<PAGE>
                                 EXHIBIT "10.0"


                               ADVISORY AGREEMENT

                                     BETWEEN

                     TRANSCONTINENTAL REALTY INVESTORS, INC.

                                       AND

                          PRIME ASSET MANAGEMENT, INC.


         THIS AGREEMENT dated as of July 1, 2003, between Transcontinental
Realty Investors, Inc., a Nevada corporation (the "Company"), and Prime Asset
Management, Inc. (the "Advisor"), a Nevada corporation.

                              WITNESSETH:

         1. The Company owns a complex, diversified portfolio of real estate,
mortgages and other assets, including many non-performing or troubled assets.

         2. The Company is an active real estate investment company with funds
available for investment primarily in the acquisition of income-producing real
estate and to a lesser extent in short and medium term mortgages.

         3. The Advisor and its employees have extensive experience in the
administration of real estate assets and the origination, structuring and
evaluation of real estate and mortgage investments.

         NOW THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties agree as follows:

         1. DUTIES OF THE ADVISOR. Subject to the supervision of the Board of
Directors, the Advisor will be responsible for the day-to-day operations of the
Company and, subject to Section 17 hereof, shall provide such services and
activities relating to the assets, operations and business plan of the Company
as may be appropriate, including:

                  (a) preparing and submitting an annual budget and business
plan for approval by the Board of the Company (the "Business Plan");


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                   (b) using its best efforts to present to the Company a
continuing and suitable investment program consistent with the investment
policies and objectives of the Company as set forth in the Business Plan;

                   (c) using its best efforts to present to the Company
investment opportunities consistent with the Business Plan and such investment
program as the Directors may adopt from time to time;

                   (d) furnishing or obtaining and supervising the performance
of the ministerial functions in connection with the administration of the
day-to-day operations of the Company including the investment of reserve funds
and surplus cash in short-term money market investments;

                   (e) serving as the Company's investment and financial advisor
and providing research, economic, and statistical data in connection with the
Company's investments and investment and financial policies;

                   (f) on behalf of the Company, investigating, selecting and
conducting relations with borrowers, lenders, mortgagors, brokers, investors,
builders, developers and others; provided however, that the Advisor shall not
retain on the Company's behalf any consultants or third party professionals,
other than legal counsel, without prior Board approval;

                   (g) consulting with the Directors and furnishing the
Directors with advice and recommendations with respect to the making, acquiring
(by purchase, investment, exchange or otherwise), holding and disposition
(through sale, exchange, or otherwise) of investments consistent with the
Business Plan of the Company;

                   (h) obtaining for the Directors such services as may be
required in acquiring and disposing of investments, disbursing and collecting
the funds of the Company, paying the debts and fulfilling the obligations of the
Company, and handling, prosecuting, and settling any claims of the Company,
including

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foreclosing and otherwise enforcing mortgage and other liens securing
investments;

                   (i) obtaining for and at the expense of the Company such
services as may be required for property management, loan disbursements, and
other activities relating to the investments of the Company, provided, however,
the compensation for such services shall be agreed to by the Company and the
service provider;
                   (j) advising the Company in connection with public or private
sales of shares or other securities of the Company, or loans to the Company, but
in no event in such a way that the Advisor could be deemed to be acting as a
broker dealer or underwriter;

                   (k) quarterly and at any time requested by the Directors,
making reports to the Directors regarding the Company's performance to date in
relation to the Company's approved Business Plan and its various components, as
well as the Advisor's performance of the foregoing services;

                  (l) making or providing appraisal reports, where appropriate,
on investments or contemplated investments of the Company;

                   (m) assisting in preparation of reports and other documents
necessary to satisfy the reporting and other requirements of any governmental
bodies or agencies and to maintain effective communications with stockholders of
the Company; and

                   (n) doing all things necessary to ensure its ability to
render the services contemplated herein, including providing office space and
office furnishings and personnel necessary for the performance of the foregoing
services as Advisor, all at its own expense, except as otherwise expressly
provided for herein.

            2. NO PARTNERSHIP OR JOINT VENTURE. The Company and the Advisor are
not partners or joint venturers with each other, and nothing herein shall be


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construed so as to make them such partners or joint venturers or impose any
liability as such on either of them.

