UNITED STATES
               SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549
                           FORM 10-KSB

                           (Mark One)

    [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                           SECURITIES
                          EXCHANGE ACT
                     OF 1934 [NO FEE REQUIRED]

          For the fiscal year ended September 30, 1997

  [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES EXCHANGE
                  ACT OF 1934 [NO FEE REQUIRED]

                Commission File Number:  0-27552

                          REALCO, INC.
     (Exact name of registrant as specified in its charter)

             New Mexico                             85-0316176
    State or other jurisdiction of               (I.R.S.Employer
 incorporation or other organization           Identification No.)

  1650 University Boulevard, N.E., Suite 5-100, Albuquerque, New
                          Mexico, 87102
  ____________________________________________________________
    (Address of principal executive offices)       (Zip Code)


Registrant's telephone number, including area code: 505-242-4561
                                
Securities registered pursuant to Section 12(b) of the Act: None
                                
   Securities registered pursuant to Section 12(g) of the Act:

                    No Par Value Common Stock
                      ____________________
                        (Title of Class)

Check   whether the issuer (1) filed all reports  required to  be
filed  by  Section 13 or 15(d) of the  Exchange  Act  during  the
past  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____.

Check if there is no disclosure of delinquent  filers in response
to Item 405 of Regulation  S-B is not  contained  in  this  form,
and  no   disclosure   will   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-
KSB or any amendment to this Form 10-KSB. [X]

State   issuer's  revenues  for  its  most  recent  fiscal  year:
$30,550,788

State the  aggregate  market  value of the voting  stock held  by
non-affiliates computed by reference  to the price at  which  the
stock  was  sold,  or the average bid and asked  prices  of  such
stock,   as  of a specified  date within the past  60  days:   On
December   23, 1997,  based on the price  quoted by NASDAQ,   the
market value was $5,585,000.

The  number  of  shares  outstanding of each of the  Registrant's
classes of voting stock, as of December 23, 1997 , was:

     No Par Value Common:     2,780,000 shares.
     Series A Preferred:         82,569
     Series B Preferred:        212,859
     Series D Preferred:         23,919

PART I

ITEM 1:  DESCRIPTION OF BUSINESS

General

The   Registrant's  principal  executive  offices are located  at
1650  University Blvd. NE, Suite 5-100,  Albuquerque,  New Mexico
87102,  and  its telephone number at that location  is  (505)242-
4561.

The  Registrant   was  organized in 1983 as a private  investment
company providing funds to others in the form of loans or equity.
Through   its   wholly  owned subsidiaries,  it  engaged  in  the
business  of   arranging  and  participating  in  secured   loans
involving  various  forms  of  real  estate   acquisitions    and
ventures.  Beginning  in October, 1994,  it changed its  business
strategy   and  developed a plan to create a financial  group  of
interrelated   companies to provide a full range of  real  estate
services.

In    March  ,   1995,   the  acquisited   several   wholly-owned
subsidiaries   including  Charter Building and Development  Corp.
(Charter),  a  residential home building contractor  and  Hooten-
Stahl,   Inc.(Hooten/Stahl)     a    real    estate     brokerage
business. The acquired corporations's shareholders exchanged  all
of  their  Common Stock, representing  approximately 98%  of  the
outstanding  stock,  for an aggregate of  82,569  shares  of  the
Registrant's   Series A Preferred Stock and  228,859   shares  of
the  Registrant's  Series B Preferred  Stock.

Following   the  acquisition  of Charter and  Hooten/Stahl,   the
Registrant,   in   February  , 1996,  successfully   concluded  a
public   offering of securities,  at which time Charter  began  a
marketing  effort  to obtain agreements with additional  builders
in  the  Albuquerque  area,  to  build  and  market  homes  under
fee arrangements.  Charter has secured two such contracts whereby
Charter is building homes  under  the  trade  name  of  each   of
the    builders.    In    addition   to   a   construction   fee,
Hooten/Stahl has secured an exclusive marketing agreement for the
marketing of those Charter built branded homes.

In    April  ,  1996,   the   Registrant  commenced   residential
construction  lending  activity.  Its lending  subsidiary,  Great
American  Equity Corporation, Inc ("GAEC"), has entered into  two
such participation agreements with local banks,  which agreements
are   contemplated   to  provide  an  annual   residential   home
construction  funding budget of approximately $24 million.  As of
September  30, 1997,  the  Registrant  and its bank partners  had
approximately  $3,115,000 in  outstanding loans  and/or   funding
commitments,    of   which   approximately   $779,000    is   the
Registrant's   participation.  The  Registrant  had  expected  to
commit   approximately $3 million of its funds to  this  project,
while the banks will provide approximately $9 million of matching
funds,  however, new  home   construction   is   lagging   behind
the  previous  year  and  consequently the  Registrant  does  not
anticipate funding its lending capacity during the ensuing fiscal
year.   This  kind of loan  generally  matures within six  months
and   the   Registrant   anticipates  that  upon   repayment   of
outstanding    loans  the  funds  will  be  reinvested   in   the
continuation of this lending activity.


Also  in  April ,  1996,  the  Registrant's subsidiary PHS,  Inc.
entered into a joint venture with CTX Mortgage  Company,  a  full
service   residential   mortgage  provider.   The  joint  venture
began  operations  at  each  of  its  three  Hooten/Stahl  branch
locations.   By  October  1996,  the  joint  venture   was  fully
operational   and  PHS, Inc. recorded  approximately $249,000  as
its share of  income for the year ended September, 1997.

In    July  ,  1996,   the   Registrant   acquired   all  of  the
outstanding   and issued common shares of stock of  Amity,  Inc.,
(Amity),  an  Albuquerque,  New Mexico based  general  contractor
specializing  in  commercial construction,  including  commercial
tenant  improvements and residential remodeling.  The  Registrant
exchanged  24,297  shares of its Series D  Convertible  Preferred
Stock, $10.00 per share liquidation value,  bearing 3% cumulative
dividend,  for all of the issued and  outstanding Amity  shares.

In   January , 1997  the Registrant acquired for cash and  notes,
Mull  Realty  Co.,  Inc., a residential and commercial  brokerage
company  which  primarily  conducts  its  business  in  Northwest
Phoenix  and  to  a  lesser extent, in central Phoenix,  Arizona.
This   company  operates  under  the  trade  name  of  Prudential
Preferred  Properties.  For the twelve months ended December  31,
1997,  the  company  is expected to exceed the  projected  pretax
earnings  threshold associated with the purchase agreement.   The
company is currently seeking new acquisition opportunities in the
greater  Phoenix area.  The Registrant expects to  introduce  its
residential  mortgage  origination  business  into  the  Phoenix,
Arizona  area by placing at least one new office of PHS  Mortgage
Co.,   an   affiliate,  within  Prudential  Preferred  Properties
offices.

On  May 1, 1997, the Registrant acquired for cash selected assets
and  liabilities of First Commercial Real Estate Services,  Inc.,
an  Albuquerque,  New Mexico based commercial brokerage  company.
Since  the  acquisition, First Commercial has introduced  several
construction  and  financing  opportunities  to  other   of   the
Registrants  subsidiaries and affiliates including the  formation
within First Commercial of a property management division.

On August 1, 1997, the Registrant participated in the purchase of
all  outstanding  common stock of Miller  &  Schroeder,  Inc.,  a
financial  services  firm, by MI Acquisition Corporation,  (MI)..
The   Registrant  through  a  combination  of  Company  cash  and
borrowings  acquired approximately 13% ownership of MI   and  the
Registrant's  President  has  been  appointed  to  its  Board  of
Directors.  The Registrant and Miller & Schroeder Financial  have
begun to cross market some of its services and products.

Operating Strategy

The   Registrant's  business  activities  are  located   in   the
metropolitan  area   of  Albuquerqe,  New  Mexico  and   Phoenix,
Arizona.   Since February of 1996, the  Registrant  has  expanded
its financial, construction  and brokerage activities to its core
of  business in a continuing effort to become a one  stop  source
for   small  to   medium  size  independent  home  builders   and
developers who may need to acquire financing, marketing and sales 
support.

The   Registrant   believes  that  it  can   capitalize   on  its
operating   methods and strategies,  which it is  introducing  to
its  existing   markets,   for expansion  to  other  geographical
areas.  For  example, the Registrant believes that  expansion  to
other   markets  may be  achieved  by its  acquisition  of either
real  estate  or building  companies.  Once such  a  business  is
acquired,   the  strategy will be to export  to its  new   market
the  entire  array  of  business  activities  of the Registrant.

On   a  continuing  basis,  the  Registrant  has  been  exploring
a    variety   of  acquisition   opportunities,   consisting   of
service,     product    and    distribution   businesses.     The
Registrant's  acquisition  strategy  complements   the   plan  of
internal growth charted for its existing activities.

Inventory Acquisition and Development

During  the fiscal year ended  September 30, 1997 the  Registrant
acquired  a  parcel  of  undeveloped   land  for  development  of
residential golf home sites located in Rio Rancho, New Mexico and
fourteen  fully developed home sites in the Northeast   foothills
of  Albuquerque, New Mexico.  The undeveloped  land  purchase and  
development costs are  completely bank financed while  the  fully  
developed  building  homesite   purchased   were   financed  by a 
combination  of  the Registrant's working capital  funds and bank 
financing.

Financing  of  existing residential homesite inventories  of  the
Registrant  are generally first position secured loans which  are
generally     provided   by   local   banks   with    whom    the
Registrant    has    credit  facilities,   on  such   terms   and
conditions as are customary in the  geographical market in  which
the   Registrant  does  business.  Subordinate  second   position
secured   loans  are generally  provided by  a   combination   of
Registrant   funds  and outside third party  participants.   This
tier  of  subordinated   debt  is generally  granted  an  "Equity
Kicker"  in  the form of additional  preferential   payments  per
residential  lot sold,  in addition  to the return of   principal
and  interest.  Interest,  terms  and  conditions  are  customary
in  the   market   in  which  the Registrant does  business.  The
Registrant  is  sometimes  requested   by   the   first  position
lender, (bank) to guarantee the entire debt obligations.

The  Registrant  has  from  time  to  time  acquired  residential
building   home   sites   by  utilizing   its   available   cash,
consequently,   a   significant  portion   of   the   Registrants
residential homesite building inventory is unencumbered.

On  July  29,  1996,   Charter,  entered into  a  joint   venture
agreement,  (Success Venture),  in which  Charter  became  a  50%
joint   venturer.  The  joint  venture acquired undeveloped  land
located  in  the Northeast quadrant of Albuquerque,  New  Mexico,
and  develope   82  residential  home sites.  The purchase  price
of the  undeveloped  land was  $2,825,000.  The land purchase and
funds  required to fully  develop the property were borrowed from
a  bank  and  from the seller of the property.    The  Registrant
executed a first  mortgage and note on the property in the amount
of  $2,500,000   and a second mortgage and note  in the amount of
$1,556,000.   At September 30, 1997, the balance of the  combined
first   and   second  mortgage  liabilities  were   approximately
$760,000.

As  of  September 30, 1997,  the  Registrant  owned or controlled
through    various  joint  venture   arrangements  and   purchase
agreements,   over 230 developed or currently under  development,
home  sites  within  the Albuquerque,  New  Mexico   metropolitan
area.   Inventory  of home sites  controlled by the   Registrant,
are  utilized by Charter and are also available for sale to other
home builders and individuals.

