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, 1998                                              0-23983


                      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 of 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  26,  1999,  there  was  30,495,187  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 x No
                                       ---  ---





                                       1
<PAGE>




                       Documents Incorporated By Reference
                       -----------------------------------

The  portions  of  the  registrant's  Prospectus  dated  October  16,  1998  and
Supplement  No. 4 dated  February  16,  1998 as filed on  October  29,  1998 and
February 17, 1999,  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.  333-64029),  are  incorporated by reference in
Parts I, II, and III of this report.

The portions of the  registrant's  Current  Report on Form 8-K dated February 4,
1998 referred to in Part I.

The portions of the  registrant's  Current Report on Form 8-K dated February 13,
1998 referred to in Part I.

The portions of the registrant's Current Report on Form 8-K dated March 31, 1998
referred to in Part I.

The portions of the  registrant's  Current  Report on Form 8-K dated May 8, 1998
referred to in Part I.

The portions of the  registrant's  Current Report on Form 8-K dated June 2, 1998
referred to in Part I.

The portions of the  registrant's  Current Report on Form 8-K dated July 1, 1998
referred to in Part I.

The portions of the  registrant's  Current Report on Form 8-K dated July 9, 1998
referred to in Part I.

The portions of the  registrant's  Current  Report on Form 8-K dated October 28,
1998 referred to in Part I.

The portions of the  registrant's  Current Report on Form 8-K dated November 17,
1998 referred to in Part I.

                                  INTRODUCTION

This Annual Report  contains  forward-looking  statements  within the meaning of
Section 27A of the Securities Act of 1993, 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 and Year 2000 compliance
issues.  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
                  subsidiaries,  Apple Limited, Inc., Apple General, Inc., Apple
                  REIT Limited  Partnership,  Apple REIT II Limited Partnership,
                  Apple  REIT III  Limited  Partnership,  Apple  REIT IV Limited
                  Partnership,  Apple REIT V Limited Partnership,  Apple REIT VI
                  Limited Partnership,  Apple REIT VII Limited Partnership,  the
                  "Company"), a Virginia corporation, was incorporated in August
                  1996.  Operations of rental property  commenced on January 28,
                  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 25
                  properties comprising 6,604 apartment units within that region
                  as of December 31, 1998. The Company's  property  acquisitions
                  are  described  in  Item 2 of this  report,  which  is  hereby
                  incorporated  herein by  reference.  The  complete  investment
                  objectives and policies of the Company are described under the
                  caption  "Investment  Objectives  and  Policies"  on  pages 25
                  through 33 of the Company's  prospectus dated October 16, 1998
                  (the  "Prospectus")  filed with the  Securities  and  Exchange
                  Commission  pursuant  to Rule 424 (b) (3) on October  29, 1998
                  relative to the Company's  Registration Statement on Form S-11
                  (Registration No.  333-64029),  which are hereby  incorporated
                  herein by reference.




                                       2
<PAGE>

                  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 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.

                  Environmental Matters
                  ---------------------

                  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.
                  No material remediation costs have or are expected to occur.

                  Property Acquisitions in 1998
                  -----------------------------

                  The following is a summary of the property  acquisitions  made
                  by the Company during 1998.

                  On February 4, 1998, the Company acquired Main Park Apartments
                  in  Duncanville,  Texas.  Information  with  respect  to  this
                  property is hereby incorporated herein by reference from pages
                  3 through 6 of the Company's Report on Form 8-K dated February
                  4, 1998.

                  On  February  13,  1998,  the  Company   acquired   Timberglen
                  Apartments in Dallas, Texas.  Information with respect to this
                  property is hereby incorporated herein by reference from pages
                  3 through 6 of the Company's Report on Form 8-K dated February
                  13, 1998.

                  On March 31,  1998,  the  Company  acquired  the Copper  Ridge
                  Apartments in Fort Worth,  Texas.  Information 



<PAGE>

                  with respect to this property is hereby incorporated herein by
                  reference  from pages 3 through 7 of the  Company's  Report on
                  Form 8-K dated March 31, 1998.






                                       4
<PAGE>




                  On May 8, 1998, the Company acquired Bitter Creek  Apartments,
                  (which was  subsequently  renamed  "Silver  Brook I") in Grand
                  Prairie,  Texas.  Information with respect to this property is
                  hereby incorporated herein by reference from pages 4 through 8
                  of the Company's Report on Form 8-K dated May 8, 1998.

                  On June 1, 1998, the Company  acquired  Summer Tree Apartments
                  in Dallas, Texas. Information with respect to these properties
                  is  hereby  incorporated  herein  by  reference  from  pages 4
                  through 8 of the  Company's  Report on Form 8-K dated  June 2,
                  1998.

                  On July 1, 1998, the Company acquired Park Village  Apartments
                  in Bedford,  Texas.  Information with respect to this property
                  is  hereby  incorporated  herein  by  reference  from  pages 4
                  through 8 of the  Company's  Report on Form 8-K dated  July 1,
                  1998.

                  On July 9, 1998,  the  Company  acquired  Cottonwood  Crossing
                  Apartments in Arlington,  Texas.  Information  with respect to
                  this property is hereby  incorporated herein by reference from
                  pages 7 through 10 of the  Company's  Report on Form 8-K dated
                  July 9, 1998.

                  On  July  17,  1998,  the  Company   acquired   Pepper  Square
                  Apartments,  (which was subsequently renamed  "Devonshire") in
                  Dallas,  Texas,  and Pace's Point  Apartments  in  Lewisville,
                  Texas.  Information with respect to these properties is hereby
                  incorporated  herein by reference  from pages 10 through 16 of
                  the Company's Report on Form 8-K dated July 9, 1998.

                  On July 24,  1998,  the  Company  acquired  Hayden's  Crossing
                  Apartments, (which was subsequently renamed "Silver Brook II")
                  in Grand Prairie, Texas, Emerald Oaks Apartments in Grapevine,
                  Texas, and Newport  Apartments in Austin,  Texas.  Information
                  with respect to this property is hereby incorporated herein by
                  reference from pages 16 through 25 of the Company's  Report on
                  Form-8-K dated July 9, 1998.

                  On July 27, 1998, the Company acquired  Estrada  Apartments in
                  Irving,  Texas.  Information  with respect to this property is
                  hereby  incorporated herein by reference from pages 26 through
                  29 of the Company's Report on Form 8-K dated July 9, 1998.

                  On  October  28,  1998,  the  Company   acquired  Burney  Oaks
                  Apartments in Arlington,  Texas.  Information  with respect to
                  this property is hereby  incorporated herein by reference from
                  pages 4  through 8 of the  Company's  Report on Form 8-K dated
                  October 28, 1998.

                  On October 29,  1998,  the Company  acquired  Brandywine  Park
                  Apartments,  (which was subsequently renamed "Cutter's Point")
                  in  Richardson,   Texas.  Information  with  respect  to  this
                  property is hereby incorporated herein by reference from pages
                  9 through 12 of the Company's Report on Form 8-K dated October
                  28, 1998.

                  On November 17, 1998, the Company  acquired The Courts on Pear
                  Ridge in  Dallas,  Texas.  Information  with  respect  to this
                  property is hereby incorporated herein by reference from pages
                  3 through 8 of the Company's Report on Form 8-K dated November
                  17, 1998.

                  Recent Developments
                  -------------------

                  On  January  5,  1999,  the  Company   acquired  Sierra  Ridge
                  Apartments, a 230-unit apartment complex in San Antonio, Texas
                  for a purchase price of  $5,817,000.  On February 1, 1999, the
                  Company  purchased  Grayson  Square  Apartments,   a  200-unit
                  apartment complex in Grapevine,  Texas for a purchase price of
                  $9,350,000.

                  The  Company  has  hired  financial  advisors  to  evaluate  a
                  potential  merger.  In  addition,  the Company  has  appointed
                  independent  committees  of the board of directors to evaluate
                  the potential merger.

                  The   Company's  Board of Directors met on March 30, 1999, and
                  voted   to approve a merger  with  Cornerstone  Realty  Income
                  Trust,  Inc.  subject    to,  among  other  requirements,   an
                  affirmative  vote   of  the  Company's  shareholders. 


ITEM 2. Properties

PROPERTY DESCRIPTIONS AND CHARACTERISTICS

As of December 31, 1998, the Company owned 26 apartment  communities  comprising
6,604 apartment units. The Properties are located in Texas.




                                       5
<PAGE>


         The  following  table sets forth  specific  information  regarding  the
Properties:

<TABLE>
<CAPTION>
                                                                                                                 Total     Average
                                                                              Initial       Total              Investment Unit Size 
                                          Year       Date of                Acquisition  Investment at  Number Per Unit at  Square  
         Property            Location   Completed  Acquisition   Encumbrances   Cost     12-31-98(1)   of Units 12-31-98     Feet)  
         --------            --------   ---------  -----------   ------------   ----     -----------    -----   --------     -----  
<S>                          <C>          <C>      <C>                      <C>           <C>            <C>    <C>        <C> 
Texas
-----

Mill Crossing              Arlington     1979       February 1997            $4,544,121    5,458,746      184    $29,667     691   
                                                                                                                                   
Polo Run                   Arlington     1984       March 1997                6,858,974    8,061,726      224     35,990     854   
                                                                                                                                   
Aspen Hill                 Arlington     1979       January 1997              5,690,560    7,502,434      240     31,260     671   
                                                                                                                                   
Cottonwood Crossing        Arlington     1985       July 1998                 5,700,000    6,147,288      200     30,736     751   
                                                                                                                                   
Burney Oaks                Arlington     1985       October 1998              9,300,000    9,679,771      240     40,332     794   
                                                                                                                                   
The Arbors on Forest Ridge Bedford       1986       April 1997                7,748,907    8,632,706      210     41,108     804   
                                                                                                                                   
Park Village               Bedford       1983       July 1998                 7,000,000    7,477,425      238     31,418     647   
                                                                                                                                   
Brookfield                 Dallas        1984       January 1997              5,458,485    6,583,990      232     28,379     714   
                                                                                                                                   
Paces Cove                 Dallas        1982       June 1997                 9,277,355    9,833,200      328     29,979     670   
                                                                                                                                   
Toscana                    Dallas        1986       March 1997                5,854,531    6,792,187      192     35,376     601   
                                                                                                                                   
Timberglen                 Dallas        1984       February 1998            12,000,000   13,126,845      304     43,180     728   
                                                 
Summer Tree                Dallas        1980       June 1, 1998              5,700,000    6,415,878      232     27,655     575   
                                                
Devonshire                 Dallas        1978       July 1998   $3,627,425    5,205,000    6,699,709      144     46,526     876
                                                 
The Courts at Pear Ridge   Dallas        1988       November 1998            11,500,000   11,806,367      242     48,787     774   
                                                 
Wildwood                   Euless        1984       March 1997                3,963,519    4,684,813      120     39,040     755   
                                                                                                                                   
Copper Crossing            Fort Worth    1980/1981  November 1997             9,275,000   10,965,314      400     27,413     739   
                                            
Eagle Crest                Irving        1983/1985  January 1997             15,650,000   17,862,629      484     36,906     887   
                                                                                                                                   
Remington Hills            Irving        1984/1985  August 1997              13,100,000   15,295,457      362     42,253     957   
                                                                                                                                   
Estrada Oaks               Irving        1983       July 1998                 9,350,000    9,867,652      248     39,789     771   
                                                                                                                                   
Main Park                  Duncanville   1984       February 1998             8,000,000    8,650,550      192     45,055     939   
                                                 
Silver Brook I             Grand Prairie 1982       May 8, 1998              13,505,000   14,853,903      472     31,470     842   
                                          
Silver Brook II            Grand Prairie 1984       July 1998    3,047,994    4,705,000    5,290,519      170     31,121     741
                                            
Pace"s Point               Lewisville    1985       July 1998    7,679,619   11,405,000   12,869,988      300     42,900     762
                                                                                                                                   
Emerald Oaks               Grapevine     1986       July 1998    6,635,025   10,930,000   11,768,594      250     47,074     850   
                                                                                                                                   