            3. RECORDS. At all times, the Advisor shall keep proper books of
account and records of the Company's affairs which shall be accessible for
inspection by the Company at any time during ordinary business hours.

            4. ADDITIONAL OBLIGATIONS OF THE ADVISOR. The Advisor shall refrain
from any action that would (a) violate any law, rule, regulation, or statement
of policy of any governmental body or agency having jurisdiction over the
Company or over its securities, (b) cause the Company to be required to register
as an investment company under the Investment Company Act of 1940, or (c)
otherwise not be permitted by the Articles of Incorporation of the Company.

            5. BANK ACCOUNTS. The Advisor may establish and maintain one or more
bank accounts in its own name, and may collect and deposit into any such account
or accounts, and disburse from any such account or accounts, any money on behalf
of the Company, under such terms and conditions as the Directors may approve,
provided that no funds in any such account shall be commingled with funds of the
Advisor; and the Advisor shall from time to time render appropriate accounting
of such collections and payments to the Directors and to the auditors of the
Company.

            6. BOND. The Advisor shall maintain a fidelity bond with a
responsible surety company in such amount as may be required by the Directors
from time to time, covering all directors, officers, employees, and agents of
the Advisor handling funds of the Company and any investment documents or
records pertaining to investments of the Company. Such bond shall inure to the
benefit of the Company in respect to losses of any such property from acts of
such directors, officers, employees, and agents through theft, embezzlement,
fraud, negligence, error, or omission or otherwise, the premium for said bond to
be at the expense of the Company.


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            7. INFORMATION FURNISHED ADVISOR. The Directors shall have the right
to change the Business Plan at any time, effective upon receipt by the Advisor
of notice of such change. The Company shall furnish the Advisor with a certified
copy of all financial statements, a signed copy of each report prepared by
independent certified public accountants, and such other information with regard
to the Company's affairs as the Advisor may from time to time reasonably
request.

            8. CONSULTATION AND ADVICE. In addition to the services described
above, the Advisor shall consult with the Directors, and shall, at the request
of the Directors or the officers of the Company, furnish advice and
recommendations with respect to any aspect of the business and affairs of the
Company, including any factors that in the Advisor's best judgment should
influence the policies of the Company.

            9. ANNUAL BUSINESS PLAN AND BUDGET. No later than January 15th of
each year, the Advisor shall submit to the Directors a written Business Plan for
the current Fiscal Year of the Company. Such Business Plan shall include a
twelve-month forecast of operations and cash flow with explicit assumptions and
a general plan for asset sales or acquisitions, lending, foreclosure and
borrowing activity, other investments or ventures and proposed securities
offerings or repurchases or any proposed restructuring of the Company. To the
extent possible, the Business Plan shall set forth the Advisor's recommendations
and the basis therefor with respect to all material investments of the Company.
Upon approval by the Board of Directors, the Advisor shall be authorized to
conduct the business of the Company in accordance with the explicit provisions
of the Business Plan, specifically including the borrowing, leasing,
maintenance, capital improvements, renovations and sale of investments set forth
in the Business Plan. Any transaction or investment not explicitly provided for
in the approved Business Plan shall require the prior approval of the Board of
Directors unless made pursuant to authority expressly delegated to the Advisor.
Within


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sixty (60) days of the end of each calendar quarter, the Advisor shall provide
the Board of Directors with a report comparing the Company's actual performance
for such quarter against the Business Plan.

            10. DEFINITIONS. As used herein, the following terms shall have the
meanings set forth below:

                  (a) "Affiliate" shall mean, as to any Person, any other Person
who owns beneficially, directly, or indirectly, 1% or more of the outstanding
capital stock, shares or equity interests of such Person or of any other Person
which controls, is controlled by, or is under common control with such Person or
is an officer, retired officer, director, employee, partner, or trustee
(excluding noninterested trustees not otherwise affiliated with the entity) of
such Person or of any other Person which controls, is controlled by, or is under
common control with, such Person.