Hooten/Stahl     currently    represents     approximately     50
independent   home  custom builders in  an  exclusive   marketing
arrangement.   These   builders are part of  a  "Builders  Group"
within  the Hooten/Stahl client base. Any of the builders in  the
"Builders  Group"  may  draw  on  the  available  building   site
inventory   controlled  by  the  Registrant.  In  addition,   any
independent qualified builder within  the  "Builders  Group"  may  
secure residential   construction   loans from  the  Registrant's   
GAEC lending subsidiary.

Competition and Market Factors

Each  of  the   Registrant's  subsidiaries  competes  principally
on  the  basis of reputation in the community in which it serves.
However,  the  Registrant  competes  in  a   highly   competitive
environment  typical  of all  real  estate  dependent  companies.
All  of  the  Registrant's  subsidiaries compete with  companies,
nearly  all of which have greater  financial  resources than  the
Registrant.  It is for that reason that the Registrant  continues
to  undertake  to form strategic  alliances with other  companies
with greater financial resources and expertise.

The   Registrant   believes   that  the  host  of   services   it
currently  offers will appeal to small and medium  size  builders
and    developers.    Since   its   Initial   Public    Offering,
Hooten/Stahl   has  nearly  doubled  the number  of   independent
custom  builders  in  its "Builder Group".  The  ability  of  the
Registrant  to  expand  its  business  is  due  in  part  to  the
addition  of new  capital  from the public securities offering.

The real estate  industry,  and the  Registrant's  business,   is
cyclical  and  is  affected  by  consumer   confidence    levels,
prevailing   economic  conditions  and interest   rates.    Other
factors     effecting     business    include    increases     in
construction   costs,  increases in costs  associated  with  home
ownership   such   as  property  taxes,   changes   in   consumer
preferences  and  demographic  trends.  The Registrant   believes
that  its  strategy of vertical  integration has  allowed  it  to
remain   profitable during downturns in the cycle and attempt  to
build  a  dominance  in its markets during such  times,  however,
there can be no assurance that this strategy will be successful.


Employees

As  of  September  30,  1997,  the   Registrant,   including  its
subsidiaries,  had 112 full and part time  employees.  They  were
employed  as  follows: corporate, 8 full-time:   residential  and
commercial  construction,  30 full-time  and  2  part-time;   and
real  estate  brokerage,  47  full-time  and 25   part-time.   In
addition, real estate brokerage  has   approximately  370   sales
associates   who  are  independent contractors.  The construction
segment   of   the   Registrant   normally    hire    independent
subcontractors  to provide the skilled labor needed to  construct
their projects.

ITEM 2: DESCRIPTION OF PROPERTIES

The   Registrant    leases,   on  a   month   to   month   basis,
approximately   6,600 square feet of office space at  $4,100  per
month for its executive  and construction offices.  Mr. James  A.
Arias,  the  Registrant's  President, is  a  part  owner  of  the
building  in  which  the  executive  offices  are  located.   The
Registrant' lease arrangement is considered a below market  lease
as  to  terms  and square foot cost when compared  to  all  other
leases currently in effect within the building.

The  Registrant  leases  space for three  real  estate  brokerage
offices,    all  located  within  the  Albuquerque,  New   Mexico
metropolitan area. Leases include space ranging from 8,600 square
feet  to 13,900 square feet at monthly rental costs ranging  from
$8,600  per  month to $13,900 per month. One lease  is  with  the
Registrant's    Executive   Vice  President   and   Chairman   of
Hooten/Stahl,   Mr. Bill E. Hooten.  Prior to entering  into  the
lease  with  Mr. Hooten,  the Registrant  acquired an independent
determination  of fairness and reasonableness  of the  lease  and
its  annual   rental  of  $103,200.  The lease  with  Mr.  Hooten
expired on January 31, 1997, and has continued to be in effect on
a  month to month basis. Lease terms and conditions have remained
unchanged  throughout the fiscal year and are expected to  remain
unchanged for the ensuing fiscal year.

ITEM 3: LEGAL PROCEEDINGS

The  Registrant  is  subject to certain  legal  claims  from time
to  time  and is involved in litigation  that has arisen  in  the
ordinary   course  of  its  business.  It  is  the   Registrant's
opinion  that  it  either has adequate  legal  defenses  to  such
claims  or that any liability that might be incurred due to  such
claims  will  not, in the aggregate,  exceed the  limits  of  the
Registrant's  insurance policies or  otherwise  result   in   any
material   adverse  effect  on  the  Registrant's  operations  or
financial  position. The only litigation in which the  Registrant
is  involved  that  might be considered other  than  routine  and
ordinary is the following:

On   April   11,   1997,  the  City  of  Albuquerque   instituted
condemnation proceedings related to a parcel of land  upon  which
the  registrant  has  a joint venture financing  arrangement  for
development.   This  matter  is  more  fully  described  in   the
Registrants  10-QSB  filing of June 30,  1997.   There  has  been
continuing correspondence, verbally and written between the legal
counsel  for  both  parties in an effort to  settle  the  matter,
however,  no settlement has been achieved and litigation  may  be
necessary to determine the value of the property.

ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No   matters   were   submitted  to a vote of  security   holders
during the fourth quarter of the fiscal year ended September  30,
1997.

PART II

ITEM  5:  MARKET  FOR  REGISTRANT'S  COMMON  EQUITY  AND  RELATED
STOCKHOLDER MATTERS

The Registrant's  common stock is  traded  on the Nasdaq National 
Market tier of The Nasdaq Stock  market  and  is  quoted  on  the 
National  Association of Securities Dealers  Automated  Quotation 
System  ("NASDAQ") under the symbol RLCO.   The  following  table 
sets forth from   February,   1996  through  September  30, 1997,  
the   range  of  the  high  and  low last reported sale prices as 
reported by NASDAQ. 

                           High       Low        High      Low
                           ____       ___        ____      ___ 

                            Fiscal 1997           Fiscal 1996

          First Quarter    3 5/8       2              N/A
          Second Quarter   3 1/8       2          6        4 5/8
          Third Quarter    2 7/8       2 1/4      5 3/4    5 3/8
          Fourth Quarter   4           2 1/4      4        3 1/8

On  December 23, 1997,  the last sale price for the common stock,
as  reported by NASDAQ,  was $2.75 per share. As of December  23,
1997,  there were  approximately  700 beneficial holders  of  the
common stock.

The transfer Agent for the Registrant's  Common Stock is American
Stock  Transfer  & Trust Registrant,  40 Wall Street,   New  York
City, New York 10005,  telephone:  (718) 921-8275.


The   Registrant has not paid any dividends on its  Common  Stock
since  its initial public offering in February, 1996 and  expects
that  for  the  foreseeable future it will  follow  a  policy  of
retaining    earnings   in  order  to  finance   the    continued
development  of its business.  Payment of dividends is within the
discretion  of   the  Registrant's  Board of Directors  and  will
depend  upon the earnings,  capital requirements  and   operating
and   financial   condition  of  the   Registrant,   among  other
factors.


ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

Operation by Segment

Revenues  of  the  Company are generated  through  the  following
segments:   (1)  real  estate  brokerage  both  residential   and
commercial;  (2)  construction both residential  and  commercial,
including   land  development  activities,  and   (3)   financing
activities which include residential construction lending through
participation   agreements  with  banks,  land  acquisition   and
development loans for single family residential subdivisions, and
from recognition of revenues generated by other entities in which
the  Company  owns  equity interests whose  businesses  currently
consist of commercial and residential mortgage lending, and  to a
minor  extent, property and casualty insurance.  The Company  may
participate  from  time  to time as a 50% joint  venture  partner
while  affiliated   companies   may  act as a financier, mortgage 
banker or insurance agent to the joint venture.     The   Company 
recognizes its  share of income from affiliate investee's profits 
and losses on the equity recognition method.

The   Company   currently  operates  its  business   within   the
Albuquerque, New Mexico and Phoenix, Arizona metropolitan  areas.
Since  inception, management has planned expanding the  Company's
businesses  and  business concepts to other  geographical  areas,
preferably within the southwest, that have similar demographics.

Because  of  the  various  businesses in  which  the  Company  is
engaged, it  has  defined  the  following  business  segments for 
purposes   of  accounting for revenue, costs and   expenses: Real 
Estate  Brokerage  Segment,  Construction  and  Land  Development 
Segment  and   Financial   Services  Segment.  These areas of the 
Company's business are more fully discussed below.

Real Estate Brokerage Segment:

The   real  estate  brokerage  segment  consists  of   Prudential
Hooten/Stahl,  Realtors,  Prudential Preferred  Realty  (formerly
Mull-Smith,  Inc.)  and  First Commercial Real  Estate  Services,
Inc..    The  Company  transferred  ownership  of  the  preceding
subsidiaries  to another  existing   subsidiary  now  named  Real
Estate  Brokerage Services, Inc. (REBS)  during the  year.   This
transfer  did  not  affect operations of this  segment;  however,
operations  for  1997 are not comparable  to 1996  because   1997
includes  Prudential Preferred Realty for nine months  and  First
Commercial Real Estate Services, Inc. for five months.

Total   revenues  from  brokerage  commissions  and   fees   from
unaffiliated  customers increased  $4,001,000 to $14,487,000   in
1997,  an  increase  of   38% over 1996.  The  Arizona  brokerage
company  provided  commissions and fees of  $5,116,000  for  it's
nine  months   operations  in  1997.  The  Albuquerque  companies
(including  $388,000   of  commercial brokerage  fees  for  1997)
realized  an  overall   reduction  in  commissions  and  fees  to
unaffiliated customers of $1,115,000 to $9,370,000,  a  reduction
of  11%  compared to  1996.   This reduction followed the general
trend  for  the Albuquerque market for the period.  In  addition,
Albuquerque commissions paid to independent contractor agents and
the  operating  and administrative  expenses  were  71%  and  34%
respectively  of  the 1997 overall commission income;  with  each
being  an  increase over the comparable  70% and 30%  ratios  for
Albuquerque  in 1996.   These cost increases were partly  due  to
increased  competition  for  top agents  and  increased  services
provided  all  agents  and  customers all in  efforts  to  retain
market  share.    The Albuquerque companies realized an operating
loss  of  ($541,000) for 1997 compared to an  operating  loss  of
($354,000)  in  1996.  The Arizona company, Prudential  Preferred
Properties,  contributed  $479,000  in  operating  profits   with
commissions paid agents and operating and administrative expenses
running  69%  and 22% respectively.  The lower commission  splits
and  operating  expenses reflect the Phoenix market  where  sales
volumes continue high and competition for agents (including semi-
retired  agents) and the demand for expensive operating  services
have not been as strong.

Market  conditions in residential resale activity  have  recently
improved slightly in the Albuquerque area and estimates are for a
continued  modest  increase  for the  coming  year.   Competition
continues  strong,   especially in services  rendered  customers.
There have been recent mergers of  local realtors  reportedly  to
afford    enhanced  services  in  this  new  internet  world   of
residential  real estate information.  This has  also  apparently
caused  a drop in the total number of agents remaining active  in
the local area.  Albuquerque management is currently implementing
changes  to  increase  market share  by  the  addition  of  lower
commission split agents, while reducing the percentage and amount
of  operating  costs.   Management anticipates that such  changes
could   significantly  reduce  the  operating   loss   from   the
Albuquerque residential brokerage activities for the year  ending
in 1998.  The Arizona company anticipates continued good earnings
and is looking for opportunities to expand business operations in
the Phoenix market.

The Albuquerque commercial brokerage activity did not  contribute
significantly for its five months operations in 1997, producing a
pre-tax  loss of  ($45,000).   However, the addition of  property
management  personnel and  the integration of brokerage  activity
with   financing  sources  and  commercial  construction  company
capabilities using value engineering, all within the  Registrant,
should  enhance  the  profit contribution  in  the  near  future.
Success  in this latter activity could lead management to  export
this combination to other market areas.