Newport                    Austin        1988       July 1998    3,020,775    6,330,000    6,741,792      200     33,709     741   
                                                                                                                                   
Cutter's Point             Richardson    1978       October 1998              8,100,000    8,690,442      196     44,339    1010  
                                                                                                                                   
Total/Average                                                  $24,010,838 $216,151,452 $241,759,925    6,604    $36,608     775   
                                                               =========== ============ ============    =====    =======     ===   

</TABLE>


<TABLE>
<CAPTION>
                                                                           
                                                                   
                                  December        December       Year-to-Date    Year-to-DateRent Per       
                                  Average        Average           Economic        Economic Month         
                              Rent-Per-Month    Rent-Per-Month    Occupancy          Occupancy
         Property                12/31/98         12/31/97         12/31/98          12/31/97
         --------                --------         --------         --------          --------
<S>                            <C>               <C>               <C>            <C>
Texas                      
-----                      
                           
Mill Crossing                     $510.23          $462.07            87%               91%
                                                                                   
Polo Run                           590.61           556.22            91%               92%
                                                                                   
Aspen Hill                         503.50           459.79            88%               88%
                                                                                   
Cottonwood Crossing                507.08              -              96%                -
                                                                                   
Burney Oaks                        606.46              -              93%                -
                                                                                   
The Arbors on Forest Ridge         615.60           588.01            95%               96%
                                                                                   
Park Village                       509.45              -              90%                -
                                                                                   
Brookfield                         518.64           472.19            95%               97%
                                                                                   
Paces Cove                         540.01           507.12            94%               92%
                                                                                   
Toscana                            529.06           499.70            93%               95%
                                                                                   
Timberglen                         595.83              -              93%                -
                                                                                   
Summer Tree                        495.00              -              93%                -
                                                                                   
Devonshire                         612.59              -              94%                -
                                                                                   
The Courts at Pear Ridge           719.39              -              93%                -
                                                                                   
Wildwood                           629.74           590.31            89%               93%
                                                                                   
Copper Crossing                    468.32           523.54            89%               89%
                                                                                   
Eagle Crest                        629.09           595.10            93%               93%
                                                                                   
Remington Hills                    797.28           726.52            93%               94%
                                                                                   
Estrada Oaks                       589.63              -              94%                -
                                                                                   
Main Park                          699.15              -              96%                -
                                                                                   
Silver Brook I                     524.11              -              94%                -
                                                                                   
Silver Brook II                    505.92              -              86%                -
                                                                                   
Pace"s Point                       591.78              -              93%                -
                                                                                   
Emerald Oaks                       668.47              -              91%                -
                                                                                   
Newport                            575.71              -              93%                -
                                                                                   
Cutter's Point                     659.56              -              96%                -
                                                                                   
Total/Average                       $585             $555             92%               93%
                                    ====             ====             ===               ===
                                                                               

</TABLE>






                                       6
<PAGE>




               (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)  An  open  item  denotes  that  the  Company  did not own the
                    property during the period indicated.

               (3)  Copper Crossing is comprised of Copper  Crossing  (completed
                    in 1981) and Copper Ridge  (completed in 1980),  acquired in
                    November  1997 and March  1998,  respectively,  at a cost of
                    $4,750,000, and $4,525,000. They are adjacent properties and
                    are operated as one apartment community.

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

               (5)  Economic  occupancy  percentage  reflects adjusted scheduled
                    rent  divided by adjusted  gross  potential  where  adjusted
                    gross   potential   consists  of  gross   potential  net  of
                    concessions, model unit costs, and employee units costs, and
                    adjusted scheduled rent consists of adjusted gross potential
                    net of vacancies and bad debt expense.

ITEM 3.  LEGAL PROCEEDINGS

                    None.

ITEM, 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                    None


                                     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  February  3, 1999,  there were  10,372  shareholders  of
                    record of the Company's common shares.

                    Distributions  of $13,040,936  were made to the shareholders
                    during 1998. Distributions were $.20 per share for the first
                    and  second  quarters  and $.21 per  share for the third and
                    forth quarters in 1998.

                    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. 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, 1998:







                                       7
<PAGE>



                  Common Shares Registered:
                  -------------------------
<TABLE>
<CAPTION>
<S>              <C>                <C>             <C>                     <C>
                  1,666,666.67      Common Shares   $9 per Common Share     $ 15,000,000
                 28,500,000.00      Common Shares   $10 per Common Share    $285,000,000

Totals:          30,166,666.67      Common Shares
</TABLE>


                  Common Shares Sold:
                  -------------------
<TABLE>
<CAPTION>
<S>              <C>                <C>             <C>                     <C>
                   1,666,667.67     Common Shares   $9 per Common Share     $ 15,000,000
                  26,246,828.33     Common Shares   $10 per Common Share    $262,468,283

Totals:           27,913,495600     Common Shares                           $277,468,283
</TABLE>

Expenses of Issuance and  Distribution of Common Shares
<TABLE>
<CAPTION>
<S>                                                                          <C>
         1.  Underwriting discounts and commission                           $  27,746,828
         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                             $   1,590,902

         Total Expenses of Issuance and Distribution of
         Common Shares                                                       $  29,337,624

         Net Proceeds to the Company                                         $ 248,130,553

         1.  Purchase of real estate (including repayment of
             indebtedness incurred to purchase real estate)                  $ 188,380,614
         2.  Interest on indebtedness                                        $   1,196,259
         3.  Working capital                                                 $  44,261,782
         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.                  $   7,827,622
         5. Fees and expenses of third parties:
                  a.  Legal                                                  $          --
                  b.  Accounting                                             $          --
         6. Other (specify-Deposit to purchase real estate)                  $   5,825,000
         Total of Application of Net Proceeds to the Company                 $ 248,130,553

</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.

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


                                       8
<PAGE>
<TABLE>
<CAPTION>
As of December 31,                                             1998                      1997              1996 (b)
-------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>                       <C>                     <C>
OPERATING RESULTS
Rental Income                                             $  30,764,904             $  12,005,968               $--
Net Income                                                   10,079,908                 3,499,194                --
Distributions Declared and Paid                              13,040,936                 3,249,098                --
--------------------------------------------------------------------------------------------------------------------

PER SHARE
Net Income                                                $        0.51             $        0.54               $--
Distributions                                             $        0.82             $        0.60               $--
Distributions Representing Return of Capital                          0%                        0%               --
Weighted Average Shares Outstanding-Basic                    19,910,408                 6,493,114                --
--------------------------------------------------------------------------------------------------------------------

BALANCE SHEET DATA
Investment in Rental Property                             $ 241,759,925             $  89,634,348             $----
Total Assets                                              $ 281,847,152             $ 112,485,520             $ 100
Notes Payable                                             $  25,165,861                       $--             $----
Shareholders' Equity                                      $ 249,199,621             $ 109,340,555             $ 100
Shares Outstanding                                        $  28,331,274                12,371,829             $  10

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

OTHER DATA

Cash Flow from:
Operating Activities                                      $  17,122,276             $   7,075,025             $--
Investing Activities                                      $(130,842,627)            $ (88,753,814)            $--
Financing Activities                                      $ 129,630,977             $ 105,841,261             $--
Number of Properties Owned at Year-End                               25                        11              --
--------------------------------------------------------------------------------------------------------------------

FUNDS FROM OPERATIONS CALCULATION
Net Income                                                $  10,079,908             $   3,499,194             $--
Depreciation of Real Estate                                   5,788,476                 1,898,003              --
--------------------------------------------------------------------------------------------------------------------
Funds from Operations (a)                                 $  15,868,384             $   5,397,197             $--
--------------------------------------------------------------------------------------------------------------------
</TABLE>


(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.  

(b) The company commenced operations in January 1997.


ITEM 7 AND 7A.  MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                RESULTS OF OPERATION/MARKET RISK DISCLOSURE.

The following  discussion is based on the consolidated  financial  statements of
the  company  as of  December  31,  1998.  This  information  should  be read in
conjunction  with the selected  financial  data and the  company's  consolidated
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.



                                       9
<PAGE>


RESULTS OF OPERATIONS
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1998 TO DECEMBER 31, 1997

INCOME AND OCCUPANCY
The results of the company's property operations for the year ended December 31,
1998 include the results of operations from the pre-1998  acquisitions  and from
the 16 properties acquired in 1998 from their respective  acquisition dates. The
increased  rental income and operating  expenses for the year ended December 31,
1998, over the year ended December 31, 1997, are primarily due to a full year of
operation in 1998 of the 1997 acquisitions as well as the incremental  effect of
the 1998 acquisitions.

The  principal  source of the company's  revenue is the rental  operation of its
apartment communities.  Rental income increased 156% in 1998 to $30,764,904 from
$12,005,968  in 1997 due to the above  factors.  Rental  income is  expected  to
increase  from the  impact of planned  improvements,  which are being made in an
effort to improve the properties' marketability, economic occupancies and rental
rates.

Overall average economic occupancy was 92% in 1998 and 93% in 1997. Rental rates
for the  portfolio  increased  5% to $585 on  December  31,  1998,  from $555 on
December 31, 1997. The increase is due to a combination of rental  increases and
the acquisition of properties with higher average rental rates.

EXPENSES
Total property expenses increased 161% to $21,585,665 in 1998 from $8,271,066 in
1997. The operating  expense ratio (the ratio of operating  expenses,  excluding
depreciation,  amortization and general and administrative  expenses,  to rental
income) decreased to 49% in 1998 from 50% in 1997. The decrease is primarily due
to a full year of operation of the 1997 acquisitions and increased  efficiencies
associated  with  economies  of  scale.  The  company   contracts  its  property
management to a third party (see Note 6 to consolidated financial statements).

General and administrative expenses totaled 2.6% of revenues in 1998 and 2.9% 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 further  decrease as the
company's operations grow.

Depreciation  of real estate  increased to $5,788,476 in 1998 from $1,898,003 in
1997, and is directly  attributable to the acquisition of apartment  communities
in 1998 and a full year of depreciation of properties acquired in 1997.

INTEREST AND INVESTMENT INCOME AND EXPENSE
The company  earned  interest  income of $1,638,544 in 1998 and $222,676 in 1997
from the  investment of its cash and cash  reserves.  The increase is due to the
company's investment balance held in liquid money market investments pending use
for  acquisitions.  The  weighted-average  interest  rate  earned on  short-term
investments  was 4.5% in 1998  and 4% in 1997.  The  company  incurred  interest
expense of  $737,875 in 1998  related to the  assumption  of mortgage  loans and
$458,384 in 1997 associated with short-term borrowings under its line of credit.
These  amounts  include the  amortization  of loan costs.  The weighted  average
interest rate on 1998 mortgage notes payable was 6.5%, and on the line of credit
during 1997 was 7.8%.

COMPARISON OF THE YEAR ENDED DECEMBER 31, 1997 TO DECEMBER 31, 1996

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.  Rental  rates  for the
portfolio were $555 at December 31, 1997.

EXPENSES
Total property expenses were $8,271,066 in 1997. The operating expense ratio was
50% in 1997. The company contracts its property management to a third party (see
Note  6  to  consolidated  financial  statements).  General  and  administrative
expenses  totaled  2.9% of  revenues  in 1997.  Depreciation  of real estate was
$1,898,003.

INTEREST AND INVESTMENT INCOME AND EXPENSE
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%.



                                       10
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

EQUITY
There was a significant change in the company's  liquidity during the year ended
December 31, 1998, as the company  continued to grow.  During 1998,  the company
sold 15,959,445 shares of its common stock to its investors  (including  790,863
common shares sold through the company's additional share option),  bringing the
total number of shares  outstanding  to  28,331,274.  The total gross  proceeds,
since the start of its "best  efforts"  offering  in 1997,  from the shares sold
were $281,228,144, which netted $251,890,553 to the company after the payment of
underwriter fees and other offering-related costs.