                  (b) "Appraised Value" shall mean the value of a Real Property
according to an appraisal made by an independent qualified appraiser who is a
member in good standing of the American Institute of Real Estate Appraisers and
is duly licensed to perform such services in accordance with the applicable
state law, or, when pertaining to Mortgage Loans, the value of the underlying
property as determined by the Advisor.

                  (c) "Book Value" of an asset or assets shall mean the value of
such asset or assets on the books of the Company, before provision for
amortization, depreciation, depletion or valuation reserves and before deducting
any indebtedness or other liability in respect thereof, except that no asset
shall be valued at more than its fair market value as determined by the
Directors.

                  (d) "Book Value of Invested Assets" shall mean the Book Value
of the Company's total assets (without deduction of any liabilities), but
excluding


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(i) goodwill and other intangible assets, (ii) cash, and (iii) cash equivalent
investments with terms which mature in one year or less.

                  (e) "Business Plan" shall mean the Company's investment
policies and objectives and the capital and operating budget based thereon,
approved by the Board as thereafter modified or amended.

                  (f) "Fiscal Year" shall mean any period for which an income
tax return is submitted to the Internal Revenue Service and which is treated by
the Internal Revenue Service as a reporting period.

                  (g) "Gross Asset Value" shall mean the total assets of the
Company after deduction of allowance for amortization, depreciation or depletion
and valuation reserves.

                  (h) "Mortgage Loans" shall mean notes, debentures, bonds, and
other evidences of indebtedness or obligations, whether negotiable or
non-negotiable, and which are secured or collateralized by mortgages, including
first, wraparound, construction and development, and junior mortgages.

                  (i) "Net Asset Value" shall mean the Book Value of all the
assets of the Company minus all the liabilities of the Company.

                  (j) "Net Income" for any period shall mean the Net Income of
the Company for such period computed in accordance with generally accepted
accounting principles after deduction of the Gross Asset Fee, but before
deduction of the Net Income Fee, as set forth in Sections 11(a) and 11(b),
respectively, herein, and inclusive of gain or loss of the sale of assets.

                  (k) "Net Operating Income" shall mean rental income less
property operating expenses.

                  (l) "Operating Expenses" shall mean the aggregate annual
expenses regarded as operating expenses in accordance with generally accepted
accounting principles as determined by the independent auditors selected by the
Directors and including the Gross Asset Fee payable to the Advisor



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and fees and expenses paid to the Directors who are not employees or Affiliates
of the Advisor.

                  (m) The operating expenses shall exclude, however, the
following:

                     (i) the cost of money borrowed by the Company;

                     (ii) income taxes, taxes and assessments on real property
                  and all other taxes applicable to the Company;

                     (iii) expenses and taxes incurred in connection with the
                  issuance, distribution, transfer, registration and stock
                  exchange listing of the Company's securities (including legal,
                  auditing, accounting, underwriting, brokerage, printing,
                  engraving and other fees);

                     (iv) fees and expenses paid to independent mortgage
                  servicers, contractors, consultants, managers and other agents
                  retained by or on behalf of the Company;

                     (v) expenses directly connected with the purchase,
                  origination, ownership and disposition of Real Properties or
                  Mortgage Loans (including the costs of foreclosure, insurance,
                  legal, protective, brokerage, maintenance, repair and property
                  improvement services) other than expenses with respect thereto
                  of employees of the Advisor, except legal, internal auditing,
                  foreclosure and transfer agent services performed by employees
                  of the Advisor;

                     (vi) expenses of maintaining and managing real estate
                  equity interests and processing and servicing mortgage and
                  other loans;

                     (vii) expenses connected with payments of dividends,
                  interest or distributions by the Company to shareholders;



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                     (viii) expenses connected with communications to
                  shareholders and bookkeeping and clerical expenses for
                  maintaining shareholder relations, including the cost of
                  printing and mailing share certificates, proxy solicitation
                  materials and reports;

                     (ix) transfer agent's, registrar's and indenture trustee's
                  fees and charges; and

                     (x) the cost of any accounting, statistical, bookkeeping or
                  computer equipment necessary for the maintenance of books and
                  records of the Company.

