much of the  recent  population
growth  in the area is due to  relocations  from  other  parts  of the  country,
although the  percentage of total  population  growth  represented  by relocated
persons is expected to decrease over the coming years.  Currently,  job gains in
the Austin metropolitan area are at approximately four percent per year.

         The immediate  neighborhood  surrounding the Property consists of other
multi-family and  single-family  housing and commercial and retail  development.
Newport  Apartments are located near The Colonade Mall and Northcross  Mall, and
are  an  approximately  20-minute  drive  from  an  IBM  facility  and  a  Texas
Instruments  facility.  This  property  is  within  a few  blocks  of a new Dell
Computer  facility and is a 15-minute  drive from the downtown  Austin  business
district.

         DESCRIPTION  OF THE  PROPERTY.  The Property  consists of 200 apartment
units in 15  buildings  on  approximately  10 acres of land.  The  Property  was
constructed in 1988.

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

<TABLE>
<CAPTION>
                                                                     APPROXIMATE INTERIOR
      QUANTITY                          TYPE                            SQUARE FOOTAGE              MONTHLY RENTAL
      --------                          ----                            --------------              --------------
<S>      <C>          <C>                                                      <C>                       <C>  
         60           One bedroom, one bathroom                                510                       $469 
                                                                                                              
         60           One bedroom, one bathroom                                710                        549 
                                                                                                              
         40           One bedroom, one bathroom                                875                        629 
                                                                                                              
         40           One bedroom, one bathroom                              1,000                        699 
                      with den                                                                           
</TABLE>

         The apartments provide a total of approximately  148,000 square feet of
net rentable area.

         The  Company  believes  that  the  Property  has  generally  been  well
maintained  and  is  in  good  condition.  However,  the  Company  has  budgeted
approximately  $400,000 for repairs and capital  improvements to the Property to
include  clubhouse  renovations,  exterior  painting and siding  replacement and
interior upgrades.


                                       17


<PAGE>



          The  following  information was  provided  by  the  seller.   Physical
occupancy at the Property  averaged  approximately 97% in 1993, 96% in 1994, 95%
in 1995,  93% in 1996 and 88% in 1997.  Leases at the Property are generally for
terms of one year or less.  Average  rental  rates for the past five  years have
generally increased. As an example, a one-bedroom,  one-bathroom apartment (1000
square feet) rented for $426 in 1993,  $465 in 1994,  $669 in 1995, $679 in 1996
and $689 in 1997.  The average  effective  annual  rental per square foot at the
Property for 1993, 1994, 1995, 1996 and 1997 was $5.66, $6.18, $8.90, $9.03, and
$9.16, respectively.

         The Property has an outdoor  swimming  pool, a lighted  tennis court, a
picnic area and two laundry facilities. The Property also has a clubhouse with a
leasing office.

         The buildings are wood framed  construction with a combination of brick
veneer and wood  siding on  concrete  slab  foundations.  Roofs are  pitched and
covered with fiberglass shingled on plywood.

         Each apartment unit has wall-to-wall  carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and  individually  controlled  heating and  air-conditioning  unit. Each
kitchen has a  refrigerator/freezer,  electric  range and oven,  dishwasher  and
garbage  disposal.  All units have full-sized  washer/dryer  connections and all
upper-level  units have vaulted  ceilings.  Some of the units have  wood-burning
fireplaces, dry bars and private patios or decks. Each unit has walk-in closets,
outside storage and ceiling fans. The owner of the Property pays for cold water,
sewer charges,  gas (for hot water) and trash removal. The tenants pay for their
electricity   service,   which   includes   cooking,   lighting,   heating   and
air-conditioning.

          There are at least four  apartment  properties  that  compete with the
Property.  All  offer  similar  amenities  and  generally  have  rents  that are
comparable to those of the Property.  Based on a recent  telephone  survey,  the
Advisor  estimates  that  occupancy  at  nearby  competing  properties  averaged
approximately 96% on June 30, 1998.

         As of June 30, 1998, the Property was approximately  93% occupied.  The
tenants are primarily a mix of white-collar  and blue-collar  workers,  students
and retired persons.

         The following  table sets forth the 1997 real estate tax information on
the Property:

         JURISDICTION        ASSESSED VALUE      RATE             TAX
         ------------        --------------      ----             ---

Travis County .............  $6,600,000          $0.4938          $ 32,590.80

City of Austin.............  $6,600,000          $0.5401          $ 35,646.60

Austin I.S.D...............  $6,600,000          $1.4010          $ 92,466.00

ACC (Travis)...............  $6,600,000          $0.0500          $  3,300.00
                                                                  ------------
         Total ............                                       $164,003.40


                                       18


<PAGE>



         The basis of the depreciable  residential  real property portion of the
Property  (approximately   $5,920,449  at  the  time  of  acquisition)  will  be
depreciated over 27.5 years on a straight-line  basis. The basis of the personal
property portion will be depreciated in accordance with the modified accelerated
cost recovery system of the Code.  Amounts to be spent by the Company on repairs
and improvements will be treated for tax purposes as permitted by the Code based
on the nature of the expenditures.