Using proceeds from the sale of common shares of $142,800,094  and assumption of
mortgage loans of $24,159,019,  the company acquired 3,828 apartment units in 16
residential rental communities during 1998. These acquisitions brought the total
number of residential  rental  communities to 25 and the total  apartment  units
owned at year-end to 6,604.  During  1998,  the company  made the  following  16
acquisitions:

<TABLE>
<CAPTION>
                                                  Initial         Number               Date
Description                Location       Acquisition Cost       of Units             Acquired
-------------------------------------------------------------------------------------------------------------------
<S>                        <C>                  <C>              <C>                 <C>
Main Park                  Duncanville, TX      $8,000,000         192               February 1998
Timberglen                 Dallas, TX           12,000,000         304               February 1998
Copper Crossing II         Fort Worth, TX        4,525,000         200               March 1998
Silverbrook I              Grand Prairie, TX    13,505,000         472               May 1998
Summer Tree                Dallas, TX            5,700,000         232               June 1998
Park Village               Bedford, TX           7,000,000         238               July 1998
Cottonwood Crossing        Arlington, TX         5,700,000         200               July 1998
Devonshire                 Dallas, TX            5,205,000         144               July 1998
Pace's Point               Lewisville, TX       11,405,000         300               July 1998
Silverbrook II             Grand Prairie, TX     4,705,000         170               July 1998
Emerald Oaks               Grapevine, TX        10,930,000         250               July 1998
Newport                    Austin, TX            6,330,000         200               July 1998
Estrada Oaks               Irving, TX            9,350,000         248               July 1998
Burney Oaks                Arlington, TX         9,300,000         240               October 1998
Cutter's Point             Richardson, TX        8,100,000         196               October 1998
The Courts on Pear Ridge   Dallas, TX           11,500,000         242               November 1998
-------------------------------------------------------------------------------------------------------------------
                                              $133,255,000       3,828

</TABLE>


NOTES PAYABLE
During  July 1998,  the  company  assumed  $24.2  million in  mortgage  loans in
connection  with the acquisition of five  properties.  The total of the mortgage
loans at December  31,  1998,  including  $1.2  million in premiums  relating to
valuing debt at fair value, was  approximately  $25.2 million (see Note 3 to the
consolidated financial statements).

CASH AND CASH EQUIVALENTS
Cash and cash equivalents  totaled  $40,073,198 at December 31, 1998. During the
year,  the  company  distributed  $13,040,936  to  its  shareholders,  of  which
$7,908,627 was reinvested in additional  shares under the terms of the company's
additional  share option.  The  reinvested  funds netted the company  $7,117,767
after payment of underwriter fees.

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 1998 and fund  these cash  needs  from a variety  of  sources,  including
equity, cash reserves, and assumption of mortgage loans.

The company  continues  to renovate its  properties.  In  connection  with these
renovations,  the company  capitalized  improvements  of $12 million in 1998. At
least $6 million of additional capital improvements are budgeted for 1999 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
from a provision for taxes.

Capital  resources  are  expected to grow with the future sale of its shares and
from cash flow from  operations.  Approximately  55% of all 1998  distributions,
totaling  a net amount of  $7,117,767,  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 1999.



                                       11
<PAGE>


The company is expecting to continue with  significant  growth during 1999.  The
company  plans to have monthly  equity  closings in 1999,  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 1998, the company purchased two additional apartment
properties using cash and an assumption of a mortgage loan totaling $15,167,000.
The company is continuously evaluating other potential acquisitions; however, no
acquisitions are considered probable at this time.

In 1997, the company  granted  Cornerstone a continuing  right to purchase up to
9.8%  of the  common  shares  of  Apple  at the  market  price,  net of  selling
commissions. Cornerstone owned 417,778 common shares of the company at a cost of
$3.76 million which represents approximately 1.5% of the company's common shares
outstanding at December 31, 1998. The company also 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. Cornerstone and Apple have hired external
financial advisors and formed separate independent  committees of the respective
boards of directors to consider a potential merger.

IMPACT OF YEAR 2000
The year 2000 issue is the result of computer  programs  being written using two
digits  rather than four to define the  applicable  year.  Any of the  company's
computer  programs or  hardware  that have  date-sensitive  software or embedded
chips may  recognize  a date  using "00" as the year 1900  rather  than the year
2000.  This  could  result  in  a  system  failure  or  miscalculations  causing
disruptions of operations,  including, among other things, a temporary inability
to process  transactions,  send invoices,  or engage in similar normal  business
activities.

The company's  accounting,  property  management,  human resources,  and payroll
services and computer systems are provided by an outside management company. The
managing  company states the  applications are classified as year 2000 compliant
by their  respective  software  vendors once upgraded.  The managing  company is
actively engaged in upgrading the computer systems.

The  company  is also  exposed  to the risk that one or more of its  vendors  or
service providers could experience year 2000 problems that impact the ability of
such vendor or service  provider to provide goods and  services.  Though this is
not considered as significant a risk with respect to the suppliers of goods, due
to  the  availability  of  alternative  suppliers,  the  disruption  of  certain
services, such as utilities, could, depending upon the extent of the disruption,
have a material adverse impact on the company's operations. To date, the company
is not aware of any vendor or service  provider year 2000 issue that  management
believes  would  have a material  adverse  impact on the  company's  operations.
However,  the  company  has no means of  ensuring  that its  vendors  or service
providers will be year 2000-ready. The inability of vendors or service providers
to complete their year 2000 resolution process in a timely fashion could have an
adverse  impact on the  company.  The  effect on  non-compliance  by  vendors or
service providers is not determinable at this time.

The company  utilizes  microprocessors  which are imbedded in systems  which are
part of the company's operations. In particular, year 2000 problems in the HVAC,
elevator,  telephone,  security,  or other such systems at the properties  could
disrupt  operations  at  the  affected  properties.  The  company  completed  an
assessment  of these systems in 1998 and has an ongoing plan to make all systems
compliant.  At this point,  based on the status of its  assessment,  the company
does not believe material systems will be non-compliant.  Additionally,  many of
these  systems,  which  operate  automatically,  can be  operated  manually  and
consequently in the event these systems  experience a failure as a result of the
year 2000 problem,  the disruption caused by such failure should not be material
to the company's operations.

Failure to correct a material year 2000 problem could result in an  interruption
in, or a failure of,  certain  normal  business  activities or  operations.  The
company  believes  that,  with the  implementation  of new or upgraded  business
systems and completion of the year 2000 project as scheduled, the possibility of
significant  interruptions  of normal  operations  due to the  failure  of those
systems will be reduced.  However,  the company is also dependent upon the power
and  telecommunications  infrastructure  within  the  United  States.  The  most
reasonable likely  worst-case  scenario would be that the company may experience
disruption in its operations if any of these  third-party  suppliers  reported a
system  failure.  Although the company's year 2000 project will reduce the level
of uncertainty  about the  compliance and readiness of its material  third-party
providers,  due to the general  uncertainty  over year 2000  readiness  of these
third-party  suppliers,  the company is unable to determine at this time whether
the consequences of year 2000 failures will have a material impact.

There should be no additional  cost to the company for the software and computer
hardware upgrades.  The software upgrades are included in the annual maintenance
fee paid by the  managing  company to the  vendors,  and the  computer  hardware
upgrades are included in the ordinary course of business  regardless of the year
2000 issue.

The  company has  contingency  plans for certain  critical  applications.  These
contingency  plans  involve,   among  other  actions,   manual  workarounds  and
contracting with vendors capable of providing services.

MARKET RISK DISCLOSURE
Substantially  all of the  company's  market  risk is  exposure  to  changes  in
mortgage  interest rates related to the recent  assumption of 



                                       12

<PAGE>

mortgage loans and interest  rates on short-term  investments.  The  contractual
weighted  average  interest  rates of the  assumed  debt was 7.56%.  The company
marked this debt to market using  interest rates  available on similar  mortgage
loans at the time of  assumption,  resulting  in effective  interest  expense of
6.5%. The company invests  proceeds from its best efforts offering in short-term
money market  investments  pending  acquisitions.  The company intends to invest
this money in real estate  assets as suitable  opportunities  arise and does not
anticipate maintaining as high a level of cash as it did during 1998.

If interest rates on short-term investments were to decrease by 100 basis points
in 1999 from what they were in 1998, net income would decrease by  approximately
$350,000,  assuming the same level of cash investment (see discussion above). It
is  anticipated  that the impact on net income  from a reduction  in  short-term
rates would not be as great as indicated above, as the invested cash amounts are
expected to decrease upon investment in real estate assets in 1999. In the event
of a change of such magnitude,  management  would likely take actions to further
mitigate  its exposure to the change.  However,  due to the  uncertainty  of the
specific actions that would be taken and their possible effects, the sensitivity
analysis assumes no changes in the company's financial structure.

IMPACT OF INFLATION
The company does not believe that  inflation had any  significant  impact on the
operation of the company in 1998. 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, 1998 and 1997,
and the related consolidated statements of operations, shareholders' equity, and
cash flows for the years then ended.  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,  1998  and  1997,  and  the
consolidated  results  of its  operations  and its cash flows for the years then
ended 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  whole,  presents  fairly  in all
material respects the information set forth therein.


                                      /s/ Ernst & Young LLP


Richmond, Virginia
February 4, 1999




                                       13
<PAGE>


<TABLE>
<CAPTION>
Financial Information
Consolidated Balance Sheets

December 31,                                                                   1998                     1997
------------                                                                   ----                     ----
<S>                                                                       <C>                       <C>
Assets
Investment in rental property
Land                                                                         $40,761,281              $15,396,823
Buildings and property improvements                                          197,807,725               73,113,886
Furniture and fixtures                                                         3,190,919                1,123,639
-------------------------------------------------------------------------------------------------------------------
                                                                             241,759,925               89,634,348

Less accumulated depreciation                                                 (7,686,479)              (1,898,003)
-------------------------------------------------------------------------------------------------------------------
                                                                             234,073,446               87,736,345

Cash and cash equivalents                                                     40,073,198               24,162,572
Prepaid expenses                                                                 339,605                  142,581
Other assets                                                                   7,360,903                  444,022
-------------------------------------------------------------------------------------------------------------------

TOTAL ASSETS                                                                $281,847,152             $112,485,520
-------------------------------------------------------------------------------------------------------------------

LIABILITIES and SHAREHOLDERS' EQUITY

Liabilities
Mortgage notes payable                                                       $25,165,861                       --
Accounts payable                                                               1,565,453                 $536,324
Accrued expenses                                                               4,883,852                2,143,888
Rents received in advance                                                        150,351                   70,051
Tenant security deposits                                                         882,014                  394,702
-------------------------------------------------------------------------------------------------------------------

TOTAL LIABILITIES                                                             32,647,531                3,144,965
-------------------------------------------------------------------------------------------------------------------

Shareholders' Equity
Common stock, no par value, authorized 50,000,000
   shares; issued and outstanding 28,331,274 shares
   and 12,371,829 shares, respectively                                       251,890,553              109,090,459
Class B convertible stock, no par value, authorized 200,000 shares;
   issued and outstanding 200,000  shares                                         20,000                   20,000
Receivable from officer-shareholder                                                   --                  (20,000)
Net income greater (less) than distributions                                  (2,710,932)                 250,096
-------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY                                                   249,199,621              109,340,555
-------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                  $281,847,152             $112,485,520
-------------------------------------------------------------------------------------------------------------------

See accompanying notes to financial statements.
</TABLE>



                                       14
<PAGE>


<TABLE>
<CAPTION>

Consolidated Statements of Operations

-------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                          1998              1997
-------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>             <C>
REVENUE:
Rental income                                               $30,764,904     $12,005,968
-------------------------------------------------------------------------------------------------------------------
EXPENSES:
Property and maintenance                                      8,819,809       3,571,484
Taxes and insurance                                           4,453,177       1,765,741
Property management                                           1,685,713         656,267
General and administrative                                      799,732         351,081
Amortization expense                                             38,758          28,490
Depreciation of rental property                               5,788,476       1,898,003
-------------------------------------------------------------------------------------------------------------------

Total expenses                                               21,585,665       8,271,066