                  Additionally, the following expenses of the Advisor shall be
        excluded:

                     (i) employment expenses of the Advisor's personnel
                  (including Directors, officers and employees of the Company
                  who are directors, officers or employees of the Advisor or its
                  Affiliates), other than the expenses of those employee
                  services listed at (v) above.

                     (ii) rent, telephone, utilities and office furnishings and
                  other office expenses of the Advisor (except those relating to
                  a separate office, if any, maintained by the Company); and
                  (iii) the Advisor's overhead directly related to performance
                  of its functions under this Agreement.

                  (n) "Person" shall mean and include individuals, corporations,
         limited partnerships, general partnerships, joint stock companies or
         associations, joint ventures, associations, companies, trusts, banks,
         trust companies, land trusts, business trusts, or other entities and
         governments and agencies and political subdivisions thereof.

                  (o) "Real Property" shall mean and include land, rights in
         land, leasehold interests (including but not limited to interests of a
         lessor


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         or lessee therein), and any buildings, structures, improvements,
         fixtures, and equipment located on or used in connection with land,
         leasehold interests, and rights in land or interests therein.

         All calculations made pursuant to this Agreement shall be based on
statements (which may be unaudited, except as provided herein) prepared on an
accrual basis consistent with generally accepted accounting principles,
regardless of whether the Company may also prepare statements on a different
basis. All other terms shall have the same meaning as set forth in the Company's
Articles of Incorporation and Bylaws.

         11. ADVISORY COMPENSATION.

                  (a) Gross Asset Fee. On or before the twenty-eighth day of
         each month during the term hereof, the Company shall pay to the
         Advisor, as compensation for the basic management and advisory services
         rendered to the Company hereunder, a fee at the rate of .0625% per
         month of the average of the Gross Asset Value of the Company at the
         beginning and at the end of the next preceding calendar month. Without
         negating the provisions of Sections 18, 19, 22 and 23 hereof, the
         annual rate of the Gross Asset Fee shall be .75% per annum.

                  (b) Net Income Fee. As an incentive for successful investment
         and management of the Company's assets, the Advisor will be entitled to
         receive a fee equal to 7.5% per annum of the Company's Net Income for
         each Fiscal Year or portion thereof for which the Advisor provides
         services. To the extent the Company has Net Income in a quarter, the
         7.5% Net Income fee is to be paid quarterly on or after the third
         business day following the filing of the report on Form 10-Q with the
         Securities and Exchange Commission, except for the payment for the
         fourth quarter, ended December 31, which is to be paid on or after the
         third


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         business day following the filing of the report on Form 10-K with the
         Securities and Exchange Commission.

                  The 7.5% Net Income Fee is to be cumulative within any Fiscal
         Year, such that if the Company has a loss in any quarter during the
         Fiscal Year, each subsequent quarter's payment during such Fiscal Year
         shall be adjusted to maintain the 7.5% per annum rate, with final
         settlement being made with the fourth quarter payment and in accordance
         with audited results for the Fiscal Year. The 7.5% Net Income Fee is
         not cumulative from year to year.

                  (c) Acquisition Commission. For supervising the acquisition,
         purchase or long term lease of Real Property for the Company, the
         Advisor is to receive an Acquisition Commission equal to the lesser of
         (i) up to 1% of the cost of acquisition, inclusive of commissions, if
         any, paid to nonaffiliated brokers; or (ii) the compensation
         customarily charged in arm's-length transactions by others rendering
         similar property acquisition services as an ongoing public activity in
         the same geographical location and for comparable property. The
         aggregate of each purchase price of each property (including the
         Acquisition Commissions and all real estate brokerage fees) may not
         exceed such property's Appraised Value at acquisition.