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

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

         1. The  Austin  area  generally  and the  specific  area in  which  the
Property  is located  were  perceived  as being  characterized  by a diverse and
rapidly developing economy.  Accordingly,  it was believed that such economy and
its anticipated  growth and development would support stable occupancy rates and
reasonable increases in rents at the Property.

         2. Based on an engineering report and its own inspections,  the Advisor
believes  that the  Property has been well  maintained  and is generally in good
condition,   although  the  Advisor   believes  that  the  planned  repairs  and
improvements will allow future increases in rents at the Property.

         3.  The  Property  is  conveniently  located  near The  Colonade  Mall,
Northcross Mall, an IBM facility,  a Texas  Instruments  facility and a new Dell
Computer facility.

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

          ACQUISITION  AND  MANAGEMENT  SERVICES AND FEES. In  consideration  of
services   rendered  to  the  Company  in  connection  with  the  selection  and
acquisition  of the Property,  Cornerstone  Realty Income Trust,  Inc.  earned a
property  acquisition fee equal to 2% of the purchase price of the property,  or
$126,600.  At closing,  Cornerstone Realty Income Trust, Inc. was paid a portion
of the property  acquisition  fee  corresponding  to the portion of the purchase
price of the  property  paid in cash by the  Company.  The cash  portion  of the
purchase  price  was  approximately  $3,286,127,  and  2%  of  that  amount  was
approximately  $65,723. The balance of the property acquisition fee will be paid
if, when and as the  indebtedness  taken  subject to at closing is repaid by the
Company.

            Cornerstone Realty Income Trust, Inc. will serve as property manager
for the  Property  and for its  services  will be paid by the  Company a monthly
management  fee  equal  to 5%  of  the  gross  revenues  of  the  Property  plus
reimbursement of certain expenses.


                                       19


<PAGE>



                             ESTRADA OAKS APARTMENTS
                                  Irving, Texas

          On July 27, 1998, Apple REIT Limited Partnership purchased the Estrada
Oaks  Apartments  located  at  2115  Estrada  Parkway,  in  Irving,  Texas  (the
"Property").

          The Property comprises 248 apartment units. The purchase price for the
Property was $9,350,000. The seller was Dallas - Fort Worth Properties,  L.P., a
Texas limited partnership which was not affiliated with the Company, the Advisor
or their affiliates. The purchase price was paid using proceeds from the sale of
Shares of the  Company.  Title to the  Property  was  conveyed to the Company by
limited warranty deed.

         LOCATION.  The Property is located on Estrada  Parkway south of Airport
Freeway (SH 183) and west of Belt Line Road in Irving,  Texas.  The  Property is
readily  available  from  Highways  181 and 163,  two major  highways in Irving,
Texas.  The Property is located within "The  Metroplex."  For information on The
Metroplex, see under "Cottonwood Crossing Apartments" above.

         The immediate  neighborhood  surrounding the Property consists of other
multi-family and  single-family  housing and commercial and retail  development.
The Property is conveniently located near fine restaurants,  businesses, schools
and churches.  The Property is an approximately  5-minute drive from Dallas/Fort
Worth  International  Airport,  an  approximately  25-minute drive from downtown
Dallas and downtown Fort Worth.

         DESCRIPTION  OF THE  PROPERTY.  The Property  consists of 248 apartment
units in 14  buildings  on  approximately  10.1 acres of land.  The Property was
constructed in 1983.

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

<TABLE>
<CAPTION>
                                                             APPROXIMATE INTERIOR
      QUANTITY                          TYPE                    SQUARE FOOTAGE          MONTHLY RENTAL
      --------                          ----                    --------------          --------------
<S>      <C>                                                          <C>                   <C> 
         24           One bedroom, one bathroom                       490                   $480

         56           One bedroom, one bathroom                       608                    510

         60           One bedroom, one bathroom                       744                    565

         10           One bedroom, one bathroom                       744                    575
                      tennis court view

         10           One bedroom, one bathroom                       744                    580
                      pool view

         24           Two bedrooms, one bathroom                      886                    670

         30           Two bedrooms, two bathrooms                     942                    715

          2           Two bedrooms, two bathrooms                     942                    730
                      pool view

         30           Two bedrooms, two bathrooms                    1081                    770
</TABLE>


                                       20


<PAGE>



<TABLE>
<CAPTION>
                                                            APPROXIMATE INTERIOR
      QUANTITY                   TYPE                          SQUARE FOOTAGE              MONTHLY RENTAL
      --------                   ----                          --------------              --------------
<S>       <C>         <C>                                           <C>                        <C>
          2           Two bedrooms, two bathrooms                   1081                       785
                      pool view
</TABLE>

         The apartments provide a total of approximately  191,328 square feet of
net rentable area.