Assets  dedicated to the real estate brokerage segment  increased
$1,821,000 to $3,456,000 in 1997 over 1996,  primarily due to the
acquisition  of  the  Arizona residential real  estate  brokerage
company  and  the  Albuquerque commercial real  estate  brokerage
operations.  Depreciation expense increased from these  additions
and from capital expenditures in 1997.


Construction and Land Development Segment:

The  construction and land development segment operates   in  the
Albuquerque and  Rio Rancho, New Mexico metropolitan  area,   and
consists of Charter  and Amity.   This segment also includes  The
Company's equity in earnings of  joint ventures where the Company
or  a wholly-owned subsidiary  owns a 50% non-management interest
in  land development activities which involve the acquisition  of
raw  land  for development into residential home site lots  which
may be sold to Charter  or to other builders.  The other builders
generally  have their homes marketed by Prudential  Hooten/Stahl,
Inc.   and  may  have  construction  financing  through  programs
offered by the the Registrant's financial services group.

Revenues  from  residential  construction  by  Charter  increased
$602,000  to $11,291,000  in 1997, an increase of  6% over  1996.
Operating  profit for Charter declined $521,000 from a profit  of
$423,000  in 1996 to a loss of  ($98,000) for 1997,  a decline of
123%  from  1996.    Costs of construction for Charter  increased
$771,000  to $10,597,000  in 1997,  and operating costs increased
$108,000  to  $791,000  in  1997.   Costs  of  construction   and
operating costs were 94% and 7% of construction revenues in  1997
compared  to  90% and 6% respectively for 1996.  A  1997  general
decline in the new home market in Albuquerque, especially in  the
$150,000  to  $200,000 price range for Charter homes, contributed
to  the  significant  drop in operating profit  from  residential
construction.  Models and speculative (spec) homes completed in a
newly  opened west side subdivision were several thousand dollars
higher  than  comparable sized houses offered by other  builders.
Revisions   were  made  during  the  year,  however,  such  homes
required  discounted prices and the ongoing cost  of  advertising
and  maintaining  models and specs added to  operating  costs  in
relation  to revenues.    Charter follows the completed  contract
method  for residential home building and sales,  and accordingly
capitalizes interest and property taxes into inventory  and  cost
of  sales.   Charter's inventory of developed  lots  and  models,
specs   and  presold  homes  under  construction  average   about
$10,000,000.    During 1997,  a significant portion of  inventory
consisted  of  slow  moving developed lots and  models  and  spec
homes,   which were accumulating capitalized interest, taxes  and
other  carrying  costs and thereby reducing  gross  margins  when
sold.

Charter management has redesigned models with reduced prices  per
square foot in order to better meet competition and be closer  to
the  price range that is expected to remain fairly strong in  the
Albuquerque, New Mexico area.

Charter  sold  61 new homes at an average sales  price  of  about
$180,000.   At September 30, 1997, Charter had over 230  lots  in
nine  subdivisions available for new homes, either owned directly
by  Charter or by affiliated land development operations or under
contract  for  purchase by Charter.  The  lots  may  be  used  by
Charter  or sold to other builders as market conditions  warrant.
Charter  has a backlog of  26 homes under contract  at  September
30, 1997 with an indicated revenue  of approximately  $4,903,000.

Revenues  from  commercial construction and remodeling  increased
$632,000  to  $1,750,000 in 1997, an increase of   56%  over  the
three  months of Amity's operations included in 1996.   Operating
profits increased  from $8,600 in 1996 to $164,800 in 1997 with a
cost  of  construction being 78% and operating  expenses  12%  of
revenues.   Amity  had  limited success with  a  program  whereby
Prudential   Hooten/Stahl  sales  agents   provided   leads   for
remodeling  contracts.   However,  participation  with  affiliate
First  Commercial  Real  Estate  Services,  Inc.   have  recently
produced commercial construction jobs.  The recent relocation and
expansion  of Amity's offices and the addition of personnel  with
construction value engineering expertise, is expected to increase
Amity's  revenue and continue it's profitability  in  the  coming
year.

Earnings from equity in land development joint ventures increased
$256,000  to  $458,000 in 1997, an increase of  127%  over  1996.
Two  development  joint ventures in Rio Rancho,  New  Mexico,  (a
community  adjacent  to the northwest corner of  Albuquerque  and
home of a billion dollar plant of Intel substantially expanded in
recent  years)  contributed all of the $201,000   venture  equity
earnings  in  1996.   Lot sales decreased in 1997 as subdivisions
neared  completion and home building activity declined with   the
completion of  the Intel  construction activity.  The Rio  Rancho
ventures contributed equity earnings in 1997 of  $45,000 prior to
termination  of the joint ventures effective July  1,  1997.   On
that  date,  the Company purchased all of the interest  of  Boyle
Development Company, the managing co-venturer, in both ventures (
Village  Joint  Venture and Stonehenge  at  High  Resort).    The
venture   interests  were  purchased  for  $800,000   which   was
approximately  $122,000 more than the Boyle  Development  Company
net  book  value in the ventures.  Included among the undeveloped
land  contained  in  the  ventures was  a  100  lot  golf  course
residential  subdivision  fully permitted  and  with  development
construction  just  under  way.   The  Company  also  assumed  an
acquisition  loan  of  $1,050,000  and  a  development  loan   of
$1,600,000  from a bank with which the Company has various  other
banking  relations.   The  $122,000  cost  over  book  value  was
assigned  to  cost of this land.   Completion of  development  of
this land is expected early in calendar 1998.

The  remaining  earnings  from equity in land  development  joint
ventures were from two new ventures.   Success Joint Venture  was
organized  in  1996 to develop a subdivision in the far Northeast
Heights of Albuquerque, New Mexico, containing 82 lots ranging in
price from $48,000 to $85,000 with most in the upper range.   The
development construction began in November, 1996, with lot  sales
as  early as December, 1996.  Through September 30, 1997,   sales
of  60  lots  had been completed generating earnings of  $841,000
with  50%  thereof  or  $420,500  included  herein.    Management
anticipates completion and closure of this joint venture in 1998.

Vinyards  Joint  Venture  was  organized  in  1996  and  in  1997
purchased   land  in  the  valley  adjacent  to  and   north   of
Albuquerque,  which  was approved for construction  of  125  home
building  sites.    After  all financing and  permitting  was  in
place,  but  before construction began, The City  of  Albuquerque
filed  a  lawsuit  to condemn the property and paid  through  the
courts,  $7,905,000 to Vinyards Joint Venture.  This  lawsuit  is
still  pending  with  Vinyards Joint Venture alleging  a  greater
value  for the land.  Management cannot predict final settlement,
however  management anticipates some increase  with  such  amount
being  sufficient  to  produce profits one half  of  which  would
accrue to the Company.  The $7,905,000 already received generated
a  small  gain  after retiring all obligations and  providing  an
allowance for future  legal expenses.    The Company's  share  of
the net  earnings was $4,800 reported in 1997.

Assets   identified    to   the residential construction activity
increased $2,891,000 to   $14,857,000 in 1997, an increase of 24%
over 1996.  The primary  increase was approximately $2,946,000 of
land held by the land  development division of the Company rather
than being held by a joint venture with only the Company's 50% of
net equity being on the balance sheet.

Financial Services Segment:

The  financial services segment consists of The Company  (Realco)
and  GAEC  and  PHS,  lnc.  (, formerly  Hooten/Stahl  Management
Company,   an  inactive  company).   Operations  include   equity
earnings of  various finance entities.

Equity earnings from investees consisted principally of  (1)  20%
interest in First American Title of New Mexico,  which share  was
$47,000 in 1997 compared to $58,000 in 1996, (2) 50% interest  in
PHS  Mortgage  partnership,  which share  was  $249,000  in  1997
compared  to a start up loss of ($9,800)  in 1996, and  (3)   13%
interest  in MI Acquisition Corporation, which share was  $30,000
for it's two months operations of August and September 1997.

First  American  Title Company of New Mexico   is  an  80%  owned
subsidiary  of  First  American  Title  Company,  California,   a
publicly  held  corporation.  The New Mexico company  serves  the
Albuquerque  area and the reduced earnings in 1997 reflects   the
softening  of the residential real estate market  in  1997.   The
Company's  20% equity, stated at $166,000 at September 30,  1997,
was  sold to First American Title  for $500,000 cash in November,
1997.

PHS  owns  a  49.99%  interest  in  PHS  Mortgage  Company,  (the
"Partnership")  a  New  Mexico general   partnership  managed  by
general   partner   CTX   Mortgage  Ventures   Corporation   (CTX
Ventures).  The Partnership was organized in April, 1996, for the
purpose  of  originating and selling mortgage  loans  and  to  be
involved  in  other mortgage banking activities related  thereto.
Partnership   revenues   consist  of   servicing   rights   sold,
origination  and  other  fees , gain on  sale  of  mortgages  and
interest.    Operations  presently  cover  only  the  Albuquerque
Prudential Hooten/Stahl brokerage offices with real estate agents
therein   providing  leads  and/or  referrals   for   Partnership
services.   Management  is  currently  initiating  practices   to
increase  participation by the independent contractor  agents  in
this activity.  Additionally, management is considering expanding
such service to The Company's Arizona brokerage business.

MI Acquisition Corporation was organized to acquire from proceeds
of  a  private  stock  offering together  with  anticipated  debt
financing  in  the  amount of approximately $5,900,000,  all  the
outstanding common stock of Miller & Schroeder, Inc, a  financial
services  firm which derives a majority of its revenue  from  the
underwriting,  sale and trading of securities  by  its  principal
operating  subsidiary, Miller & Schroeder Financial,  Inc.    The
Company  purchased  100,000  shares  of  common  stock    in   MI
Acquisition  Corporation  for  $1,000,000,   representing  a  13%
interest in shares outstanding at September 30, 1997.


GAEC  provides  financing for the acquisition and development  of
residential home subdivisions and  interim construction loans  to
certain  clients  of  Prudential Hooten/Stahl.   GAEC  loan  fees
increased  $454,000  to $529,000 in 1997, an increase  of  almost
600% over 1996.  Various home builder loans and subdivision loans
arranged  by GAEC provided significant contributions to the  1997
revenue  and  operating profit.  Loan fees earned  by  GAEC  have
nominal  related  costs  and therefore high percentage  operating
profits.

Interest  earned  through use of uncommitted  funds  is  reported
separately along with related interest expense primarily  on  the
$5,750,000 of 9.5% subordinated notes payable.   Such uncommitted
funds  may  be used in participation with banks, individuals  and
other  financial institutions in financing home builder   interim
construction loans and loans for the acquisition and  development
of   residential  subdivisions.    Interest  and   other   income
increased $1,077,000 to $1,760,000  in 1997, an increase of  158%
over 1996.

ITEM 7: FINANCIAL STATEMENTS
Report of  Independent Certified Public Accountants



       Report of Independent Certified Public Accountants
        _________________________________________________


The Shareholders
Realco, Inc.

We  have audited the accompanying consolidated balance sheets  of
Realco, Inc. and Subsidiaries, as of September 30, 1997 and 1996,
and    the   related   consolidated   statements   of   earnings,
stockholders'  equity, and cash flows for the years  then  ended.
These   financial  statements  are  the  responsibility  of   the
Company's  management.   Our  responsibility  is  to  express  an
opinion on these financial statements 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  financial statements  referred  to  above
present  fairly,  in  all  material  respects,  the  consolidated
financial  position  of  Realco, Inc.  and  Subsidiaries,  as  of
September  30,  1997  and 1996, and the consolidated  results  of
their  operations and their consolidated cash flows for the years
then  ended  in  conformity  with generally  accepted  accounting
principles.