Income before interest income (expense)                       9,179,239       3,734,902
Interest income                                               1,638,544         222,676
Interest expense                                              (737,875)        (458,384)
-------------------------------------------------------------------------------------------------------------------

Net income                                                  $10,079,908      $3,499,194
-------------------------------------------------------------------------------------------------------------------
Basic and diluted earnings per common share                       $0.51           $0.54
-------------------------------------------------------------------------------------------------------------------

See accompanying notes to financial statements.
</TABLE>



                                       15
<PAGE>


<TABLE>
<CAPTION>

Consolidated Statements of Shareholders' Equity

------------------------------------------------------------------------------------------------------------------------------------
                                        Common Stock         Convertible Class B Stock 
                                        ----------------------------------------------  Receivable         Net Income          Total
                                           Number                   Number              From Officer-   Greater (Less) Shareholders'
                                         of Shares        Amount   of Shares     Amount  Shareholder  Than Distributions      Equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>            <C>            <C>        <C>         <C>          <C>          <C> 
BALANCE AT DECEMBER 31, 1996                     10          $100    200,000    $20,000     $(20,000)             $--          $100
                                                                                                                                    
Net proceeds from the sale of shares     11,756,545   103,552,905         --         --           --               --   103,552,905
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 AT DECEMBER 31, 1997             12,371,829   109,090,459    200,000     20,000      (20,000)         250,096   109,340,555
Net proceeds from the sale of shares     15,168,582   135,682,327         --         --           --               --   135,682,327
Net income                                       --            --         --         --           --       10,079,908    10,079,908
Cash distributions declared to
     shareholders ($.818 per share)              --            --         --         --           --      (13,040,936)  (13,040,936)
Payment  from officer-shareholder                --            --         --         --       20,000               --        20,000
Shares issued through
     Additional Share Option                790,863     7,117,767         --         --           --               --     7,117,767

------------------------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1998             28,331,274  $251,890,553    200,000    $20,000          $--     $(2,710,932)  $249,199,621

------------------------------------------------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
</TABLE>



                                       16
<PAGE>


<TABLE>
<CAPTION>

Consolidated Statements of Cash Flows

-------------------------------------------------------------------------------------------------------------------
                                                                              1998                     1997
-------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                     <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income                                                               $  10,079,908           $   3,499,194
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization                                                5,827,234               1,926,493
Amortization of deferred financing costs                                        28,781                  60,490
Amortization of mortgage notes payable premium                                (104,460)                     --
Changes in operating assets and liabilities:
Prepaid expenses                                                              (197,024)               (142,581)
Other assets                                                                (1,159,420)               (533,002)
Accounts payable                                                             1,029,129                 536,324
Accrued expenses                                                             1,645,180               1,631,776
Rent received in advance                                                        80,300                  70,051
Tenant security deposits                                                      (107,352)                 26,280
-------------------------------------------------------------------------------------------------------------------
      Net cash provided by operating activities                             17,122,276               7,075,025
-------------------------------------------------------------------------------------------------------------------

CASH FLOW FROM INVESTING ACTIVITIES:
Acquisitions of rental property, net of liabilities assumed               (112,620,816)            (85,147,726)
Capital improvements                                                       (12,396,811)             (3,606,088)
Earnest deposit money for pending acquisition of rental property            (5,825,000)                     --
-------------------------------------------------------------------------------------------------------------------
     Net cash used in investing activities                                (130,842,627)            (88,753,814)
-------------------------------------------------------------------------------------------------------------------

CASH FLOW FROM FINANCING ACTIVITIES:
Proceeds from short-term borrowings                                                 --              39,640,000
Repayments of short-term borrowings                                                 --             (39,640,000)
Repayment of mortgage notes payable                                           (148,181)                     --
Payment from officer-shareholder                                                20,000                      --
Net proceeds from issuance of shares                                       142,800,094             109,090,359
Cash distributions paid to shareholders                                    (13,040,936)             (3,249,098)
-------------------------------------------------------------------------------------------------------------------
     Net cash provided by financing activities                             129,630,977             105,841,261
-------------------------------------------------------------------------------------------------------------------

Increase in cash and cash equivalents                                       15,910,626              24,162,472

Cash and cash equivalents, beginning of year                                24,162,572                     100
-------------------------------------------------------------------------------------------------------------------
     Cash and cash equivalents, end of year                              $  40,073,198           $  24,162,572
-------------------------------------------------------------------------------------------------------------------

See accompanying notes to financial statements.
</TABLE>



                                       17
<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., and Apple General,  Inc., and seven subsidiary  partnerships (the
"company"),  is an  externally  advised real estate  investment  trust formed on
August 7, 1996, as a Virginia  corporation.  The company operates in one defined
business segment as an  owner-operator of residential  apartment  communities in
Texas.  The majority of the company's  apartment  communities are located in the
Dallas/Fort Worth, Texas metropolitan area. All operations  commenced in January
1997 and, 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 Apple Residential Income Trust, Inc. and its
subsidiaries.  All significant inter-company accounts and transactions have been
eliminated in consolidation.

SUMMARY OF NEW ACCOUNTING PRONOUNCEMENTS
As  of  January  1,  1998,  the  company  adopted   Statement  130,   "Reporting
Comprehensive Income." Statement 130 establishes new rules for the reporting and
display of  comprehensive  income and its components;  however,  the adoption of
this  Statement  had no  impact on the  company's  net  income or  shareholders'
equity.  The company does not currently have any items of  comprehensive  income
requiring separate reporting and disclosure.

CASH AND CASH EQUIVALENTS
Cash  equivalents  include highly liquid money market  investments with original
maturities  of three  months  or less.  The fair  market  value of cash and cash
equivalents  approximate  their carrying value.  Cash equivalents of $36,220,000
and  $22,556,000  were invested  with First Union  National Bank at December 31,
1998 and 1997, respectively.

INVESTMENT IN RENTAL PROPERTY
The  investment  in rental  property is recorded at cost,  net of  depreciation,
which  includes real estate  brokerage  commissions  paid to Apple Realty Group,
Inc.,  Cornerstone Realty Income Trust,  Inc., and Apple Residential  Management
Group Inc. (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.  No  impairment  losses  have been
recorded to date.

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 10 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  amortized  over the term of the  related  debt.
Amortization of deferred  financing  costs is classified as interest  expense in
the consolidated statements of operations.

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.

EARNINGS PER SHARE
Basic and diluted  earnings per common share are  calculated in accordance  with
FASB  Statement  128,  "Earnings Per Share." Basic  earnings per common share is
computed based upon the weighted average number of shares outstanding during the
year.  Diluted  earnings per common share is calculated  after giving effect for
all potential common shares that were 



                                       18
<PAGE>

outstanding for the year.

FEDERAL INCOME TAXES
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 $.82 and $.60 for the years ended December 31, 1998 and 1997, respectively.
In 1998 and 1997, the total distribution was taxable as ordinary income.

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.


NOTE 2
INVESTMENT IN RENTAL PROPERTY
The following is a summary of rental property owned at December 31, 1998.

<TABLE>
<CAPTION>

                            Initial             Total         Accumulated     Date
Description                Acquisition Cost Investment*       Depreciation   Acquired **              Encumbrances
-------------------------------------------------------------------------------------------------------------------
<S>                       <C>              <C>                 <C>                  <C>                    
Brookfield                $5,458,485       $6,583,990          $461,797     January 1997                 --
Eagle Crest               15,650,000       17,862,629         1,090,199     January 1997                 --
Aspen Hills                5,690,560        7,502,434           503,215     January 1997                 --
Mill Crossing              4,544,121        5,458,746           340,409    February 1997                 --
Polo Run                   6,858,974        8,061,726           476,847       March 1997                 --
Wildwood                   3,963,519        4,684,813           263,140       March 1997                 --
Toscana                    5,854,531        6,792,187           383,495       March 1997                 --
The Arbors on Forest Ridge 7,748,907        8,632,706           488,283       April 1997                 --
Pace's Cove                9,277,355        9,833,200           452,595        June 1997                 --
Remington at Las Colinas  13,100,000       15,295,457           668,070      August 1997                 --
Copper Crossing            9,275,000       10,965,314           337,705    November 1997                 --
Main Park                  8,000,000        8,650,550           274,697    February 1998                 --
Timberglen                12,000,000       13,126,845           384,619    February 1998                 --
Silverbrook               18,210,000       20,144,422           367,291         May 1998         $3,047,994
Summer Tree                5,700,000        6,415,878            73,713        June 1998                 --
Park Village               7,000,000        7,477,425           126,428        July 1998                 --
Cottonwood Crossing        5,700,000        6,147,288           106,322        July 1998                 --
Devonshire                 5,205,000        6,699,709            83,371        July 1998          3,627,425
Pace's Point              11,405,000       12,869,988           194,112        July 1998          7,679,619
Emerald Oaks              10,930,000       11,768,594           198,390        July 1998          6,635,025
Newport                    6,330,000        6,741,792           113,758        July 1998          3,020,775
Estrada Oaks               9,350,000        9,867,652           147,860        July 1998                 --
Burney Oaks                9,300,000        9,679,771            52,635     October 1998                 --
Cutter's Point             8,100,000        8,690,442            40,770     October 1998                 --
The Courts on Pear Ridge  11,500,000       11,806,367            56,758    November 1998                 --
-------------------------------------------------------------------------------------------------------------------
                        $216,151,452     $241,759,925        $7,686,479                         $24,010,838
</TABLE>

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

**   Date  listed  is the date  which  the  property  was  first  acquired.  The
     subsequent  acquisition  of adjacent  properties  has been  combined in the
     other categories.

The following is a reconciliation of the carrying amount of real estate owned:
<TABLE>
<CAPTION>
                                               1998              1997
-------------------------------------------------------------------------------------------------------------------
<S>                                      <C>                  <C>
BALANCE AT JANUARY 1                     $  89,634,348               $--
Real estate purchased***                   139,728,766        86,028,260
Improvements, furniture, and fixtures       12,396,811         3,606,088
-------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31                    $241,759,925       $89,634,348
</TABLE>

*** In connection  with the  acquisition  of rental  property  during 1998,  the
company assumed mortgage loans of $24,159,019, which was increased by $1,259,403
for a fair value adjustment.



                                       19
<PAGE>

The following is a reconciliation of accumulated depreciation:
<TABLE>
<CAPTION>
                                               1998               1997
-------------------------------------------------------------------------------------------------------------------
<S>                                         <C>                <C>
BALANCE AT JANUARY 1                        $1,898,003                $--
Depreciation expense                         5,788,476          1,898,003
-------------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31                      $7,686,479         $1,898,003
</TABLE>


NOTE 3
NOTES PAYABLE
In connection with the acquisitions of five properties in July 1998, the company
assumed  five  mortgage  notes with a  principal  amount of  $24,159,019.  These
mortgage  notes  were  recorded  at a fair value of  $25,418,421  at the date of
assumption. The difference between the fair value and principal balance is being
amortized as an adjustment to interest  expense over the term of the  respective
notes.  At December 31,  1998,  the balance of the  mortgage  notes  payable was
$25,165,861.  Mortgage notes payable are due in monthly installments,  including
principal  and  interest.  Prepayment  penalties  apply for  early  retirements.
Scheduled  maturities  are at various dates through  December 2005. The weighted
average  contractual  interest rate on the mortgage  notes was 7.56% at December
31, 1998, and the effective  weighted average rate was 6.5% including the effect
of the fair value adjustment.  Interest paid by the company in 1998 was $910,689
relating to the mortgage loans.

The aggregate maturities of mortgage notes payable for the five years subsequent
to December 31, 1998 were as follows:
                       Year           Amount
                       ---------------------
                       1999        $ 495,273
                       2000          543,922
                       2001          569,283
                       2002          596,599
                       2003        7,803,458
                 Thereafter       15,157,326
                 ---------------------------
                                 $25,165,861
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 in the timely acquisition of properties. The unsecured line of credit
expired on March 31, 1998 and was not amended to extend the maturity  date.  The
company  paid  interest of $312,466 in 1997  relating to the  unsecured  line of
credit. The weighted average interest rate incurred under the line of credit was
7.8% in 1997.