                  (d) Incentive Sales Compensation. To encourage periodic sales
         of appreciated Real Property at optimum value and to reward the Advisor
         for improved performance of the Company's Real Property, the Company
         shall pay to the Advisor, on or before the 45th day after the close of
         each Fiscal Year, an incentive fee equal to 10% of the amount, if any,
         by which the aggregate sales consideration for all Real Property sold
         by the Company during such Fiscal Year exceeds the sum of: (i) the cost
         of each such Real Property as originally recorded in the Company's
         books


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         for tax purposes (without deduction for depreciation, amortization or
         reserve for losses), (ii) capital improvements made to such assets
         during the period owned by the Company, and (iii) all closing costs,
         (including real estate commissions) incurred in the sale of such Real
         Property; provided however, no incentive fee shall be paid unless (a)
         such Real Property sold in such Fiscal Year, in the aggregate, has
         produced an 8% simple annual return on the Company's net investment,
         including capital improvements, calculated over the Company's holding
         period before depreciation and inclusive of operating income and sales
         consideration and (b) the aggregate Net Operating Income from all Real
         Property owned by the Company for all of the prior Fiscal Year and the
         current Fiscal Year shall be at least 5% higher in the current Fiscal
         Year than in the prior Fiscal Year.

                  (e) Mortgage or Loan Acquisition Fees. For the acquisition or
         purchase from an unaffiliated party of any existing mortgage or loan by
         the Company, the Advisor or an Affiliate is to receive a Mortgage or
         Loan Acquisition Fee equal to the lesser of (a) 1% of the amount of the
         mortgage or loan purchased by the Company or (b) a brokerage or
         commitment fee which is reasonable and fair under the circumstances.
         Such fee will not be paid in connection with the origination or funding
         by the Company of any mortgage loan.

                  (f) Mortgage Brokerage and Equity Refinancing Fees. For
         obtaining loans to the Company or refinancing on Company properties,
         the Advisor or an Affiliate is to receive a Mortgage Brokerage and
         Equity Refinancing Fee equal to the lesser of (a) 1% of the amount of
         the loan or the amount refinanced or (b) a brokerage or refinancing fee
         which is reasonable and fair under the circumstances; provided, however
         that no such fee shall be paid on loans from the Advisor or an
         Affiliate without


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         the approval of the Board of Directors. No fee shall be paid on loan
         extensions.

         12. LIMITATION ON THIRD PARTY MORTGAGE PLACEMENT FEES. The Advisor or
any of its Affiliates shall pay to the Company, one-half of any compensation
received by the Advisor or any such Affiliate from third parties with respect to
the origination, placement or brokerage of any loan made by the Company,
provided, however, the compensation retained by the Advisor or Affiliate shall
not exceed the lesser of (a) 2% of the amount of the loan committed by the
Company or (b) a loan brokerage and commitment fee which is reasonable and fair
under the circumstances.

         13. STATEMENTS. The Advisor shall furnish to the Company not later than
the tenth day of each calendar month, beginning with the second calendar month
of the term of this Agreement, a statement showing the computation of the fees,
if any, payable in respect to the next preceding calendar month (or, in the case
of incentive compensation, for the preceding Fiscal Year, as appropriate) under
the Agreement. The final settlement of incentive compensation for each Fiscal
Year shall be subject to adjustment in accordance with, and upon completion of,
the annual audit of the Company's financial statements; any payment by the
Company or repayment by the Advisor that shall be indicated to be necessary in
accordance therewith shall be made promptly after the completion of such audit
and shall be reflected in the audited statements to be published by the Company.

         14. COMPENSATION FOR ADDITIONAL SERVICES. If and to the extent that the
Company shall request the Advisor or any director, officer, partner, or employee
of the Advisor to render services for the Company other than those required to
be rendered by the Advisor hereunder, such additional services, if performed,
will be compensated separately on terms to be agreed upon between such party and
the Company from time to time. In particular, but without limitation, if the
Company shall request that the Advisor perform property management, leasing,
loan


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disbursement or similar functions, the Company and the Advisor shall enter into
a separate agreement specifying the obligations of the parties and providing for
reasonable additional compensation to the Advisor for performing such services.

         15. EXPENSES OF THE ADVISOR. Without regard to the amount of
compensation or reimbursement received hereunder by the Advisor, the Advisor
shall bear the following expenses:

                  (a) employment expenses of the personnel employed by the
         Advisor (including Directors, officers, and employees of the Company
         who are directors, officers, or employees of the Advisor or of any
         company that controls, is controlled by, or is under common control
         with the Advisor), including, but not limited to, fees, salaries,
         wages, payroll taxes, travel expenses, and the cost of employee benefit
         plans and temporary help expenses except for those personnel expenses
         described in Sections 16(e) and (p);

                  (b) advertising and promotional expenses incurred in seeking
         investments for the Company;

                  (c) rent, telephone, utilities, office furniture and
         furnishings, and other office expenses of the Advisor and the Company,
         except as any of such expenses relates to an office maintained by the
         Company separate from the office of the Advisor; and

                  (d) miscellaneous administrative expenses relating to
         performance by the Advisor of its functions hereunder.