                                        GRANT THORNTON LLP

Oklahoma City, Oklahoma
November 14, 1997


                  Realco, Inc. and subsidiaries
                   CONSOLIDATED BALANCE SHEETS

                          September 30,


                                                  1997        1996
                                               __________   __________
ASSETS 
 Cash and cash equivalents                   $  4,242,305 $  4,480,880
 Restricted cash                                  402,979      486,559
 Securities available for sale                    199,291      188,435
 Accounts and notes receivable, net (note E)    2,353,852    3,718,826
 Inventories (note B)                          13,578,721   10,321,533
   Costs  and  estimated earnings  in
   excess  of billings on uncompleted
   contracts (note C)                             228,272      307,433
 Property and equipment, net (note F)             928,416      795,816
 Investments - equity method (note D)           1,980,163      895,596
 Deferred income taxes (note H)                       -         87,734
 Other assets                                   2,440,306    1,325,108
                                               __________   __________

                                              $26,354,305  $22,607,920
                                               ==========   ==========


LIABILITIES
 Notes payable (note G)                       $ 6,949,493  $ 5,627,240
 Lease obligations (note I)                       104,800      187,535
   Construction  advances  and  notes
    payable, collateralized by
    inventories (note G)                        5,139,284    3,389,012
   Billings  in excess of  costs  and
    estimated earnings on
    uncompleted contracts (note C)                100,638          -
 Accounts payable and accrued liabilities       2,260,896    1,784,917
 Deferred income taxes (note H)                    69,339          -
 Escrow funds held for others                     402,979      486,559
                                               __________   __________

         Total liabilities                     15,027,429   11,475,263

STOCKHOLDERS' EQUITY (note N)
 Preferred stock - authorized, 500,000 shares
      Series  A  - issued and outstanding,  
         82,569 shares in 1997 and 1996, 
         stated   at liquidation value            825,690      825,690
      Series  B  - issued   and  outstanding,
         212,859  shares in 1997 and 217,859  
         shares in 1996, stated at liquidation
         value                                  2,128,590    2,178,590
      Series  D  - issued and outstanding,
         23,919  shares  in 1997  and 24,297 
         shares in 1996, stated at liquidation 
         value                                    239,190      242,970
   Common  stock  -  no  par  value;
     authorized,   6,000,000    shares;
     issued,  2,845,000 shares in  1997
     and 1996                                   7,712,461    7,712,461
 Retained earnings                                495,585      165,588
 Unrealized gains on available-for-sale
     securities, net of taxes                      18,749        7,358
                                               __________   __________
                                               11,420,265   11,132,657
        Less   32,000  shares  common
     stock  held in treasury in  1997
     - at cost                                     93,389          -
                                               __________ ____________
                                               11,326,876   11,132,657
                                               __________   __________

                                              $26,354,305  $22,607,920
                                               ==========   ==========



   The accompanying notes are an integral part of these statement.


                 Realco, Inc. and Subsidiaries
               CONSOLIDATED STATEMENTS OF EARNINGS
                    Year ended September 30,


                                                   1997         1996
                                               __________   __________
REVENUES
 Brokerage commissions and fees               $14,486,945  $10,485,508
 Construction sales                            13,041,022   11,807,150
 Sales of developed lots                        1,153,500    1,004,859
 Equity in net earnings of investees (note D)     789,313      270,984
 Interest and other, net                        1,080,008      688,141
                                               __________   __________
                                               30,550,788   24,256,642

COSTS AND EXPENSES
 Cost of brokerage revenue                     10,275,373    7,409,205
 Cost of construction sales                    11,607,850   10,672,952
 Cost of developed lots sold                    1,073,467    1,014,312
 Selling, general, administrative, and other    5,879,596    4,220,119
 Depreciation and amortization                    501,752      360,572
 Interest                                         683,753      423,340
                                               __________   __________
                                               30,021,791   24,100,500
                                               __________   __________
 
      Earnings before income taxes                528,997      156,142

INCOME TAX EXPENSE (note H)                       199,000       24,000
                                               __________   __________
                                           
         NET EARNINGS                             329,997      132,142

PREFERRED STOCK DIVIDEND REQUIREMENT              120,575      117,846
                                               __________   __________
         NET EARNINGS APPLICABLE TO
           COMMON SHARES                     $    209,422   $   14,296
                                              ===========    =========
EARNINGS PER COMMON SHARE
   Net   earnings  per  common  share
   before  preferred  stock  dividend
   requirement                               $        .12          .05
                                              ===========    =========
   Net   earnings  per  common  share
   after   preferred   stock dividend
   requirement                               $        .07   $      .01
                                              ===========    =========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING      2,829,837    2,498,005
                                               ==========    =========
  The accompanying notes are an integral part of these statements.


 
                 Realco, Inc. and Subsidiaries
         CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

             Years ended September 30, 1997 and 1996



<TABLE>
                                      Series A          Series  B         Series D
                                   preferred stock   preferred stock   preferred Stock         Common
                                    6% cumulative     3% cumulative     3% cumulative          stock      
                                   _______________   _______________   _______________     ___________

<S>                                   <C>               <C>              <C>               <C>
                        
Balance at October 1, 1995            $825,690          $2,228,590       $      -           $1,229,750
                                                                                                                             
Sale of common stock                        -                   -               -            6,178,174

Sale of common stock warrants               -                   -               -              304,537 

Issuance of Series D preferred stock
 in business acquisition (Note K)           -                   -            242,970              -

Retirement of Series B preferred stock      -              (50,000)             -                 -

Change in unrealized gains on available                 
-for-sale securities, net of Taxes of $304  -                   -               -                 -                            
                                                                                                  
Dividends paid on Series A preferred stock  -                   -               -                 -
                                                                                                                             
Net earnings                                -                   -               -                 -
                                         _______         _________           _______          _________  
Balance at September 30, 1996            825,690         2,178,590           242,970          7,712,461

Retirement of Series B preferred stock      -              (50,000)             -                  -

Retirement of Series D preferred stock      -                 -               (3,780)              -

Change in unrealized gains on available
 -for-sale securities, net of taxes
  of $7,757                                 -                 -                 -                  -

Purchase of common stock for treasury       -                 -                 -                  -

Net  earnings                               -                 -                 -                  -
                                        ________        __________          ________         __________
Balance  at September 30, 1997          $825,690        $2,128,590          $239,190         $7,712,461
                                        ========        ==========          ========         ==========                 
</TABLE>


   The accompanying notes are an integral part of this statement.



   
                   Realco, Inc. and subsidiaries
          CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

              Years ended September 30, 1997 and 1996
<TABLE>                                
                                                          Unrealize
                                                        gains (losses)
                                                       on available for                         Total       
                                        Retained       sale  securities      Treasury       stockholders'                  
                                        earnings          net of tax           stock           equity     
                                       _________       ________________      _________     ______________          
<S>                                    <C>              <C>                  <C>           <C>
Balance at October 1, 1995             $  82,987        $    7,570           $   -         $  4,374,587

Sale of common stock                        -                 -                  -            6,178,174

Sale of common stock warrants               -                 -                  -              304,537

Issuance of Series D preferred stock
  in business acquisition (Note K)          -                 -                  -              242,970

Retirement of Series B preferred stock      -                 -                  -              (50,000)

Change in unrealized gains on available
  -for-sale securities, net of taxes 
  of $304                                   -                (212)             -                 (212)

Dividends paid on Series A preferred 
 stock                                   (49,541)             -                  -              (49,541)

Net  earnings                            132,142              -                  -              132,142
                                         _________          _______             ______        __________
Balance  at September 30, 1996           165,588             7,358               -           11,132,657

Retirement of Series B preferred stock      -                 -                  -              (50,000)

Retirement of Series D preferred stock      -                 -                  -               (3,780)

Change in unrealized gains on available
  -for-sale securities, net of taxes
  of $7,757                                 -              11,391                -               11,391

Purchase of common stock for treasury       -                -                (93,389)          (93,389)

Net earnings                             329,997             -                   -              329,997
                                        ________       __________            _________      ___________
Balance at September 30, 1997           $495,585       $   18,749           $(93,389)      $ 11,326,876
                                        ========       ==========           ==========     ============


   The accompanying notes are an integral part of this staement.


</TABLE>
                 Realco, Inc. and Subsidiaries
              CONSOLIDATED STATEMENTS OF CASH FLOWS
                    Year ended September 30,


                                                          1997       1996
                                                       ________      _______   
Cash flows from operating activities
 Net earnings                                        $  329,997   $  132,142
   Adjustments    to    reconcile    net
   earnings   to   net  cash   used   in
   operating activities
     Depreciation and amortization                      501,752      360,572
     Accretion of discount on notes payable              55,235       36,823
        Net earnings in excess of distributions 
         from investees                                (657,505)    (112,248)
     Gain on sale of securities available for sale      (47,094)     (80,296)
     Changes in operating assets and liabilities (net 
      of businesses acquired)
       Decrease (increase) in restricted cash            85,590       (3,415)
                                                       ________      ________
       Increase in accounts receivable                 (384,293)    (399,562)
       Decrease (increase) in inventories               322,705   (3,924,721)
       Decrease in net billings related to costs and 
         estimated earnings on uncompleted contracts    179,799       41,886
       Decrease (increase) in deferred tax asset        167,000      (38,255)
       (Increase) decrease in other assets             (273,632)      56,417
       Increase (decrease) in accounts payable and
           accrued liabilities                          339,556      (10,551)
       Increase (decrease) in escrow funds held for
            others                                      (85,590)       3,415
                                                        ________    ________
         Net cash provided by (used in) operating
              activities                                533,520   (3,937,793)

Cash flows from investing activities
 Purchases of property and equipment                   (283,542)    (208,487)
 Payments for businesses acquired                    (1,424,144)        -
 Advances on notes receivable                          (718,906)  (3,059,185)
 Receipts on notes receivable                         1,465,089      580,556
 Proceeds from sale of securities available 
  for sale                                              195,490      147,280
 Purchase of securities available for sale              (90,413)     (30,000)
 Purchase of investments - equity method             (1,045,900)     (62,588)
 Cash acquired in business acquisitions                 251,913       71,159

         Net cash used in investing activities       (1,650,413)  (2,561,265)

Cash flows from financing activities
 Construction advances and notes payable, net           587,424     (689,792)
 Proceeds from borrowings under revolving and 
  long-term debt                                        500,000    4,709,491
 Payments on revolving, capital lease, and 
  long-term debt                                       (115,717)    (115,760)
 Sale of common stock                                      -       6,178,174
 Sale of common stock warrants                             -         304,537
 Dividends paid on preferred stock                         -         (49,541)
 Purchase of common stock                               (93,389)        -
                                                      _________   __________
         Net cash provided by financing activities      878,318   10,337,109
                                                      _________   __________
         NET INCREASE (DECREASE) IN CASH AND 
             CASH EQUIVALENTS                          (238,575)   3,838,051

Cash and cash equivalents at beginning of year        4,480,880      642,829
                                                      _________    _________
Cash and cash equivalents at end of year            $ 4,242,305  $ 4,480,880
                                                      =========    =========
Cash paid during the year for:

 Income taxes                                       $    88,000  $     3,700
 Interest                                               684,000      664,000


Noncash financing and investing activities:

In 1997, the Company acquired all the common stock of Mull Realty
Company  for  $1,159,144.  In conjunction with  the  acquisition,
liabilities were assumed as follows:

 Fair value of assets acquired, including cash of $205,912        $1,282,077
 Cash paid                                                          (359,144)
 Issuance of note payable                                           (800,000)
                                                                    ________
           Liabilities assumed                                    $  122,933
                                                                    ========
In  1997,  the Company purchased the net assets and  business  of
First  Commercial  Real Estate Services, Inc. for  $265,000.   In
conjunction  with the acquisition, liabilities  were  assumed  as
follows:

 Fair value of assets acquired                                    $  268,500
 Cash paid                                                          (265,000)
                                                                    ________
           Liabilities assumed                                    $    3,500
                                                                    ========
In  1997,  the  Company purchased the remaining  50%  partnership
interest  in Village Joint Venture and Stonehenge at High  Resort
Joint Venture for $800,000.  In conjunction with the acquisition,
liabilities were assumed as follows:

 Fair value of assets acquired, including cash of $46,002         $3,697,038
 Cash paid                                                          (800,000)
 Previous equity basis investment                                   (618,938)
                                                                   _________
           Liabilities assumed                                    $2,278,100
                                                                   =========
In  1997,  the  Company exchanged a $50,000 note  receivable  for
5,000  shares of Series B preferred stock and $3,780 of furniture
and  fixtures  for  378 shares of Series D preferred  stock.   In
1996,  the Company exchanged a $50,000 note receivable for  5,000
shares of Series B preferred stock in 1996.