No interest was capitalized in 1998 or 1997.


NOTE 4
SHAREHOLDERS' EQUITY
During 1998, the company  completed its initial "best efforts"  offering of $250
million and extended the  offering  for an  additional  $50 million of which $28
million  was raised as of  December  31,  1998.  The  company is raising  equity
capital  through  the  "best  efforts"   offering  of  shares  by  David  Lerner
Associates, Inc. (the "Managing Dealer"), which receives selling commissions and
a marketing  expense allowance based on proceeds of the shares sold. The company
received  gross  proceeds  of  $159,594,450  and  $121,633,733  from the sale of
15,959,445 and 12,371,819 shares, including shares sold through the reinvestment
of distributions,  for the years ended December 31, 1998 and 1997, respectively.
The  Managing  Dealer  received  selling  commissions  and a  marketing  expense
allowance equal to 7.5% and 2.5%, respectively,  of the gross proceeds of shares
sold. During 1998 and 1997, the underwriter  earned $15,959,445 and $11,787,399,
respectively.  The  net  proceeds  of  the  offering,  after  deducting  selling
commissions and other offering expenses,  were $142,800,094 and $109,090,359 for
1998 and 1997,  respectively.  These totals include 417,778 shares  purchased by
Cornerstone  Realty Income Trust,  Inc.  ("Cornerstone")  in 1997 for $3,760,000
outside of the public "best efforts" offering.  Cornerstone owned  approximately
1.5% of the company's outstanding shares on December 31, 1998 (see Note 6 to the
consolidated financial statements).

On November 14, 1996, the company  issued 200,000 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 



                                       20
<PAGE>

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:

         Gross Proceeds             Number of
         Raised from                Common Shares
         Sales of Common            through Conversion
         Shares through             of One Class B
         Date of Conversion         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 for the  difference  between the market value of the
company's stock and par value of the Class B Convertible Shares in the statement
of  operations  based  on the full  convertibility  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 years ended
December  31,  1998 and  1997,  $7,908,627  (net  proceeds  of  $7,117,767)  and
$1,974,949 (net proceeds of $1,777,454), respectively, were provided through the
reinvestment of distributions.


NOTE 5
BENEFIT PLANS
STOCK INCENTIVE PLANS
Under the 1997 Incentive Plan, as amended,  a maximum of 1,242,735 options could
be granted, at the discretion of the Board of Directors, to certain officers and
key employees of the company. Under the Directors Plan, as amended, a maximum of
517,443 options could be granted to the independent directors of the company.

In 1998,  the  company  granted  11,376  options to  purchase  shares  under the
Directors Plan and no options under the Incentive Plan.

On September 17, 1998,  the company's  board of directors  approved the grant to
Glade M. Knight of options to purchase  common  shares (the "Award  Agreement").
This grant was made apart from the Incentive Plan. The Award Agreement  provides
Mr. Knight options to purchase 355,111 common shares (the "Award Options").  The
Award  Options vest in five equal  parts,  if, as, and when there is sold in the
company's  "best efforts"  additional $50 million  offering of $10 million,  $20
million, $30 million,  $40 million, and $50 million,  respectively (each a break
point),  in shares. If the offering is terminated at any point other than one of
the break points,  a pro rata portion of the Award Options will vest at the time
of  termination.  Under the terms of the Award  Agreement,  142,045  options  to
purchase shares were vested at December 31, 1998.

Under the Award  Agreement,  the exercise price of the Award Options will be $10
per common  share  acquired,  which is equal to the selling  price of the common
shares under the "best efforts" offering. However, if a triggering event occurs,
the exercise  price will be $1.00 per common share for the following 180 days. A
triggering  event means the  occurrence of either of the following  events:  (1)
substantially  all of the  company's  assets,  stock,  or  business  is  sold or
otherwise  transferred;  or (2) the Advisory  Agreement  between the company and
Apple Residential  Advisors,  Inc. ("ARA") is terminated or not renewed, and the
company  ceases to use Apple  Residential  Management  Group,  Inc.  ("ARMG") to
provide substantially all of its property management services.

If a triggering event occurs,  and the holder of the Award Options either elects
not to, or fails to,  exercise any exercisable  Award Options,  then the company
will pay to the holder the  difference  between the exercise price and the value
of the common  shares that would be obtained upon  exercise.  If the exercise or
the  receipt  of  payment  in lieu of such  exercise  subjects  the holder to an
additional  penalty tax under the Internal Revenue Code, the company will pay to
the holder an additional amount to offset the penalty tax.

Both the Incentive Plan and the Directors Plan of the company 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.  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 years ended
December 31, 1998 and 1997 is summarized in the following table:


                                       21
<PAGE>

<TABLE>
<CAPTION>

                                    1998                      1997
-------------------------------------------------------------------------------------------------------------------
                                      Weighted Average                 Weighted Average
                                 OptionsExercise Price        Options  Exercise Price
-------------------------------------------------------------------------------------------------------------------
<S>                               <C>          <C>                          
Outstanding, beginning of year    20,550       $10.00            --       --
Granted                          366,487        10.00         20,550   $10.00
Exercised                             --           --            --         --
Forfeited                             --           --            --         --
-------------------------------------------------------------------------------------------------------------------
Outstanding, end of year         387,037       $10.00         20,550   $10.00
Exercisable at end of year       173,971       $10.00         20,550   $10.00
-------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE FAIR VALUE OF
OPTIONS GRANTED DURING THE YEAR                  $.40                    $.83

</TABLE>



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 1998
and 1997,  respectively:  risk-free interest rates of 5.5% for 1998 and 6.7% for
1997; a dividend yield of 9.0% for 1998 and 7.0% for 1997; volatility factors of
the  expected  market price of the  company's  common stock of .160 for 1998 and
 .161 for 1997; and a weighted average expected life of the options of five years
for 1998 and 10 years for 1997.

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.  The full
impact is included in the pro forma amounts disclosed below.

<TABLE>
<CAPTION>
                                              1998                1997
-------------------------------------------------------------------------------------------------------------------
<S>                                         <C>              <C>
Pro forma FASB 123
         Net income                         $10,019,905       $3,482,138
         As reported net income             $10,079,908       $3,499,194
Pro forma FASB 123
         Earnings per share                        $.50             $.54
         As reported net income per share          $.51             $.54

</TABLE>

401(K) SAVINGS PLAN
Eligible employees of the company participate in a contributory employee savings
plan. Under the plan, the company may match a percentage of  contributions  made
by  eligible  employees,  such  percentage  to apply to a maximum of 1% of their
annual salary. Expenses under this plan for 1998 were $11,190.


NOTE  6  RELATED-PARTY  TRANSACTIONS  
The  company  had  contracted  with Apple  Residential  Management  Group,  Inc.
("ARMG") to manage the acquired  properties;  Apple Residential  Advisors,  Inc.
("ARA") to advise and provide the company with day-to-day  management  services;
and Apple Realty  Group,  Inc.  ("the  Cornerstone  affiliates")  to acquire and
dispose of real estate assets held by the company.  ARMG,  ARA, 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
Realty Income Trust, Inc. Before the transaction  described below,  during 1997,
the  company  paid  ARMG a  management  fee equal to 5% of  rental  income  plus
reimbursement of certain expenses in the amount of $52,375. The company paid ARA
a fee equal 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 ARMG and ARA, whereby Cornerstone agreed to provide
advisory  and property  management  services to the company in exchange for fees
and expense  reimbursement  on the same terms described  above.  During 1998 and
1997, the company paid Cornerstone or the Cornerstone  affiliates $2,220,593 and
$822,497, respectively, in management and advisory fees.

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 (valued at an
aggregate of  $1,650,000)  to Glade M. Knight in exchange for the  assignment of
the rights to the acquisition/disposition  agreement.  Cornerstone was entitled,
under the terms of the asset/disposition  agreement, to a real estate 


                                       22

<PAGE>

commission  equal to 2% of the gross purchase price of the company's  properties
plus  reimbursement  of  certain  expenses.  During  1998 and 1997,  Apple  paid
Cornerstone  $2,665,100 and $1,031,066,  respectively,  for acquisition services
under the agreement.

Cornerstone  owns  417,778  shares of the  company's  common  stock  which  were
purchased during 1997 for $3,760,000, which represents approximately 1.5% of the
total common shares of the company outstanding on December 31, 1998. 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.  The company
paid Cornerstone distributions of $340,483 in 1998 and $253,172 in 1997.

The company also has granted  Cornerstone a "first right of refusal" to purchase
the property or business of Apple.  Cornerstone has stated in its public filings
its intent to make periodic  evaluations  on the  feasibility  of purchasing the
company.  The company and  Cornerstone  have hired  external  advisors  and have
formed separate, independent committees of the respective boards of directors to
consider a potential merger.


NOTE 7
QUARTERLY FINANCIAL DATA (UNAUDITED)
The  following is a summary of  quarterly  results of  operations  for the years
ended December 31, 1998 and 1997:

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                First            Second            Third         Fourth
1998                                          Quarter           Quarter          Quarter         Quarter
-------------------------------------------------------------------------------------------------------------------
<S>                                        <C>               <C>              <C>              <C>        
Revenue                                    $4,928,751        $6,106,378       $9,221,478       $10,508,297
Income before interest income (expense)     1,635,832         2,004,663        2,830,639         2,708,105
Net income                                  1,959,718         2,476,742        2,884,732         2,758,716
Basic and diluted earnings
  per common share                                .14              . 14             . 13              . 11
Distributions per share                           .20              . 20             . 21              . 21

-------------------------------------------------------------------------------------------------------------------
                                                First            Second            Third         Fourth
1997                                          Quarter           Quarter          Quarter         Quarter
-------------------------------------------------------------------------------------------------------------------
Revenue                                    $1,154,400        $2,824,034       $3,788,306        $4,239,228
Income before interest income (expense)       475,487           983,700        1,089,092         1,186,623
Net income                                    556,255           830,469          856,729         1,255,741
Basic and diluted earnings
  per common share                                .16              . 15             . 12              . 12
Distributions per share                            --              . 20             . 20              . 20
</TABLE>


NOTE 8
EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:

<TABLE>
<CAPTION>
                                                             1998              1997
-------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>               <C>
NUMERATOR:
Net income numerator for basic and diluted earnings       $10,079,908       $3,499,194
DENOMINATOR:
   Denominator for basic earnings per
     share-weighted-average shares                         19,910,408        6,493,114
Effect of dilutive securities:
   Stock options                                                   --               --
-------------------------------------------------------------------------------------------------------------------
   Denominator for diluted earnings per share-adjusted
    weighted-average shares and assumed conversion         19,910,408        6,493,114
-------------------------------------------------------------------------------------------------------------------

   Basic and diluted earnings per share                   $       .51       $      .54
-------------------------------------------------------------------------------------------------------------------
</TABLE>

Options  outstanding of 173,971 are not included in dilutive  earnings per share
calculations  since they are not dilutive.  Class B  Convertible  Shares are not
included in earnings  per common share  calculations  until such time it becomes
probable that such shares can be converted to common shares (see Note 4).


NOTE 9
SUBSEQUENT EVENT
In  January  1999,  the  company   declared  and  paid  cash   distributions  to
shareholders of $5,349,330, of which $3,147,377 was reinvested 



                                       23
<PAGE>

in the Additional Share Option. The company also closed the sale to investors of
627,164  shares at $10 per share  representing  net  proceeds  to the company of
$5,644,475  after payment of  underwriter  fees.  In January  1999,  the company
purchased Sierra Ridge Apartments in San Antonio,  Texas. The 230-unit apartment
community was purchased for  $5,817,000 in cash. In February  1999,  the company
purchased Grayson Square Apartments in Grapevine,  Texas. The 200-unit apartment
community was purchased for $9,350,000, consisting of $2,357,215 in cash and the
assumption of a $6,992,785 mortgage loan.