         16. EXPENSES OF THE COMPANY. The Company shall pay all of its expenses
not assumed by the Advisor and, without limiting the generality of the
foregoing, it is specifically agreed that the following expenses of the Company
shall be paid by the Company and shall not be paid by the Advisor:

                  (a) the cost of money borrowed by the Company;


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                  (b) income taxes, taxes and assessments on real property, and
         all other taxes applicable to the Company;

                  (c) legal, auditing, accounting, underwriting, brokerage,
         listing, registration and other fees, printing, and engraving and other
         expenses, and taxes incurred in connection with the issuance,
         distribution, transfer, registration, and stock exchange listing of the
         Company's securities:

                  (d) fees, salaries, and expenses paid to officers, and
         employees of the Company who are not directors, officers or employees
         of the Advisor, or of any company that controls, is controlled by, or
         is under common control with the Advisor;

                  (e) expenses directly connected with the origination or
         purchase of Mortgage Loans and with the acquisition, disposition and
         ownership of real estate equity interests or other property (including
         the costs of foreclosure, insurance, legal, protective, brokerage,
         maintenance, repair, and property improvement services) and including
         all compensation, traveling expenses, and other direct costs associated
         with the Advisor's employees or other personnel engaged in (i) real
         estate transaction legal services, (ii) internal auditing, (iii)
         foreclosure and other mortgage finance services, (iv) sale or
         solicitation for sale of mortgages, (v) engineering and appraisal
         services, and (vi) transfer agent services.

                  (f) expenses of maintaining and managing real estate equity
         interests;

                  (g) insurance, as required by the Directors (including
         Directors' liability insurance);

                  (h) the expenses of organizing, revising, amending,
         converting, modifying, or terminating the Company;


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                  (i) expenses connected with payments of dividends or interest
         or distributions in cash or any other form made or caused to be made by
         the Directors to holders of securities of the Company;

                  (j) all expenses connected with communications to holders of
         securities of the Company and the other bookkeeping and clerical work
         necessary in maintaining relations with holders of securities,
         including the cost of printing and mailing certificates for securities
         and proxy solicitation materials and reports to holders of the
         Company's securities;

                  (k) the cost of any accounting, statistical, bookkeeping or
         computer equipment or computer time necessary for maintaining the books
         and records of the Company and for preparing and filing Federal, State
         and Local tax returns;

                  (l) transfer agent's, registrar's, and indenture trustee's
         fees and charges;

                  (m) legal, accounting, investment banking, and auditing fees
         and expenses charged by independent parties performing these services
         not otherwise included in clauses (c) and (e) of this Section 16;

                  (n) expenses incurred by the Advisor, arising from the sales
         of Company properties, including those expenses related to carrying out
         foreclosure proceedings;

                  (o) commercially reasonable fees paid to the Advisor for
         efforts to liquidate mortgages before maturity, such as the
         solicitation of offers and negotiation of terms of sale;

                  (p) costs and expenses connected with computer services,
         including but not limited to employee or other personnel compensation,
         hardware and software costs, and related development and installation
         costs associated therewith;


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                  (q) costs and expenses associated with risk management (i.e.
         insurance relating to the Company's assets);

                  (r) loan refinancing compensation; and

                  (s) expenses associated with special services requested by the
         Directors pursuant to Section 14 hereof.

         17. OTHER ACTIVITIES OF ADVISOR. The Advisor, its officers, directors,
or employees or any of its Affiliates may engage in other business activities
related to real estate investments or act as advisor to any other person or
entity (including another real estate investment trust), including those with
investment policies similar to the Company, and the Advisor and its officers,
directors, or employees and any of its Affiliates shall be free from any
obligation to present to the Company any particular investment opportunity that
comes to the Advisor or such persons, regardless of whether such opportunity is
in accordance with the Company's Business Plan. However, to minimize any
possible conflict, the Advisor shall consider the respective investment
objectives of, and the appropriateness of a particular investment to each such
entity in determining to which entity a particular investment opportunity should
be presented. If appropriate to more than one entity, the Advisor shall present
the investment opportunity to the entity that has had sufficient uninvested
funds for the longest period of time.