In  1996, the Company acquired all of the common stock of  Amity,
Inc.  in  exchange for the issuance of 24,297 shares of Series  D
preferred   stock.    In   conjunction  with   the   acquisition,
liabilities were assumed as follows:

 Fair value of assets acquired, including cash of $ 71,159        $  726,052
 Preferred stock issued for assets of Amity, Inc.                   (242,970)
                                                                   _________
           Liabilities assumed                                    $  483,082
                                                                   =========
  The accompanying notes are an integral part of these statements.

                  
                Realco, Inc. and Subsidiaries
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                   September 30, 1997 and 1996


NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES

 Realco,  Inc.,  a New Mexico corporation, and Subsidiaries  (the
 Company)   has  operations  which  include  single-family   home
 construction;  real estate brokerage sales through  a  franchise
 from  Prudential  Real Estate Affiliates, Inc.;  joint  ventures
 for   building  lot  development;  and,  to  a  lesser   extent,
 commercial  construction and financial services.  Its operations
 and  customers are primarily in the vicinity of Albuquerque, New
 Mexico except for a real estate broker in Sun City, Arizona.

 In  February, 1996, the Company completed the sale in an initial
 public  offering of 1,000,000 shares of common stock, $5,750,000
 subordinated  sinking  fund  notes,  and  690,000  common  stock
 purchase warrants to purchase Company common stock at $8.40  per
 share.    The   common   stock  was  issued  for   approximately
 $6,178,000, net of offering expenses of approximately  $822,000.
 The   subordinated   sinking  fund   notes   were   issued   for
 approximately  $4,770,000, net of offering costs  and  discounts
 of  approximately $980,000.  The common stock purchase  warrants
 which  became  immediately  exercisable  upon  closing  of   the
 offering  were  allocated  a  portion  of  proceeds  based  upon
 estimated   fair  value  of  approximately  $304,000,   net   of
 approximately $41,000 offering costs, and remain outstanding  at
 September  30,  1997.  Offering  proceeds  were  used  to  repay
 borrowings   under   construction  loans,  acquire   residential
 building  sites, fund advances under notes, and provide  working
 capital.

 The  Company's  accounting policies reflect  industry  practices
 and  conform  to generally accepted accounting principles.   The
 more significant policies are briefly discussed below.

 1.  Principles of Consolidation
     ___________________________

 The  consolidated financial statements include the  accounts  of
 Realco,  Inc.  and its wholly owned subsidiaries.  All  material
 intercompany  accounts and transactions have been eliminated  in
 consolidation.

 2.  Revenue Recognition and Provision for Warranty Claims
     _____________________________________________________

 The  Company  constructs single-family homes of  short  building
 duration for which minimal deposits are generally required  from
 the  buyer.   Revenue  is  recognized upon  closing.   Estimated
 warranty costs are provided at the time of sale.

 Revenues from significant commercial construction contracts  are
 recognized  on the percentage-of-completion method; accordingly,
 income  is recognized in the ratio that costs incurred  bear  to
 estimated  total  costs.  The aggregate of  costs  incurred  and
 income  recognized on uncompleted contracts in excess of related
 billings  is  shown as an asset, and the aggregate  billings  on
 uncompleted  contracts in excess of related costs  incurred  and
 income  recognized is shown as a liability.  Certain  short-term
 smaller commercial construction contracts are accounted  for  on
 the    completed-contract   method,   which   does   not    vary
 significantly   from  the  percentage-of-completion   basis   of
 accounting.    Contract  costs  include  all  direct   material,
 subcontractor,  supplies,  and labor costs  and  those  indirect
 costs   relating   to  contract  performance.   Provisions   for
 estimated  losses  on  uncompleted contracts  are  made  in  the
 period  in  which such losses are determined.   Changes  in  job
 performance, job conditions, estimated profitability, and  final
 contract settlements may result in revisions to cost and  income
 and  are  recognized in the period in which  the  revisions  are
 determined.  Brokerage commissions and  fees earned  from   real   
 estate brokerage services are recognized at  the time of closing 
 on the underlying real estate sales contracts.

 3.  Cash, Cash Equivalents, and Restricted Cash
     ___________________________________________

 The  Company  considers  money market accounts  and  all  highly
 liquid  debt  instruments purchased with  a  maturity  of  three
 months  or  less to be cash equivalents.  The Company  maintains
 its  cash  and  cash equivalents in accounts which  may  not  be
 federally  insured.  The Company has not experienced any  losses
 in  such  accounts  and  believes  it  is  not  exposed  to  any
 significant  credit risk.  Included in cash and cash equivalents
 at  September 30, 1997 is approximately $514,000 ($1,025,000 for
 1996)  in  a single money market fund and approximately $999,000
 ($1,057,000  for  1996)  in  a  savings  account  at  a   single
 financial institution.

 In  the ordinary course of operations, the Company collects  and
 holds  in  escrow  funds associated with  real  estate  contract
 deposits,  construction  sales  contract  deposits,  and   other
 escrowed  funds.   These  balances are reflected  as  restricted
 cash with a corresponding liability.

 4.  Accounts and Notes Receivable
     _____________________________

 The   Company   reviews  accounts  and  notes   receivable   for
 collectibility and provides reserves on specific accounts  based
 upon  whether  the  Company believes that the  collection  of  a
 specific  account is questionable.  The Company provides  credit
 to  its  customers under ordinary trade terms.  Receivables  for
 real  estate contracts are generally collateralized by the  real
 estate.

 5.  Inventories
     ___________

 Inventories  are carried at the lower of cost or  estimated  net
 realizable  value  and  include all  acquisition  costs,  direct
 labor  and  benefits, project interest, materials unique  to  or
 installed   in   the   project,  subcontractor   cost,   and   a
 proportional overhead allocation charge.

 6.  Property and Equipment
     ______________________

 Depreciation  is provided in amounts sufficient  to  relate  the
 cost  of  depreciable assets to operations over their  estimated
 service  lives  of  three to ten years using  straight-line  and
 accelerated methods.

 Impairment  losses  are recorded on long-lived  assets  used  in
 operations  when  indicators of impairment are present  and  the
 undiscounted  cash  flows estimated to  be  generated  by  these
 assets are less than the assets' carrying amount.

 Assets  acquired under capital leases are recorded at the  lower
 of  fair  market  value or the present value of  future  minimum
 lease  payments.   These leases are amortized on  the  straight-
 line  method  over  the  lesser of the  primary  lease  term  or
 estimated economic lives.

 7.  Income Taxes
     ____________

 Deferred  income  taxes  are provided on  temporary  differences
 between  the tax basis of an asset or liability and its reported
 amount  in  the  consolidated  financial  statements  that  will
 result  in  taxable  or  deductible  amounts  in  future  years.
 Deferred  income  tax assets or liabilities  are  determined  by
 applying the presently enacted tax rates and laws.

 The  Company and its subsidiaries file consolidated  income  tax
 returns.


 8.  Earnings Per Common Share
     _________________________
 Earnings per common share has been computed on the basis of  the
 weighted  average  shares  outstanding  during  the  year.   The
 series  preferred  stock and common stock  warrants  are  common
 stock  equivalents; however, they are antidilutive and  are  not
 included in the per share computations.

 9.  Investments
     ___________

 Investments  in  affiliated companies and joint  ventures  owned
 20%  to 50% or which the Company is able to exercise significant
 influence  over  operations  are accounted  for  on  the  equity
 method.  Accordingly,  the consolidated statements  of  earnings
 include  the  Company's  share of the affiliated  entities'  net
 earnings.

 Available-for-sale  securities are carried at  fair  value  with
 the  unrealized  gains  and losses excluded  from  earnings  and
 reported  in  a separate component of stockholders' equity,  net
 of tax effects.

 10. Intangible Assets
     _________________

 Cost  in excess of net assets of businesses acquired with a  net
 value of approximately $1,278,000 and $384,000 at September  30,
 1997 and 1996, respectively, is included in other assets and  is
 being  amortized using the straight-line method over fifteen  or
 twenty years.

 The  Company  assesses the recoverability of cost in  excess  of
 net  assets  of businesses acquired by determining  whether  the
 amortization  of the asset balance over its remaining  life  can
 be  recovered  through  the undiscounted future  operating  cash
 flows  of the acquired operation.  The amount of the impairment,
 if  any,  is  measured  based  on  projected  discounted  future
 operating  cash flows.  The Company believes that no  impairment
 has  occurred and that no reduction in the estimated useful life
 is warranted.

 11. Use of Estimates
     ________________

 The  preparation  of  financial statements  in  conformity  with
 generally accepted accounting principles requires management  to
 make  estimates  and  assumptions that affect  certain  reported
 amounts  and  disclosures;  accordingly,  actual  results  could
 differ from those estimates.

 12. Stock Options
     _____________

 The  Company  applies APB Opinion 25 and related interpretations
 in  accounting for its stock options. Accordingly,  compensation
 expense  is only recognized for grants of options which  include
 an  exercise  price less than the market price of the  stock  at
 the date of the grant.

 13. Recently Issued Accounting Pronouncement
     ________________________________________

 In   1997,  the  Financial  Accounting  Standards  Board  issued
 Statement  of  Financial Accounting Standards  (SFAS)  No.  128,
 Earnings  Per  Share, which establishes standards for  computing
 and  presenting earnings per share, and SFAS No. 131, Disclosure
 About  Segments of an Enterprise and Related Information,  which
 establishes   standards  for  the  way  that   public   business
 enterprises  report  information  about  operating  segments  or
 annual  financial statements and requires that these enterprises
 report  selected information about operating segments in interim
 financial  reports  issued  to shareholders.  The  Company  will
 adopt  these  pronouncements in 1998; the effect of adoption  is
 not  expected  to  have a material impact  on  the  consolidated
 financial statements of the Company.

 14. Reclassifications
     _________________

 Certain   reclassifications  have  been   made   to   the   1996
 consolidated  financial  statements  to  conform  to  the   1997
 presentation.

NOTE B - INVENTORIES

 During  the years ended September 30, 1997 and 1996, the Company
 incurred  and  capitalized approximately $303,000 and  $301,000,
 respectively,  of  interest costs.  Capitalized  interest  costs
 charged   to  cost  of  construction  sales  were  approximately
 $343,000  and  $323,000 for the years ended September  30,  1997
 and 1996, respectively.