NOTE 10
PRO FORMA INFORMATION (UNAUDITED)
The following  unaudited pro forma  information for the years ended December 31,
1998  and 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 or assumed  mortgages to acquire the properties  purchased
during 1998 and 1997.  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.

<TABLE>
<CAPTION>
Unaudited Pro Forma Totals               1998             1997
-------------------------------------------------------------------------------------------------------------------
<S>                                 <C>              <C>
Revenue                             $42,871,978      $41,247,614
Net Income                           10,970,342       10,187,703
Basic earnings per share                    .48              .46
</TABLE>

The pro forma  information  presented above reflects  adjustments for the actual
rental income and rental  expenses of the properties  purchased  during 1998 and
1997 for the  respective  periods in 1998 and 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; (2) depreciation has been adjusted based on the company's basis in
the properties; and (3) interest expense has been adjusted based on the interest
rate in effect at the assumption of the mortgage debt.

NOTE 11
POTENTIAL  MERGER WITH  CORNERSTONE  REALTY INCOME TRUST,  INC.  (UNAUDITED) 
The Company's  Board of Directors met on March 30, 1999,  and voted to approve a
merger with  Cornerstone  Realty  Income  Trust,  Inc.  subject to,  among other
requirements, an affirmative vote of the Company's shareholders.

ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.

                  None.


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

OWNERSHIP OF EQUITY SECURITIES

"Beneficial Ownership" as used herein has been determined in accordance with the
rules and regulations of the Securities and Exchange Commission and is not to be
construed as an admission that any of such Shares are in fact beneficially owned
by any person.  As of the Record Date,  there are no  shareholders  known to the
Company who own beneficially more than 5% of the outstanding Shares.

Beneficial  Ownership of Shares held by directors and executive  officers of the
Company as of the Record Date is indicated in the table below. Each person named
in the table and  included  in the  director/officer  group has sole  voting and
investment  powers as to such  Shares,  or shares  such  powers  with his or her
spouse and minor children, if any.


<TABLE>
<CAPTION>
                                                                          Number of
                                                                          Shares
                                                                          Beneficially         Percent of Class
         Name                                                               Owned(1)           ----------------
         ----                                                               --------
<S>                                                                       <C>                  <C>
Lisa B.  Kern .                                                                10,642.00          *
Glade M. Knight(2)                                                            361,228.05          *
Penelope W. Kyle                                                               11,142.00          *
Bruce H.  Matson                                                               10,642.00          *
All directors and executive officers as a group                               393,654.05          *
</TABLE>


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



                                       24

<PAGE>

   * Less than one percent of outstanding Shares.

(1)  Includes Shares that may be acquired upon the exercise of stock options, as
     follows:  Mss. Kern and Kyle and Mr. Matson - 10,642 Shares each at $10 per
     Share.

(2)  In addition,  Mr. Knight owns 200,000  Class B Convertible  Shares of which
     30,000 Class B Convertible  Shares are beneficially held for Debra A. Jones
     and Stanley J. Olander,  Jr.,  15,000 Class B Convertible  Shares each. The
     Class B Convertible  Shares are convertible  upon the occurrence of certain
     events into  Shares  pursuant  to a formula  based upon the gross  proceeds
     raised by the Company through the date of conversion.


ELECTION OF DIRECTORS

Nominees for  Directors.  At the Annual  Meeting,  four (4)  directors are to be
elected,  each to hold office until the next annual meeting of Shareholders,  or
until his or her successor is duly elected and qualified, except in the event of
death,  resignation or removal.  The nominees for election to the four positions
on the Board of  Directors  to be voted upon at the Annual  Meeting  are Lisa B.
Kern, Glade M. Knight, Penelope W. Kyle and Bruce H.
Matson.

The nominees, their ages, the year of election of each to the Board of Directors
of the Company,  their principal occupations during the past five years or more,
and  directorships of each in public  companies in addition to the Company,  and
the executive officers of the Company, are as follows:

Glade M. Knight,  54, is Chairman,  Chief Executive Officer and President of the
Company. Since 1972, Mr. Knight has held executive and/or ownership positions in
several  corporations  involved  in the  management  of and  investment  in real
estate, and has served, directly or indirectly,  as a general or limited partner
of 71 limited partnerships owning 80 properties comprising over 13,000 apartment
units.  Mr.  Knight is also a director,  Chairman of the Board and  President of
Cornerstone Realty Income Trust, Inc. Cornerstone Realty Income Trust, Inc. is a
real  estate  investment  trust which at  December  31, 1998 owned 58  apartment
communities   comprising   13,462   apartment  units  in  the  mid-Atlantic  and
southeastern United States.

Penelope  W.  Kyle,  51, is a director  of the  Company.  Ms.  Kyle has been the
director of the Virginia  Lottery  since  September 1, 1994.  Ms. Kyle worked in
various  capacities for CSX Corporation  and its affiliated  companies from 1981
until August 1994. She served as Vice President,  Administration and Finance for
CSX Realty,  Inc.  beginning in 1991, as Vice President,  Administration for CSX
Realty, Inc. from 1989 to 1991, and as Assistant Vice President and Assistant to
the  President  for CSX  Realty,  Inc.  from  1987 to 1989.  Ms.  Kyle is also a
director of Cornerstone Realty Income Trust, Inc.

Lisa B. Kern, 38, is a director of the Company.  Ms. Kern is a portfolio manager
and Vice  President of Davenport & Co.,  LLC, an  investment  banking  firm,  in
Richmond,  Virginia.  Previously,  Ms. Kern was a Vice  President  with  Crestar
Bank's Trust and Investment Management Group from 1989 to 1996.

Bruce H.  Matson,  41,  is a  director  of the  Company.  Mr.  Matson  is a Vice
President  and  director  of the  law  firm  of  LeClair  Ryan,  a  Professional
Corporation, in Richmond, Virginia. Mr. Matson has practiced law since 1983.

EXECUTIVE OFFICERS

The Company's sole executive officer is Glade M. Knight. Information with regard
to Mr. Knight is set forth above under the caption "Election of Directors."

ITEM 11. EXECUTIVE COMPENSATION

COMPENSATION OF EXECUTIVE OFFICER

The  Company did not pay a salary to its  executive  officer for the year ending
December  31,  1998.  The  Company  operates  as  an  "externally-advised"   and
"externally-managed"   real  estate  investment  trust  ("REIT").  See  "Certain
Relationships and Agreements - Management Contracts"

COMPENSATION OF DIRECTORS

During 1998,  independent directors (Mss. Kern and Kyle and Mr. Matson) received
annual  directors'  fees of $5,000  plus $500 for each  meeting of the Board and
$100 for each committee meeting attended; however, independent directors did not
receive any compensation for attending a committee meeting if it occurred on the
same  day as a  meeting  of  the  entire  Board  of  Directors.  Non-independent
directors  received  no  compensation  from the  Company  for their  service  as
directors.  All  directors  were  reimbursed by the 


                                       25
<PAGE>



Company for their travel and other out-of-pocket  expenses incurred in attending
meetings of the directors or a committee  and in conducting  the business of the
Company.

In addition,  in 1998, each independent  director received an option to purchase
3,792 Shares,  exercisable at $10 per Share.  Independent directors will receive
additional   Share  options  in  1999  and  future  years  under  the  Company's
Non-Employee Directors Stock Option Plan.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information on security ownership of certain beneficial owners and management is
included in Item 10.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Management  Contracts.  The  Company  operates  as an  "externally-advised"  and
"externally-managed"  REIT. Through subcontract  agreements,  Cornerstone Realty
Income Trust, Inc.  ("Cornerstone")  serves as the advisor to and as the manager
of the properties of the Company.  In addition,  Cornerstone  provides  property
acquisition services to the Company.

Prior to March 1, 1997, the Company entered into a separate management agreement
with Apple Residential  Management  Group, Inc. (the "Management  Company") with
respect to each  property  acquired.  Under the terms of these  agreements,  the
Company was obligated to pay the Management Company a management fee equal to 5%
of gross rental income from the related  property plus  reimbursement of certain
expenses. Prior to March 1, 1997, under the terms of the advisory agreement with
Apple Residential Advisors,  Inc. (the "Advisor"),  the Company was obligated to
pay to the Advisor an annual advisory fee of up to 0.25% of the Company's assets
based on certain  performance  criteria.  Prior to March 1, 1997, Mr. Knight was
the sole owner of the  Management  Company and the Advisor.  Effective  March 1,
1997,  with the approval of the Company,  Cornerstone  entered into  subcontract
agreements  with the  Management  Company  and the Advisor  whereby  Cornerstone
provides advisory and property  management  services to the Company in exchanges
for fees and expense  reimbursement  on the same terms described  above. For the
period  prior to March 1, 1997,  the Company  paid to the  Management  Company a
management fee plus  reimbursement  of certain expenses in the amount of $52,375
and to the Advisor an advisory fee in the amount of $14,894. For the period from
March 1, 1997  through  December  31,  1997,  the  Company  paid to  Cornerstone
$822,934 in management  and advisory fees and $214,961 for certain  reimbursable
items.

Prior to March 1, 1997, under the terms of the acquisition  agreement with Apple
Realty  Group,  Inc. (the sole owner of which was Mr.  Knight),  the Company was
obligated to pay Apple Realty  Group,  Inc. a brokerage  commission of 2% of the
gross purchase price of each property acquisition. Effective March 1, 1997, with
the approval of the Company, Cornerstone acquired all the assets of Apple Realty
Group,  Inc.,  including the rights to the acquisition  agreement.  The purchase
price for the assets was $2 million,  paid  $350,000 in cash and  $1,650,000  in
Cornerstone  common shares (150,000  Cornerstone common shares valued at $11 per
common share).  For the period prior to March 1, 1997, the Company paid to Apple
Realty Group, Inc. fees in the amount of $624,382.  For the period from March 1,
1997 through  December 31, 1997, the Company paid to  Cornerstone  approximately
$1,031,066 under the acquisition agreement.

Other  Relationships.  The husband of Penelope W. Kyle, who is a director of the
Company,  is a partner in McGuire,  Woods,  Battle & Boothe LLP, which serves as
general counsel to the Company.




                                       26
<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, 1998 and 1997

               Consolidated Statements of Operations
                                 Years Ended December 31, 1998 and 1997

               Consolidated Statements of Shareholders' Equity
                                 Years Ended December 31, 1998 and 1997

               Consolidated Statements of Cash Flows
                                 Years Ended December 31, 1998 and 1997

               Notes to Consolidated Financial Statements

          2.   Financial Statement Schedules

               Schedule  III - Real Estate and  Accumulated Depreciation 
               (Included on pages 27 and 28 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 30 through 35 of this Form 10-K Report.

               (b)  Reports on Form 8-K

               During the last quarter of 1998,  the Company filed the following
               Current Reports on Form 8-K:

               On November 12, 1998, the registrant filed a Report dated October
               28, 1998 on Form 8-K The item reported was Item 2 (acquisition of
               Burney   Oaks  and   Brandywine   Park   Apartments   (which  was
               subsequently renamed Cutter's Point)).

               On December 2, 1998, the registrant filed a Report dated November
               17,  1988  on  Form  8-K.  The  item  reported  was  Item  2 (the
               acquisition of The Courts on Pear Ridge Apartments).