         The  Company  believes  that  the  Property  has  generally  been  well
maintained  and  is  in  good  condition.  However,  the  Company  has  budgeted
approximately  $248,000 for repairs and capital  improvements to the Property to
include clubhouse renovations, exterior painting and wood replacement.

          The  following  information was  provided  by  the  seller.   Physical
occupancy at the Property  averaged  approximately 94% in 1993, 94% in 1994, 95%
in 1995,  96% in 1996 and 95% in 1997.  Leases at the Property are generally for
terms of one year or less.  Average  rental  rates for the past five  years have
generally increased.  As an example, a one-bedroom,  one-bathroom apartment (744
square feet) rented for $430 in 1993,  $470 in 1994,  $470 in 1995, $470 in 1996
and $490 in 1997.  The average  effective  annual  rental per square foot at the
Property for 1993, 1994, 1995, 1996 and 1997 was $7.16, $7.82, $7.82, $7.82, and
$8.16, respectively.

          The Property has an outdoor  swimming pool, a jacuzzi,  lighted tennis
courts, a fitness center, a laundry facility and 80 covered parking spaces.  The
Property also has a clubhouse with a leasing office.

         The buildings are wood framed  construction with a combination of brick
veneer and  painted  wood siding on concrete  slab  foundations.  Roofs are high
sloped with asphalt shingles.

         Each apartment unit has wall-to-wall  carpeting in the living areas and
vinyl floors in the kitchen and bath. Each apartment unit has a cable television
hook-up and individually  controlled heating and  air-conditioning  unit. All of
the units include  ceiling fans,  intrusion  alarm  systems,  patio/balcony  and
outside  storage.  All of the units,  except the two smallest one bedroom  floor
plans,  include full size washer/dryer  connections and all of the units, except
the  smallest one bedroom  floor plan,  include  wood  burning  fireplaces  with
mantels.  Select units  includes  microwaves,  icemakers and double french patio
doors.  All  kitchens  are  equipped  with a  frost  free  refrigerator/freezer,
self-cleaning  electric  range and oven,  dishwasher and garbage  disposal.  The
owner of the Property pays for cold water,  sewer  charges,  gas (for hot water)
and trash removal. The tenants pay for their electricity service, which includes
cooking, lighting, heating and air-conditioning.

          There are at least three  apartment  properties  that compete with the
Property.  All  offer  similar  amenities  and  generally  have  rents  that are
comparable to those of the Property.  Based on a recent  telephone  survey,  the
Advisor  estimates  that  occupancy  at  nearby  competing  properties  averaged
approximately 98% on June 30, 1998.


                                       21


<PAGE>



         As of July 27, 1998, the Property was approximately  97% occupied.  The
tenants are primarily a mix of blue-collar and  white-collar  workers,  students
and retired persons.

         The following  table sets forth the 1997 real estate tax information on
the Property:

         JURISDICTION          ASSESSED VALUE      RATE         TAX
         ------------          --------------      ----         ---

County of Dallas...........    $7,009,660          $0.44307     $ 31,057.70

City of Irving.............    $7,009,660          $0.49300     $ 34,557.62

Irving I.S.D...............    $7,009,660          $1.64840     $115,547.24
                                                                ------------
         Total ............                                     $181,162.56

         The basis of the depreciable  residential  real property portion of the
Property  (approximately   $7,579,500  at  the  time  of  acquisition)  will  be
depreciated over 27.5 years on a straight-line  basis. The basis of the personal
property portion will be depreciated in accordance with the modified accelerated
cost recovery system of the Code.  Amounts to be spent by the Company on repairs
and improvements will be treated for tax purposes as permitted by the Code based
on the nature of the expenditures.

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

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

         1. The Dallas/Fort  Worth area generally and the specific area in which
the Property is located  were  perceived  as being  characterized  by a diverse,
stable and steadily  growing  economy.  Accordingly,  it was believed  that such
economy  and  its  anticipated  growth  and  development  would  support  stable
occupancy rates and reasonable increases in rents at the Property.

         2.  Based  upon an  engineering  report  and its own  inspections,  the
Advisor  believes that the Property has been well maintained and is generally in
good  condition,  although  the Advisor  believes  that the planned  repairs and
improvements will allow an increase in rents at the Property.

         3. The  Property  has an  advantageous  location  -  convenient  to the
Dallas/Fort Worth International Airport, downtown Dallas and downtown Fort Worth
- and is located in a rapidly  growing area  proximate to centers of  employment
and retail development.

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


                                       22


<PAGE>



         Acquisition  and  Management  Services and Fees.  In  consideration  of
services   rendered  to  the  Company  in  connection  with  the  selection  and
acquisition  of the Property,  Cornerstone  Realty Income Trust,  Inc.  earned a
property  acquisition fee equal to 2% of the purchase price of the property,  or
$187,000.

         Cornerstone  Realty Income Trust,  Inc. will serve as property  manager
for the  Property  and for its  services  will be paid by the  Company a monthly
management  fee  equal  to 5%  of  the  gross  revenues  of  the  Property  plus
reimbursement of certain expenses.


                                       23