 Inventories consist of the following as of September 30:

                                                 1997        1996
                                               _________   _________

  Land and improvements under development    $ 9,350,468 $ 5,464,200
  Houses in progress                           3,249,361   3,598,516
  Model homes                                    978,892   1,258,817
                                              __________  __________ 
                                             $13,578,721 $10,321,533
                                              ==========  ==========
 Houses   in   progress   include   homes   under   contract   of
 approximately  $1,585,000 and $1,174,000 at September  30,  1997
 and 1996, respectively.

NOTE C - COSTS AND BILLINGS ON UNCOMPLETED CONTRACTS

 The   following   is   a   summary  of  significant   commercial
 construction  contracts  accounted  for  on  the  percentage-of-
 completion method as of September 30:

                                                    1997     1996
                                                 ________  _________
  Costs incurred on uncompleted contracts       $ 384,736 $2,988,084
  Estimated earnings                               29,868     36,134
                                                 ________  _________
                                                  414,604  3,024,218
     Less billings to date                        286,970  2,716,785
                                                 ________  _________
                                                $ 127,634 $  307,433
                                                 ========  =========

 Included in the accompanying consolidated balance
         sheets under the following captions
       Costs and estimated earnings in excess of
           billings on uncompleted contracts    $ 228,272 $  307,433
       Billings in excess of costs and estimated
           earnings on uncompleted contracts     (100,638)        -
                                                 ________  _________
                                                $ 127,634 $  307,433
                                                 ========  =========
NOTE D - INVESTMENTS

 The  following is a summary of investments carried on the equity
 method as of September 30:

                                                    1997      1996
                                                _________   ________
     First American Title Company  of
     New   Mexico,   20%  stockholder
     interest                                  $  166,415  $ 144,002
     MI  Acquisition Corporation, 13%
     stockholder interest                       1,030,370       -
     PHS  Mortgage,  50%  stockholder
     interest                                     261,915       -
   Village Joint Venture                             -       306,502
   Stonehenge at High Resort Joint Venture           -       294,410
   Success Venture                                420,627        100
   Vinyards Joint Venture                           4,952        -
   Other                                           95,884    150,582
                                                _________    _______
                                               $1,980,163  $ 895,596
                                                =========    =======
 
 The  Company  participates  in land development  projects  under
 separate  joint venture agreements.  The Company's liability  is
 joint  and  several for such joint ventures.  The Company's  50%
 share  in  the operations of certain joint ventures is  adjusted
 for  preferential rights of the managing joint venturers and  is
 reported  on  the equity method in the accompanying consolidated
 financial statements.

NOTE D - INVESTMENTS - CONTINUED

 Village  Joint Venture was formed in March, 1992 and  Stonehenge
 at  High Resort Joint Venture was formed in May 1993.  Each  was
 formed   with   Boyle  Development  Company,  managing   general
 venturer.   Effective  July 1, 1997, the Company  purchased  the
 other  50%  interest in Village Joint Venture and Stonehenge  at
 High  Resort Joint Venture from Boyle Development Company for  a
 cash  payment  of  $800,000.  This action terminated  the  joint
 ventures,  and  the assets, liabilities, and subsequent  results
 of  operations  are  included in the  accompanying  consolidated
 financial statements.

 Success  Venture  was  formed  in  July  1996  with  Mesa  Verde
 Development  Corporation and Vinyards Joint Venture  was  formed
 in November 1996 with Rio Grande Curve Ltd. Co.

 Summarized financial information of investments carried  on  the
 equity method is as follows:
<TABLE>

                      As  of and for the year ended September 30, 1997
                     _________________________________________________        
                  
                     First American     MI
                     Title Company  Acquisition     PHS       Joint
                     of New Mexico  Corporation  Mortgage    Ventures
                      __________    __________   _________   _________
   <S>               <C>          <C>           <C>         <C> 

   Cash              $   765,438  $  2,145,578  $  588,166  $   218,319
   Other assets        9,294,676    30,991,355     629,000    1,549,920
                      __________    __________   _________    _________
                     $10,060,114  $ 33,136,933  $1,217,166  $ 1,768,239
                      ==========    ==========   =========    ========= 

   Liabilities       $ 9,228,041  $ 25,921,778  $  688,714  $   917,081
   Equity                832,073     7,215,155     528,452      851,158
                      __________   ___________   _________    _________
                     $10,060,114  $ 33,136,933  $1,217,166  $ 1,768,239
                      ==========   ===========   =========    =========

   Revenue earned    $ 3,920,670  $  5,177,778  $  918,612  $12,433,511
                      ==========   ===========    =========  ========== 

   Net earnings      $   234,507  $    236,159  $  498,444  $   866,073
                      ==========   ===========    =========  ==========

</TABLE>
                                          As  of and for the year ended
                                              September 30, 1996
                                          _____________________________
                    
                                           First American
                                           Title Company     Joint
                                           of New Mexico    Ventures
                                           _____________    __________
   [S]                                       [C]           [C]  
   
   Cash                                      $   658,776   $    45,387
   Other assets                                8,167,839     5,665,952
                                               _________     _________
                                             $ 8,826,615   $ 5,711,339
                                               =========     =========

   Liabilities                               $ 8,106,606   $ 4,509,316
   Equity                                        720,009     1,202,023
                                               _________     _________
                                             $ 8,826,615   $ 5,711,339
                                               =========     =========
   Revenue earned                            $ 4,155,923   $ 2,359,312
                                               =========     =========
   Net earnings                              $   331,843   $   606,631
                                               =========     =========

 In  November 1997, the Company sold its 20% stockholder interest in First 
 American Title Company of New Mexico for $500,000.

NOTE E - ACCOUNTS AND NOTES RECEIVABLE

 Accounts   and   notes  receivable  include  the  following   at
 September 30:

                                                    1997          1996
                                                 _________    _________
   Land   development  financing   to   an
   affiliate,  collateralized  by  certain
   real  estate and a limited guaranty  of
   the borrowers, interest due monthly  at
   8.5%,  principal due as developed  lots
   are sold through July 1998                    $    -     $   972,292

   Land   development  financing   to   an
   affiliate,  collateralized  by  certain
   real  estate and a limited guaranty  of
   the borrowers, interest due monthly  at
   9.75%,  principal due as lots are  sold
   through February 1997                              -         426,015

   Residential  construction  advances  to
   various  builders sub-ordinate  to  the
   interest  of  banks under participation
   agreements, collateralized  by  certain
   real    estate    and    homes    under
   construction, interest due  monthly  at
   the   banks'   prime  rate   plus   1%,
   principal due as homes are sold, up  to
   a   nine-month  term  with  three-month
   renewals considered                            778,743      844,256

   
   Notes  receivable  from  various   real
   estate   agents,   collateralized    by
   computer equipment, payable in  monthly
   installments  aggregating approximately
   $5,500,  including  interest  at   10%,
   with  maturity  dates through  November
   2000                                           126,338      218,747

   Note   receivable,  collateralized   by
   real  estate, interest due  monthly  at
   9%,  principal payable as lots are sold
   or upon demand                                 118,000      118,000

   Notes  receivable,  collateralized   by
   real   estate,   payable   in   monthly
   installments   of   $1,275,   including
   interest   at   8%,  with   outstanding
   principal due May 1997                            -         173,398

   Uncollateralized note  receivable  from
   the  Company's executive vice president
   (a  stockholder), interest due annually
   at 6%, principal due June 1997                    -          50,000

   Brokerage    commissions    and    fees
   receivable                                     554,611      318,907

   Construction sales receivable                  416,872      154,263

   Other advances and receivables                 435,034      442,948
                                                _________    _________
                                                2,429,598    3,718,826
    Less allowance for doubtful accounts           75,746         -
                                                _________    _________
                                               $2,353,852   $3,718,826
                                                =========    =========
NOTE F - PROPERTY AND EQUIPMENT

 Property  and equipment consisted of the following at  September 30:

                                                   1997         1996
                                                _________    _________         
   Office equipment, furniture, and fixtures   $1,423,922   $  997,702
   Leasehold improvements                         159,317      114,948
   Automobiles and equipment                      113,208      109,052
                                                _________    _________
                                                1,696,447    1,221,702
     Less accumulated depreciation and 
      amortization                                768,031      425,886
                                                _________    _________
                                               $  928,416   $  795,816
                                                =========    =========

NOTE G - DEBT

 Debt consisted of the following at September 30:

                                                   1997          1996
                                                _________     _________   
   Subordinated   sinking   fund    notes,
   $5,750,000  face amount, 9.5%  interest
   payable annually, principal payable  at
   various  dates  through  December  2003
   (less     $225,342     and     $280,577
   unamortized  discount at September  30,
   1997  and 1996, respectively, based  on
   imputed interest rate of 10.5%) (A)           $5,524,658  $5,469,423

   Construction and development  advances,
   collateralized by inventories (B)              1,798,584   1,220,512

   Notes   payable,   collateralized    by
   inventories (C)                                3,340,700   2,168,500
   
   Note    payable   to   Norwest    Bank,
   collateralized   by   equity   investee
   common stock owned by the Company,  due
   in  semiannual installments of  $35,700
   plus  interest  at 1% over  the  bank's
   prime rate, through July 2004                    500,000        -
   
   Noninterest-bearing  note  payable   to
   selling  shareholder  of  Mull   Realty
   Company,  Inc., collateralized  by  the
   common  stock of a Company  subsidiary,
   due  in annual installments based  upon
   a   factor   of   earnings   with   all
   outstanding  principal  due  in   April
   2001                                            800,000        -

   Revolving  line of credit with  Norwest
   Bank, interest payable monthly at  1.5%
   over  the  bank's prime rate, principal
   payable March 1998                              100,000     100,000

   Other notes payable                              24,835      57,817
                                                __________   _________
                                               $12,088,777  $9,016,252
                                                ==========   =========  
  (A)  Subordinated    sinking   fund   notes   are   subject  to
       various  covenants, the most restrictive of which  include
       minimum  net worth requirements, limitations on dividends,
       and limitations on debt.

  (B)  Construction  and  development   advances   collateralized
       by  inventories  include $523,350 ($497,388  at  September
       30,  1996)  advanced  under various  interim  construction
       lines  of  credit  which total $3,600,000.   Each  project
       under   these   lines  of  credit  requires   a   separate
       construction  loan bearing interest at  the  bank's  prime
       rate  plus  1%  (9.5% at September 30, 1997 and  9.25%  at
       September   30,   1996).   Construction  and   development
       advances  also include $1,158,424 ($412,290  at  September
       30,  1996) advanced under other lending guidelines.   Each
       home  to  be built under these lending guidelines requires
       a  separate  construction loan at the  bank's  prime  rate
       plus  1%  (9.5%  at  September  30,  1997  and  9.25%   at
       September  30,  1996).   Additional construction  advances
       collateralized  by  inventories of $116,810  ($310,834  at
       September  30,  1996) consist primarily of  owner-financed
       construction loans which are payable upon closing.

   
  (C)  Notes  payable  collateralized   by  inventories   include
       amounts   outstanding  on  loan  agreements  expiring   at
       various  dates through April 2000, with variable  interest
       rates  at  the banks' prime rates plus 1% or  1.5%  (prime
       rate  was  8.5% and 8.75% at September 30, 1997 and  1996,
       respectively) and fixed interest rates of 9% or 10%,  with
       principal payments due as properties are sold.