                                       27
<PAGE>
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION (AS OF DECEMBER 31, 1998)
YEAR TO DATE DECEMBER                       

<TABLE>
<CAPTION>
                                                                                                                               
                                                                    Subsequently          Gross Amount Carried
                                          Initial Cost               Capitalized                                               
                              Encum-     --------------------------------------------------------------------------------------
  Description                 brances        Land          Bldg.         Impr.         Land      Bldg. & Impr.     Total       
-------------------------------------------------------------------------------------------------------------------------------
<S>                         <C>           <C>           <C>           <C>           <C>           <C>           <C>           
1) Brookfield                      $ 0   $ 1,146,282   $ 4,312,203   $ 1,125,505   $ 1,204,680   $ 5,379,310   $ 6,583,990   
* Dallas, TX
* Multi-family housing

2) Eagle Crest                     $ 0   $ 2,973,500   $12,676,500   $ 2,212,629   $ 3,089,848   $14,772,781   $17,862,629   
* Irving, TX                                                                                                                  
* Multi-family housing

3) Aspen Apartments                $ 0   $ 1,081,206   $ 4,609,354   $ 1,811,874   $ 1,129,710   $ 6,372,724   $ 7,502,434   
* Arlington, TX
* Multi-family housing

4) Mill Crossing                   $ 0   $   772,501   $ 3,771,620   $   914,625   $   803,374   $ 4,655,372   $ 5,458,746   
* Arlington, TX
* Multi-family housing

5) Polo Run                        $ 0   $   891,667   $ 5,967,307   $ 1,202,752   $   936,906   $ 7,124,820   $ 8,061,726   
* Arlington, TX
* Multi-family housing

6) Wildwood Apartments             $ 0   $   832,339   $ 3,131,180   $   721,294   $   882,101   $ 3,802,712   $ 4,684,813   
* Euless, TX
* Multi-family housing

7) Toscana Apartments              $ 0   $   819,634   $ 5,034,897   $   937,656   $   859,080   $ 5,933,107   $ 6,792,187   
* Dallas, TX
* Multi-family housing

8) Arbors on Forest Ridge          $ 0   $   697,402   $ 7,051,505   $   883,799   $   728,237   $ 7,904,469   $ 8,632,706   
* Bedford, TX
* Multi-family housing

9) Paces Cove                      $ 0   $ 1,948,245   $ 7,329,110   $   555,845   $ 1,840,222   $ 7,992,978   $ 9,833,200   
* Dallas, TX
* Multi-family housing

10) Remington Hills                $ 0   $ 3,144,000   $ 9,956,000   $ 2,195,457   $ 3,069,248   $12,226,209   $15,295,457   
* Irving, TX                                                                                                          
* Multi-family housing

11) Copper Crossing                $ 0   $ 1,624,250   $ 7,650,750   $ 1,690,314   $ 1,691,100   $ 9,274,214   $10,965,314   
* Fort Worth, TX
* Multi-family housing

12) Main Park                      $ 0   $   560,000   $ 7,440,000   $   650,550   $   583,632   $ 8,066,918   $ 8,650,550   
* Duncanville, TX
* Multi-family housing

13) Timberglen                     $ 0   $ 2,400,000   $ 9,600,000   $ 1,126,845   $ 2,463,445   $10,663,400   $13,126,845   
* Dallas, TX
* Multi-family housing

14) Silver Brook I                 $ 0   $ 3,106,150   $10,398,850   $ 1,348,903   $ 3,230,222   $11,623,681   $14,853,903   
* Grand Prairie, TX
* Multi-family housing

15) Summer Tree                    $ 0   $ 2,964,000   $ 2,736,000   $   715,878   $ 3,067,972   $ 3,347,906   $ 6,415,878   
* Dallas, TX
* Multi-family housing
</TABLE>


<TABLE>
<CAPTION>
                                               Date of      Date           
  Description                  Acc. Dep         Const.    Acquired     Dep. Life
-------------------------------------------------------------------------------------
<S>                           <C>                <C>   <C>              <C>      
1) Brookfield                 $   461,797        1984   Jan. 28, 1997   27.5 yrs.
* Dallas, TX
* Multi-family housing

2) Eagle Crest                $ 1,090,199        1983   Jan. 30, 1997   27.5 yrs.
* Irving, TX                                     1985
* Multi-family housing

3) Aspen Apartments           $   503,215        1979   Jan. 31, 1997   27.5 yrs.
* Arlington, TX
* Multi-family housing

4) Mill Crossing              $   340,409        1979   Feb. 21, 1997   27.5 yrs.
* Arlington, TX
* Multi-family housing

5) Polo Run                   $   476,847        1984   Mar. 31, 1997   27.5 yrs.
* Arlington, TX
* Multi-family housing

6) Wildwood Apartments        $   263,140        1984   Mar. 31, 1997   27.5 yrs.
* Euless, TX
* Multi-family housing

7) Toscana Apartments         $   383,495        1986   Mar. 31, 1997   27.5 yrs.
* Dallas, TX
* Multi-family housing

8) Arbors on Forest Ridge     $   488,283        1986   Apr. 25, 1997   27.5 yrs.
* Bedford, TX
* Multi-family housing

9) Paces Cove                 $   452,595        1982   June 24, 1997   27.5 yrs.
* Dallas, TX
* Multi-family housing

10) Remington Hills           $   668,070        1984    Aug. 6, 1997   27.5 yrs.
* Irving, TX                                     1985    Aug. 6, 1997
* Multi-family housing

11) Copper Crossing           $   337,705   1980/1981   Nov. 25, 1997   27.5 yrs.
* Fort Worth, TX
* Multi-family housing

12) Main Park                 $   274,697        1984    Feb. 4, 1998   27.5 yrs.
* Duncanville, TX
* Multi-family housing

13) Timberglen                $   384,619        1984   Feb. 13, 1998   27.5 yrs.
* Dallas, TX
* Multi-family housing

14) Silver Brook I            $   287,655        1982     May 8, 1998   27.5 yrs.
* Grand Prairie, TX
* Multi-family housing

15) Summer Tree               $    73,713        1980    June 1, 1998   27.5 yrs.
* Dallas, TX
* Multi-family housing
</TABLE>

<PAGE>

<TABLE>
<CAPTION>

                                                                                                                               
                                                                          Subsequently          Gross Amount Carried
                                          Initial Cost                     Capitalized                                              
                              Encum-     -------------------------------------------------------------------------------------------
  Description                 brances          Land          Bldg.             Impr.          Land       Bldg. & Impr.     Total
------------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>           <C>           <C>           <C>           <C>              <C>          <C>           
16) Park Village                     $0        $840,000      $6,160,000      $477,425        $866,647    $6,610,778    $7,477,425 
* Bedford, TX
* Multi-family housing

17) Cottonwood                       $0        $456,000      $5,244,000      $447,288        $474,835    $5,672,453    $6,147,288 
* Arlington, TX
* Multi-family housing

18) Devonshire               $3,627,425      $1,665,600      $3,539,400    $1,494,709      $1,895,151    $4,804,558    $6,699,709 
* Dallas, TX
* Multi-family housing

19) Pace's Point             $7,679,619      $1,938,850      $9,466,150    $1,464,988      $2,133,651   $10,736,337   $12,869,988 
* Lewisville, TX
* Multi-family housing

20) Newport                  $3,020,775        $506,400      $5,823,600      $411,792        $532,096    $6,209,696    $6,741,792 
* Austin, TX
* Multi-family housing

21) Emerald Oaks             $6,635,025        $874,400     $10,055,600      $838,594        $921,151   $10,847,443   $11,768,594 
* Grapevine, TX
* Multi-family housing

22) Silver Brook II          $3,047,994      $1,035,100      $3,669,900      $585,519      $1,090,666    $4,199,853    $5,290,519 
* Grand Prairie, TX
* Multi-family housing

23) Estrada Oaks                     $0      $1,776,500      $7,573,500      $517,652      $1,846,524    $8,021,128    $9,867,652 
* Irving, TX
* Multi-family housing

24) Burney Oaks                      $0      $1,023,000      $8,277,000      $379,771      $1,061,758    $8,618,013    $9,679,771 
* Arlington, TX
* Multi-family housing

25) Cutter's Point                   $0      $1,944,000      $6,156,000      $590,442      $2,000,255    $6,690,187    $8,690,442 
* Richardson, TX
* Multi-family housing

26) The Courts on Pear Ridge         $0      $2,300,000      $9,200,000      $306,367      $2,358,770    $9,447,597   $11,806,367 
* Dallas, TX
* Multi-family housing
                            -------------------------------------------------------------   --------------------------------------

                            $24,010,838     $39,321,026    $176,830,426   $25,608,473      $40,761,281 $200,998,644  $241,759,925(1)
</TABLE>


<TABLE>
<CAPTION>
                                               Date of      Date           
  Description                  Acc. Dep         Const.    Acquired               Dep. Life
---------------------------------------------------------------------------------------------
<S>                           <C>             <C>          <C>                 <C>      

16) Park Village                 $126,428         1983       July 1, 1998          27.5 yrs.
* Bedford, TX
* Multi-family housing

17) Cottonwood                   $106,322         1985        July 9, 1998          27.5 yrs.
* Arlington, TX
* Multi-family housing

18) Devonshire                    $83,371         1978       July 17, 1998         27.5 yrs.
* Dallas, TX
* Multi-family housing

19) Pace's Point                 $194,112         1985       July 17, 1998         27.5 yrs.
* Lewisville, TX
* Multi-family housing

20) Newport                      $113,758         1988       July 24, 1998         27.5 yrs.
* Austin, TX
* Multi-family housing

21) Emerald Oaks                 $198,390         1986       July 24, 1998         27.5 yrs.
* Grapevine, TX
* Multi-family housing

22) Silver Brook II               $79,635         1984       July 24, 1998         27.5 yrs.
* Grand Prairie, TX
* Multi-family housing

23) Estrada Oaks                 $147,860         1983       July 27, 1998         27.5 yrs.
* Irving, TX
* Multi-family housing

24) Burney Oaks                   $52,635         1985       Oct. 28, 1998         27.5 yrs.
* Arlington, TX
* Multi-family housing

25) Cutter's Point                $40,770         1978       Oct. 29, 1998         27.5 yrs.
* Richardson, TX
* Multi-family housing

26) The Courts on Pear Ridge      $56,758         1988       Nov. 17, 1998         27.5 yrs.
* Dallas, TX
* Multi-family housing
                              ------------
                               $7,686,479
</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:

                    Balance at January 1, 1998                    $89,634,348
                    Real estate purchased                         139,728,766
                    Improvements, furniture and fixtures           12,396,811
                                                                --------------

                    Balance at December 31, 1998                 $241,759,925
                                                               ==============

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

                    Balance at January 1, 1998                     $1,898,003
                    Depreciation expense                            5,788,476
                                                               --------------

                    Balance at December 31, 1998                   $7,686,479
                                                               ==============
                                       
<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 29th
day of March, 1999.

                                     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.

<TABLE>
<CAPTION>

         SIGNATURE                                   CAPACITY                          DATE
         ---------                                   --------                          ----

<S>                                                  <C>                               <C>

/s/ Glade M. Knight                                  Director, President                March 29, 1999
---------------------------------------              Chief Executive
Glade M. Knight                                      Officer, Chief
                                                     Financial Officer
                                                     (and Principal
                                                     Accounting Officer)
                                                     


/s/ Penelope W. Kyle                                 Director                           March 29, 1999
---------------------------------------
Penelope W. Kyle


/s/ Bruce H. Matson                                  Director                           March 29, 1999
---------------------------------------
Bruce H. Matson


/s/ Lisa B. Kern                                     Director                           March 29, 1999
---------------------------------------
Lisa B. Kern

</TABLE>



<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. 333-10635).

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).

                      The Company  agrees to furnish the Commission on request a
                      copy of any  instrument  with respect to long-term debt of
                      the  Company  or its  subsidiaries  the  total  amount  of
                      securities  authorized  under which does not exceed 10% of
                      the total assets of the Company and its  subsidiaries on a
                      consolidated basis.

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.
                      This is a  management  contract  or  compensatory  plan or
                      arrangement required to be filed as an exhibit pursuant to
                      Item 14(c) of Form 10-K.  (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. This is a management contract
                      or compensatory  plan or arrangement  required to be filed
                      as an  exhibit  pursuant  to  Item  14(c)  of  Form  10-K.
                      (Incorporated  by  reference  to Exhibit 10.5 filed in the
                      registrant's  registration s statement on Form S-11;  File
                      No. 333-10635).


<PAGE>




Exhibit Number        Description

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).

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 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).

<PAGE>


Exhibit Number        Description

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).

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).

10.28                 Property  Management  Agreement for Main Park  Apartments.
                      (Incorporated  by  reference  to  Exhibit  10.2 to Current
                      Report  on Form  8-K  dated  February  4,  1998  of  Apple
                      Residential Income Trust, Inc.; File No. 333- 10635).

10.29                 Property Management  Agreement for Timberglen  Apartments.
                      (Incorporated  by  reference  to  Exhibit  10.2 to Current
                      Report  on Form  8-K  dated  February  13,  1998 of  Apple
                      Residential Income Trust, Inc.; File No. 333- 10635)

10.30                 Property Management Agreement for Copper Ridge Apartments.
                      (Incorporated  by  reference  to  Exhibit  10.2 to Current
                      Report  on  Form  8-K  dated   March  31,  1998  of  Apple
                      Residential Income Trust, Inc.; File No. 333-10635).

10.31                 Property Management Agreement for Bitter Creek Apartments.
                      (Incorporated  by  reference  to  Exhibit  10.2 to Current
                      Report on Form 8-K dated May 8, 1998 of Apple  Residential
                      Income Trust, Inc.; File No. 0-23983).

10.32                 Property Management  Agreement for Summer Tree Apartments.
                      (Incorporated  by  reference  to  Exhibit  10.2 to Current
                      Report on Form 8-K dated June 2, 1998 of Apple Residential
                      Income Trust, Inc.; File No. 0-23983).

10.33                 Property Management Agreement for Park Village Apartments.
                      (Incorporated  by  reference  to  Exhibit  10.2 to Current
                      Report on Form 8-K dated July 1, 1998 of Apple Residential
                      Income Trust, Inc.; File No. 0-23983).

10.34                 Certificate  of  Limited  Partnership  for  Apple  REIT II
                      Limited Partnership. (Incorporated by reference to Exhibit
                      10.1 to  Current  Report on Form 8-K dated July 9, 1998 of
                      Apple Residential Income Trust, Inc.; File No. 0- 23983).


<PAGE>



Exhibit Number        Description

10.35                 Certificate  of  Limited  Partnership  for Apple  REIT III
                      Limited Partnership. (Incorporated by reference to Exhibit
                      10.2 to  Current  Report on Form 8-K dated July 9, 1998 of
                      Apple Residential Income Trust, Inc.; File No. 0- 23983).

10.36                 Certificate  of  Limited  Partnership  for  Apple  REIT IV
                      Limited Partnership. (Incorporated by reference to Exhibit
                      10.3 to  Current  Report on Form 8-K dated July 9, 1998 of
                      Apple Residential Income Trust, Inc.; File No. 0- 23983).

10.37                 Certificate  of  Limited  Partnership  for  Apple  REIT  V
                      Limited Partnership. (Incorporated by reference to Exhibit
                      10.4 to  Current  Report on Form 8-K dated July 9, 1998 of
                      Apple Residential Income Trust, Inc.; File No. 0- 23983).

10.38                 Certificate  of  Limited  Partnership  for  Apple  REIT VI
                      Limited Partnership. (Incorporated by reference to Exhibit
                      10.5 to  Current  Report on Form 8-K dated July 9, 1998 of
                      Apple Residential Income Trust, Inc.; File No. 0- 23983).

10.39                 Limited  Partnership  Agreement  for Apple REIT II Limited
                      Partnership. (Incorporated by reference to Exhibit 10.6 to
                      Current  Report  on Form 8-K  dated  July 9, 1998 of Apple
                      Residential Income Trust, Inc.; File No. 0-23983).

10.40                 Limited  Partnership  Agreement for Apple REIT III Limited
                      Partnership. (Incorporated by reference to Exhibit 10.7 to
                      Current  Report  on Form 8-K  dated  July 9, 1998 of Apple
                      Residential Income Trust, Inc.; File No. 0- 23983).

10.41                 Limited  Partnership  Agreement  for Apple REIT IV Limited
                      Partnership. (Incorporated by reference to Exhibit 10.8 to
                      Current  Report  on Form 8-K  dated  July 9, 1998 of Apple
                      Residential Income Trust, Inc.; File No. 0- 23983).

10.42                 Limited  Partnership  Agreement  for Apple  REIT V Limited
                      Partnership. (Incorporated by reference to Exhibit 10.9 to
                      Current  Report  on Form 8-K  dated  July 9, 1998 of Apple
                      Residential Income Trust, Inc.; File No. 0- 23983).

10.43                 Limited  Partnership  Agreement  for Apple REIT VI Limited
                      Partnership.  (Incorporated  by reference to Exhibit 10.10
                      to Current  Report on Form 8-K dated July 9, 1998 of Apple
                      Residential Income Trust, Inc.; File No. 0- 23983).

10.44                 Property  Management  Agreement  for  Cottonwood  Crossing
                      Apartments. (Incorporated by reference to Exhibit 10.18 to
                      Current  Report  on Form 8-K  dated  July 9, 1998 of Apple
                      Residential Income Trust, Inc.; File No. 0- 23983).

10.45                 Property Management Agreement for Pace's Point Apartments.
                      (Incorporated  by  reference  to Exhibit  10.19 to Current
                      Report on Form 8-K dated July 9, 1998 of Apple Residential
                      Income Trust, Inc.; File No. 0-23983).

10.46                 Property   Management    Agreement   for   Pepper   Square
                      Apartments. (Incorporated by reference to Exhibit 10.20 to
                      Current  Report  on Form 8-K  dated  July 9, 1998 of Apple
                      Residential Income Trust, Inc.; File No. 0-23983).

10.47                 Property Management Agreement for Emerald Oaks Apartments.
                      (Incorporated  by  reference  to Exhibit  10.21 to Current
                      Report on Form 8-K dated July 9, 1998 of Apple Residential
                      Income Trust, Inc.; File No. 0-23983).

10.48                 Property   Management   Agreement  for  Hayden's  Crossing
                      Apartments. (Incorporated by reference to Exhibit 10.22 to
                      Current  Report  on Form 8-K  dated  July 9, 1998 of Apple
                      Residential Income Trust, Inc.; File No. 0-23983).

10.49                 Property  Management  Agreement  for  Newport  Apartments.
                      (Incorporated  by  reference  to Exhibit  10.23 to Current
                      Report on Form 8-K dated July 9, 1998 of Apple Residential
                      Income Trust, Inc.; File No. 0-23983).

10.50                 Property Management Agreement for Estrada Oaks Apartments.
                      (Incorporated  by  reference  to Exhibit  10.24 to Current
                      Report on Form 8-K dated July 9, 1998 of Apple Residential
                      Income Trust, Inc.; File No. 0-23983).


<PAGE>



Exhibit Number        Description

10.51                 Property Management Agreement Subcontract for Pace's Point
                      Apartments. (Incorporated by reference to Exhibit 10.25 to
                      Current  Report  on Form 8-K  dated  July 9, 1998 of Apple
                      Residential Income Trust, Inc.; File No. 0- 23983).

10.52                 Property  Management  Agreement   Subcontract  for  Pepper
                      Square  Apartments.  (Incorporated by reference to Exhibit
                      10.26 to Current  Report on Form 8-K dated July 9, 1998 of
                      Apple Residential Income Trust, Inc.; File No. 0-23983).

10.53                 Property Management Agreement Subcontract for Emerald Oaks
                      Apartments. (Incorporated by reference to Exhibit 10.27 to
                      Current  Report  on Form 8-K  dated  July 9, 1998 of Apple
                      Residential Income Trust, Inc.; File No. 0-23983).

10.54                 Property  Management  Agreement  Subcontract  for Hayden's
                      Crossing Apartments. (Incorporated by reference to Exhibit
                      10.28 to Current  Report on Form 8-K dated July 9, 1998 of
                      Apple Residential Income Trust, Inc.; File No. 0-23983).

10.55                 Property  Management  Agreement  Subcontract  for  Newport
                      Apartments. (Incorporated by reference to Exhibit 10.29 to
                      Current  Report  on Form 8-K  dated  July 9, 1998 of Apple
                      Residential Income Trust, Inc.; File No. 0- 23983).

10.56                 Property Management  Agreement for Burney Oaks Apartments.
                      (Incorporated  by  reference  to  Exhibit  10.3 to Current
                      Report  on Form  8-K  dated  October  28,  1998  of  Apple
                      Residential Income Trust, Inc.; File No. 0-23983).

10.57                 Property   Management   Agreement  for   Brandywine   Park
                      Apartments.  (Incorporated by reference to Exhibit 10.4 to
                      Current Report on Form 8-K dated October 28, 1998 of Apple
                      Residential Income Trust, Inc.; File No. 0-23983).

10.58                 Property Management Agreement for The Courts on Pear Ridge
                      Apartments.  (Incorporated by reference to Exhibit 10.2 to
                      Current  Report on Form 8-K  dated  November  17,  1998 of
                      Apple Residential Income Trust, Inc.; File No. 0-23983).

10.59                 Property Management Agreement for Sierra Ridge Apartments.
                      (Incorporated  by reference to Exhibit 10.2 to the Current
                      Report  on  Form  8-K  dated  January  5,  1999  of  Apple
                      Residential Income Trust, Inc.; File No. 0-23983).

10.60                 Property  Acquisition/Disposition  Agreement dated January
                      1, 1999. (Incorporated by reference to Exhibit 10.3 to the
                      Current  Report on Form 8-K dated January 5, 1999 of Apple
                      Residential Income Trust, Inc.; File No. 0- 23983).

10.61                 Property   Management   Agreement   for   Grayson   Square
                      Apartments.  (Incorporated by reference to Exhibit 10.2 to
                      Current Report on Form 8-K dated February 1, 1999 of Apple
                      Residential Income Trust, Inc.; File No. 0-23983).

10.62                 Certificate  of  Limited  Partnership  of  Apple  REIT VII
                      Limited Partnership. (Incorporated by reference to Exhibit
                      10.3 to Current  Report on Form 8-K dated February 1, 1999
                      of Apple  Residential  Income  Trust,  Inc.;  File No.  0-
                      23983).

10.64                 Stock  Option  Agreement  dated  November 9, 1998  between
                      Glade M. Knight and Apple  Residential  Income Trust, Inc.
                      This is a  management  contract  or  compensatory  plan or
                      arrangement required to be filed as an exhibit pursuant to
                      Item 14(c) of Form 10-K. FILED HEREWITH.

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

23                    Consent of Independent Auditors. FILED HEREWITH

27                    Financial Data Schedule.  FILED HEREWITH

99.1                  Pages 3  through  6 of the  Current  Report on Form 8-K of
                      Apple  Residential  Income Trust,  Inc.  dated February 4,
                      1998. FILED HEREWITH.

99.2                  Pages 3  through  6 of the  Current  Report on Form 8-K of
                      Apple  Residential  Income Trust,  Inc. dated February 13,
                      1998. FILED HEREWITH.
<PAGE>

Exhibit Number        Description

99.3                  Pages 3  through  7 of the  Current  Report on Form 8-K of
                      Apple Residential Income Trust, Inc. dated March 31, 1998.
                      FILED HEREWITH.

99.4                  Pages 4  through  8 of the  Current  Report on Form 8-K of
                      Apple  Residential  Income Trust,  Inc. dated May 8, 1998.
                      FILED HEREWITH.

99.5                  Pages 4  through  8 of the  Current  Report on Form 8-K of
                      Apple  Residential  Income Trust, Inc. dated June 2, 1998.
                      FILED HEREWITH.

99.6                  Pages 4  through  8 of the  Current  Report on Form 8-K of
                      Apple  Residential  Income Trust, Inc. dated July 1, 1998.
                      FILED HEREWITH.

99.7                  Pages 7 through  29 of the  Current  Report on Form 8-K of
                      Apple  Residential  Income Trust, Inc. dated July 9, 1998.
                      FILED HEREWITH.

99.8                  Pages 4 through  12 of the  Current  Report on Form 8-K of
                      Apple  Residential  Income Trust,  Inc.  dated October 28,
                      1998. FILED HEREWITH.

99.9                  Pages 3  through  7 of the  Current  Report on Form 8-K of
                      Apple  Residential  Income Trust,  Inc. dated November 17,
                      1998. FILED HEREWITH.