 Aggregate  future maturities of debt is as follows at  September
 30, 1997:

<TABLE>
         <S>                               <C>      

         Year ending September 30
           1998                            $  4,285,519
           1999                                 871,400
           2000                               1,921,400
           2001                               1,671,400
           2002                                 871,400
           Thereafter                         2,693,000
                                             __________
                                             12,314,119
         Less amount representing 
         discount on debt                       225,342
                                             __________
                                           $ 12,088,777

                                             ==========
</TABLE>

NOTE H - INCOME TAXES

 The  provision  for income taxes consists of the  following  for
 the years ended September 30:
<TABLE>
   <S>                                             <C>        <C>
                                                       1997       1996
                                                    ________   ________   
   Current                                         $  32,000   $ 62,255
   Deferred                                          167,000    (38,255)
                                                    ________    _______
                                                   $ 199,000   $ 24,000
                                                    ========    =======
</TABLE>

 The   Company's   effective  income  tax  rate   on   continuing
 operations differed from the federal statutory rate  of  34%  as
 follows:

<TABLE>
                                                       1997       1996
   <S>                                             <C>        <C>
                                                     _______    _______
   Income taxes at federal statutory rate          $ 179,859   $ 53,088
   Effect of graduated rates                            -        (8,943)
   Change in valuation allowance                     (15,966)   (25,574)
   Nondeductible expenses                             30,884      7,227
   Dividend exclusion                                  1,665     (8,326)
   Other                                               2,558      6,528
                                                     _______    _______
           Total tax expense                       $ 199,000   $ 24,000
                                                     =======    =======
</TABLE>

NOTE H - INCOME TAXES - CONTINUED

 Components of deferred taxes are as follows at September 30:

<TABLE>
                                                      1997       1996
     <S>                                           <C>        <C>
                                                     _______    ______
   Assets
     Accrued liabilities                           $  59,434   $ 62,577
     Property and equipment                           49,943     36,660
     Investments                                      89,892     89,892
     Tax loss carryforward                            13,888     22,721
     Other                                              -         2,763
     Valuation allowance                             (24,460)   (40,426)
                                                     _______    _______
                                                   $ 188,697   $174,187
                                                     =======    =======
   Liabilities
     Investments                                   $ 256,943   $ 75,153
     Inventories                                        -        11,300
     Other                                             1,093       -
                                                     _______    _______
                                                   $ 258,036   $ 86,453
                                                     =======    =======
</TABLE>
 The  valuation allowance decreased $15,966 and $25,574  for  the
 years ended September 30 1997 and 1996, respectively.

NOTE I - LEASES

 The  Company  leases  furniture and  equipment  under  long-term
 leases   with   ownership   of  the  furniture   and   equipment
 transferred  to  the Company at the termination of  the  leases.
 Property  and  equipment include leased furniture and  equipment
 with   a   cost   of  approximately  $313,000  and   accumulated
 depreciation   of   approximately  $222,000  and   $141,000   at
 September 30, 1997 and 1996, respectively.

 Capital  lease terms range from three to five years and  provide
 for payments as follows:
<TABLE>
         <S>                                            <C>

         Year ending September 30
                1998                                    $  76,008
                1999                                       35,196
                                                          _______
         Total minimum lease payments                     111,204

         Amount representing interest                       6,404
                                                          _______
         Present value of net minimum lease payments    $ 104,800
                                                          =======
</TABLE>

NOTE I - LEASES - CONTINUED

 The  Company leases certain office facilities and equipment used
 in  its  operations  under operating leases. Lease  terms  range
 from three to ten years and provide for payments as follows:
<TABLE>
         Year ending September 30
                <C>                                   <C> 

                1998                                   $  476,000
                1999                                      357,000
                2000                                      299,000
                2001                                      249,000
                2002                                      287,000
             Thereafter                                   324,000
                                                        _________
                                                       $1,992,000
                                                        =========
</TABLE>
 
Rental  expense  under  these leases was approximately  $601,000
 and  $564,000 for the years ended September 30, 1997  and  1996,
 respectively.   Certain  of  these  leases  relating  to  rental
 expense  of  approximately $127,000 and $112,000 for  the  years
 ended  September  30  1997  and  1996,  respectively,  are  with
 related parties.

NOTE J - EMPLOYEE BENEFIT PLAN

 The  Company  has a deferred compensation plan covering  certain
 eligible  key  employees.   The plan  allows  for  discretionary
 incentive   contributions   by   the   Company.    Discretionary
 incentive  contributions vest 20% after one year of service  and
 an  additional  20%  for each year thereafter.   Retirement  age
 under the plan is age 65 and benefits may be paid as a lump  sum
 or   in  annual  installments  over  a  period  elected  by  the
 participant  or  beneficiary up to ten years.   The  plan  is  a
 nonqualified deferred compensation plan which can be  terminated
 or  changed  by  the Company at any time.  The Company  made  no
 contributions  to the plan during the years ended September  30,
 1997 and 1996.

NOTE K - BUSINESS COMBINATIONS

 The  Company  acquired Mull Realty Company, Inc., a real  estate
 broker,  effective January 1, 1997.  The acquisition included  a
 cash  payment  of  approximately $359,000,  the  issuance  of  a
 noninterest-bearing  note  payable  for  $800,000,  and   future
 contingent  payments of up to $1,175,000.   As  installments  on
 this  noninterest-bearing note payable are based upon  a  factor
 of  earnings, the terms are not fixed and no discount on debt is
 readily  determinable.  The contingent payments  made,  if  any,
 are  based  on  future  earnings  levels  and  will  result   in
 additional  costs  in excess of the net assets  acquired  to  be
 amortized over the remaining life of the asset.

 Additionally, the Company acquired First Commercial Real  Estate
 Services,  Inc., a commercial real estate broker, effective  May
 1, 1997, for a cash payment of $265,000.

 These  business combinations have been accounted for  using  the
 purchase  method of accounting and the accompanying consolidated
 financial  statements  include  the  operations  of  these  real
 estate brokers subsequent to the date of acquisition.  Costs  in
 excess of the net assets acquired were approximately $961,000.
 The   following  summarized  pro  forma  unaudited   information
 assumes these acquisitions had occurred on October 1, 1995:
<TABLE>
                                        Year ended September 30
                                        _________________________
                                             1997          1996
   <S>                                 <C>           <C>
                                         __________    __________
   Revenues                            $ 32,107,000  $ 30,496,000

   Net loss                            $   (160,000) $    (80,000)
                                         ==========    ==========
  Loss per share                       $       (.06) $       (.03)
                                         ==========    ==========
</TABLE>
 The   Company  acquired  Amity,  Inc.  ("Amity"),  a  commercial
 construction  contractor, effective July  1,  1996.   The  Board
 approved  the  issuance of 24,297 shares of Series  D  preferred
 stock,  in  exchange for common stock representing 100%  of  the
 shares  outstanding  of  Amity.  This business  combination  has
 been  accounted for using the purchase method of accounting  and
 the  accompanying consolidated financial statements include  the
 operations  of  Amity  subsequent to its acquisition.   Cost  in
 excess  of  the  net  assets  acquired  was  $100,000.   If  the
 acquisition  had  occurred on October 1,  1995,  the  pro  forma
 revenues,  net earnings, and earnings per share would have  been
 approximately $26,968,000, $14,600, and $.01, respectively.

NOTE L - SEGMENT INFORMATION

 The  Company  operates  in the following segments:   residential
 construction,  real estate broker, commercial construction,  and
 financial   services.   Information  concerning  the   Company's
 business segments as of and for the years ended September 30  is
 as follows:
<TABLE>
                                                  1997         1996
   <S>                                       <C>            <C>
                                               __________    __________
   Revenues
     Residential construction                $ 11,290,953   $ 10,689,087
     Real estate broker
       Sales to unaffiliated customers         14,486,945     10,485,508
       Intersegment sales                         405,009        406,100
     Financial services                           876,743        276,399
     Commercial construction                    1,750,069      1,118,063
     Other sales                                1,153,500      1,004,859
     Interest and other
       Sales to unaffiliated customers            992,578        682,726
       Intersegment sales                         766,980           -
     Eliminations                              (1,171,989)      (406,100)
                                               __________     __________
           Total                             $ 30,550,788   $ 24,256,642
                                               ==========     ==========
   Operating profit (loss)
     Residential construction                $    (97,610)  $    423,478
     Real estate broker                           (61,058)      (354,356)
     Financial services                           843,042        230,436
     Commercial construction                      164,830          8,562
      Other sales                                 120,067         (9,453)
                                               ___________     _________
           Total                             $    969,271   $    298,667
                                               ===========     =========

   Assets
     Residential construction                $ 14,856,678   $ 11,965,756
     Real estate broker                         3,436,032      1,615,150
     Financial services                         1,707,052      2,608,838
     Commercial construction                      767,169        724,548
                                               __________     __________   
           Identifiable assets                 20,766,931     16,914,292

     Equity investments - other                 2,025,238        241,891
     Corporate assets                             969,319      1,112,176
     Other assets                               2,592,817      4,339,561
                                               __________     __________
           Total                             $ 26,354,305   $ 22,607,920
                                               ==========     ==========
   Depreciation and amortization
     Residential construction                $    103,612   $     77,675
     Real estate broker                           249,199        178,078
     Commercial construction                       22,868          3,859
     Other                                        126,073        100,960
                                               __________       ________
           Total                             $    501,752   $    360,572
                                               ==========       ========
   Capital expenditures
     Residential construction                $    188,331   $     97,859
     Real estate broker                            79,418         88,818
     Financial services                              -            17,629
     Commercial construction                        8,679          1,900
     Other                                          7,114          2,281
                                                _________      _________
           Total                             $    283,542   $    208,487
                                                =========      =========
</TABLE>
 Operating  profit  consists of total revenues,  less  costs  and
 expenses  including interest expense allocated to the  financial
 services  segment,  but  does not include  unallocated  interest
 expense,  other  income,  net equity in earnings  of  investees,
 loss  on sale of equipment, or income taxes. Identifiable assets
 are  those assets used in the Company's operations in each area.
 Other  assets  include  cash and cash  equivalents,  investments
 accounted  for  under  the equity method, and  capitalized  debt
 issuance costs.

NOTE M - COMMITMENTS AND CONTINGENCIES

 The  Company  is  contingently liable on land development  loans
 made  by various lending institutions to joint ventures to which
 the   Company  is  a  50%  general  partner.   The  Company  was
 contingently  liable for approximately $917,000  and  $4,300,000
 at September 30, 1997 and 1996, respectively.

 The  Company is engaged in various legal proceedings  incidental
 to  its  normal business activities. Management of  the  Company
 does  not  believe that the outcome of each such  proceeding  or
 all  of them combined will have a material adverse effect on the
 Company or its consolidated financial position or operations.

NOTE N - PREFERRED STOCK

 Series  A  voting preferred stock is entitled to dividends  when
 declared  and  paid  at  a 6% cumulative rate  payable  annually
 starting   January  31,  1996  and  payable  each   January   31
 thereafter.   Series  B voting preferred stock  is  entitled  to
 dividends  when  declared  and paid  at  a  3%  cumulative  rate
 payable  annually  starting January 31, 1996  and  payable  each
 January  31  thereafter.   Series D voting  preferred  stock  is
 entitled  to dividends when declared and paid at a 3% cumulative
 rate  annually  starting July 1, 1996 and payable  each  July  1
 thereafter.   At  September 30, 1997, preferred stock  dividends
 in  arrears were $252,980 ($132,405 for 1996).  All three series
 of  preferred  stock have a liquidation preference  of  $10  per
 share,  plus all accumulated but unpaid dividends.  Each  Series
 A  and  Series  D  preferred share is  convertible  into  common
 shares  at  $7.50  per  common share on the  basis  of  $10  per
 preferred  share.  The Series B preferred stock  is  convertible
 under  the  same  terms; however, the preferred stock  value  is
 $11.11 per share.

 During  1997,  the Company amended its articles of incorporation
 to  convert the previously authorized 80,000 shares of Series  C
 preferred  stock  to  a  series of preferred  shares  which  are
 unclassified  as  to rights or preferences.  Additionally,  this
 amendment  provides for all shares of Series A,  Series  B,  and
 Series  D  preferred shares which are reacquired by the  Company
 to  be  converted  to  a  series of  preferred  stock  which  is
 unclassified as to rights or preferences.  As a result of  these
 amendments, the Company has 180,923 preferred shares  authorized
 which  are  unclassified  as to rights  and  preferences.   Such
 shares  will be fixed with respect to rights and preferences  by
 the Board of the Company upon issuance.

NOTE O - STOCK OPTIONS

 The  Company  adopted  an  employee  incentive  stock  plan  for
 certain key employees during the year ended September 30,  1997.
 Options  currently outstanding under the plan become exercisable
 one  year from the date of the grant and expire five years after
 the  date  of the grant.  These options are exercisable  at  not
 less  than the market value of the Company's stock on  the  date
 of  the  grant.  Accordingly,  no  compensation  cost  has  been
 recognized for these options.  Had compensation cost  for  these
 options  been determined based on the fair value of the  options
 at  the grant dates consistent with the method of SFAS No.  123,
 Accounting  for  Stock-Based  Compensation,  the  Company's  net
 earnings and earnings per share would have been reduced  to  the
 pro  forma  amounts indicated below for the year ended September
 30,  1997.  There were no stock options outstanding at September
 30, 1996.

 Net earnings
            As reported                   $    209,422
            Pro forma                          193,322

 Earnings per share
            As reported                   $        .07
            Pro forma                     $        .07

 The fair value of each option grant is estimated on the date  of
 the  grant  using the Black-Scholes options-pricing  model  with
 the   following  weighted-average  assumptions  used:   dividend
 yield  was  estimated to remain at zero; expected volatility  of
 54%;  risk-free interest rates of 5.9%; and an expected life  of
 one year.

 The  Black-Scholes options 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.

 A  summary of the status of the Company's fixed stock options as
 of  September  30,  1997 and changes during the  year  ended  is
 presented below:

                                            Number of  Weighted average
                                              shares    exercise price
                                           _________  _________________

 Outstanding at beginning of year              -          $     -

 Granted                                     35,000            3.30
                                             ______
 Outstanding at end of year                  35,000       $    3.30
                                             ______
 Options exercisable at year end               -          $     -

 Weighted-average fair value of options
  granted during the year                      -          $     .46


NOTE P - FINANCIAL INSTRUMENTS

 The  following  table  includes  various  estimated  fair  value
 information as required by SFAS No. 107, Disclosures About  Fair
 Value   of  Financial  Instruments.   Such  information,   which
 pertains  to  the Company's financial instruments, is  based  on
 the  requirements set forth in SFAS No. 107 and does not purport
 to  represent  the aggregate net fair value of the Company.  The
 carrying  amounts  in the table below are the amounts  at  which
 the  financial  instruments  are reported  in  the  consolidated
 financial statements.

 All   of  the  Company's  financial  instruments  are  held  for
 purposes other than trading.

 The  following methods and assumptions were used to estimate the
 fair  value of each class of financial instruments for which  it
 is practicable to estimate that value:

 1.  Cash, Cash Equivalents, and Restricted Cash
     ___________________________________________

 The  carrying  amount  approximates fair value  because  of  the
 short maturity and highly liquid nature of those instruments.

 2.  Securities Available for Sale
     _____________________________

 The estimated fair values are based upon quoted market prices.

 3.  Fixed Rate Notes Receivable
     ___________________________

 The  discounted  amount of future cash flows using  the  current
 rates at which similar loans would be made to borrowers is  used
 to estimate fair value.

 4.  Floating Rate Notes Receivable
     ______________________________

 The  carrying  amount approximates fair value  because  interest
 rates adjust to market rates.

 5.  Fixed Rate Debt
     _______________

 The  discounted amount of future cash flows using the  Company's
 current  incremental  rate of borrowing for similar  liabilities
 is used to estimate fair value.

 6.  Floating Rate Debt
     __________________

 The  carrying  amount approximates fair value  because  interest
rates adjust to market rates. The  carrying amounts and estimated 
fair values of the Company's financial instruments are as follows:

<TABLE>
  
                                             1997                      1996
                                    _______________________    _______________________  
                                     Carrying    Estimated     Carrying     Estimated
                                      amount     fair value     amount     fair  value

   <S>                             <C>          <C>           <C>         <C>
                                     _________   ___________    ________    ___________ 
   Financial assets
     Cash, cash equivalents, and
       restricted cash             $ 4,645,284  $ 4,645,284   $ 4,967,439 $ 4,967,439
     Securities available for sale     199,291      199,291       188,435     188,435
     Fixed rate notes receivable       244,338      232,090     1,958,452   1,946,428
     Floating rate notes receivable    778,743      778,743       844,256     844,256

   Financial liabilities
     Fixed rate debt                (7,027,768)  (6,983,417)   (6,087,740) (6,088,467)
     Floating rate debt             (4,261,009)  (4,261,009)   (2,928,512) (2,928,512)

   Financial liabilities for which it is
     not practicable to estimate
     fair value
       Notes payable                  (800,000)        -             -           -                
It was not practicable to estimate the fair value  of  a  noninterest-bearing 
note  payable which  does  not  have  fixed  repayment terms.

</TABLE>
ITEM  8:  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON
ACCOUNTING  AND FINANCIAL DISCLOSURE

There have been no  changes in or  disagreements  with  Accountants  of
the kind described by Item 304 of Regulation S-B at any time during the
Registrant's two (2) most recent fiscal years.

PART III

Pursuant   to  instruction   E(3)  to  From  10-KSB,   the  information
required  by  Part  III   (Items   9,   10,   11  and  12)  is   hereby
incorporated  by  reference  to the materials  contained  in  "Election
of  Directors,"  "Executive  Compensation," "Certain  Transactions" and
"Security  Ownership  of  Certain Beneficial  Owners  and  Management,"
contained  in  the  Registrant's  definitive  proxy   materials  to  be
filed with the Commission within 120 days of September 30, 1997.

PART IV

ITEM 13: EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-
KSB

1. Financial Statements, for each of the two years ended September 30,
1997 and 1996:


INDEX TO FINANCIAL STATEMENTS
                                
                  REALCO, INC. AND SUBSIDIARIES
                                
Report of Independent Certified Public Accountants

  Balance Sheets as of September 30, 1997 and 1996

  Statements of Operations for the years ended

  September 30, 1997 and 1996

  Statement of Stockholders' Equity for the years ended

  September 30, 1997 and 1996

  Statements of Cash Flows for the year ended

  September 30, 1997 and 1996

  Notes to Consolidated Financial Statements


2.  Exhibits:

Exhibit

NUMBER                  DESCRIPTION

2.1*   Articles of Merger dated July 12, 1995

3.1*   Articles of Incorporation dated August 8, 1983

3.2*   Articles of Amendment to Articles of Incorporation dated March 20, 1995

3.3*   Articles of Amendment dated July 28, 1995

3.4*   Bylaw as amended

10.1*  Agreement and Plan or Reorganization dated March 14, 1995

10.2* Employment  Agreement  dated  March 14, 1995, between the Registrant and 
      Mr. Bill E. Hooten, included  as  an  exhibit  to  Agreement and Plan of 
      Reorganization
       
10.3* Employment  Agreement  dated  March 14, 1995, between the Registrant and 
      Mr. Melvin A. Hardison, included as an  exhibit to Agreement and Plan of 
      Reorganization
      
      
10.4* The Prudential Real Estate Affiliates, Inc. Franchise Agreement with the
      Registrant, as amended

10.5* First   Security   Bank   line  of  construction credit commitment dated 
      December 2, 1994

10.6* Loan  Agreement  dated Sept 16, 1996, between Sunwest Bank of Albuquerque 
      and Charter Building and Development Corp.
      
10.7* Real  Estate  lease  dated  January 1, 1994, between  R.R.  Rutledge and 
      Hooten/Stahl, Inc.
      
10.8* Real  Estate  lease  dated  January 1, 1991,  between Bill E. Hooten and 
      Hooten/Stahl, Inc.
      
10.9* Shopping  Center  Lease  dated    December 7, 1993,  between  Rio Rancho 
      Shopping Center and Hooten/Stahl, Inc.

10.10 1997   Employee  Incentive   Stock  Option  Plan, encorporated herein by 
      reference to  the    Registrant's    Form   10QSB filed on May 15, 1997.

21    Subsidiaries of the small business issuer

21.1  Prudential Hooten/Stahl, Inc. Realtors - New Mexico -(100%)

21.2  Charter Building and Development Corp. - New Mexico(100%)

21.3  Great American Equity Corporation, Inc.  - New York - (100%)

21.4  Amity, Inc. - New Mexico - (100%)

21.5  Prudential Preferred Properties, Inc. (formally) Mull Realty, 
      Company - Arizona -  (100%)

21.6  P.H.S. Inc. - New Mexico - (100%)

21.7  First Commercial Real Estate Services, Inc.- New Mexico - (100%)

21.8  Town Park, Inc. -Nevada- (100%)

21.9  M.I. Acquisition Corp. - Minnesota - (13%)

21.10 Real Estate Brokerage Services Inc. - New Mexico - (100%)

21.11 P.H.S. Mortgage Co. - a New Mexico Partnership - (49.99%)

21.12 Success Joint Venture - a New Mexico Joint Venture - (50%)

21.13 Vinyards Joint Venture - a New Mexico Joint Venture - (50%)

21.14 First American Title Company of New Mexico - New Mexico - (20%)

25.*  Form  T-1  Statement  of  Eligibility  and  Qualification  under  Trust  
Indenture Act of  1939 of a Corporation Designated to act as Trustee Filed as 
an exhibit to the Registrant's  Registration  Statement  under the Securities
Act of 1933, as amended,  on Form S-B2 (Registration Statement No.33-98740-D),
and incorporated herein by reference.

(b)  Reports on Form 8-K:

During the last  quarter of the period  covered by this report,  the
Registrant filed the following reports on Form 8-K:

None

SIGNATURES
In  accordance  with Section 13 or 15(d) of the Exchange  Act, the Registrant
caused  this  report to be signed on its behalf by the undersigned, thereunto 
duly authorized. 
Date: December 29, 1997

                                         REALCO, INC.
                            
                            
                            
                                          By: James A. Arias
                                
                                
                                          James A. Arias, President,
                                          Chief Executive Officer,
                                          Chairman of the Board of Directors
                                
                                
In  accordance  with the Exchange  Act, this report has been signed below by 
the following  persons in behalf of the  registrant and  in  the  capacities 
and on the dates indicated.

     Signature                Title                          Dated:


S/Melvin A. Hardison
------------------------
Melvin A. Hardison       Chief Financial                 December 29, 1997
                         Officer/Secretary/Treasurer

S/Bill E. Hooten
----------------------
Bill E. Hooten           Executive Vice President
                         and Director                    December 29, 1997

S/Arthur A. Schwartz
---------------------------
Arthur A. Schwartz             Director                  December 29, 1997


S/Marshall Blumenfeld
---------------------------
Marshall Blumenfeld            Director                  December 29, 1997


S/Jeffrey S. Silverman
---------------------------
Jeffrey S. Silverman           Director                  December 29, 1997


S/Noel Zeller
---------------------------
Noel Zeller                    Director                  December 29, 1997


S/Martin S. Orland
---------------------------
Martin S. Orland               Director                  December 29, 1997