         18. LIMITATION ON OPERATING EXPENSES. To the extent that the Operating
Expenses of the Company for any Fiscal Year exceed the lesser of (a) 1.5% of the
average of the Book Values of Invested Assets of the Company at the end of each
calendar month of such Fiscal Year, or (b) the greater of 1.5% of the average of
the Net Asset Value of the Company at the end of each calendar month of such
Fiscal Year or 25% of the Company's Net Income, the Advisor shall refund to the
Company from the fees paid to the Advisor the amount, if any, by which the
Operating Expenses so exceed the applicable amount, provided, however, that the


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Advisor shall not be required to refund to the Company, with respect to any
Fiscal Year, any amount which exceeds the aggregate of the Gross Asset Fees paid
to the Advisor under this Agreement with respect to such Fiscal Year.

         19. TERM; TERMINATION OF AGREEMENT. This Agreement shall continue in
force until the next Annual Meeting of Stockholders of the Company, and,
thereafter, it may be renewed from year to year, subject to any required
approval of the Stockholders of the Company and, if any Director is an Affiliate
of the Advisor, the approval of a majority of the Directors who are not so
affiliated. Notice of renewal shall be given in writing by the Directors to the
Advisor not less than 60 days before the expiration of this Agreement or of any
extension thereof. This Agreement may be terminated for any reason without
penalty upon 60 days' written notice by the Company to the Advisor or 120 days'
written notice by the Advisor to the Company, in the former case by the vote of
a majority of the Directors who are not Affiliates of the Advisor or by the vote
of holders of a majority of the outstanding shares of the Company.
Notwithstanding the foregoing, however, in the event of any material change in
the ownership, control or management of the Advisor, the Company may terminate
this Agreement without penalty and without advance notice to the Advisor.

         20. AMENDMENTS. This Agreement shall not be changed, modified,
terminated or discharged in whole or in part except by an instrument in writing
signed by both parties hereto, or their respective successors or assigns, or
otherwise as provided herein.

         21. ASSIGNMENT. This Agreement shall not be assigned by the Advisor
without the prior consent of the Company. The Company may terminate this
Agreement in the event of its assignment by the Advisor without the prior
consent of the Company. Such an assignment or any other assignment of this
Agreement shall bind the assignee hereunder in the same manner as the Advisor is
bound hereunder. This Agreement shall not be assignable by the Company without
the


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consent of the Advisor, except in the case of assignment by the Company to a
corporation, association, trust, or other organization that is a successor to
the Company. Such successor shall be bound hereunder and by the terms of said
assignment in the same manner as the Company is bound hereunder.

         22. DEFAULT, BANKRUPTCY, ETC. At the option solely of the Directors,
this Agreement shall be and become terminated immediately upon written notice of
termination from the Directors to the Advisor if any of the following events
shall occur:

                  (a) If the Advisor shall violate any provision of this
         Agreement, and after notice of such violation shall not cure such
         default within 30 days; or

                  (b) If the Advisor shall be adjudged bankrupt or insolvent by
         a court of competent jurisdiction, or an order shall be made by a court
         of competent jurisdiction for the appointment of a receiver,
         liquidator, or trustee of the Advisor or of all or substantially all of
         its property by reason of the foregoing, or approving any petition
         filed against the Advisor for its reorganization, and such adjudication
         or order shall remain in force or unstayed for a period of 30 days; or

                  (c) If the Advisor shall institute proceedings for voluntary
         bankruptcy or shall file a petition seeking reorganization under the
         Federal bankruptcy laws, or for relief under any law for the relief of
         debtors, or shall consent to the appointment of a receiver of itself or
         of all or substantially all its property, or shall make a general
         assignment for the benefit of its creditors, or shall admit in writing
         its inability to pay its debts generally, as they become due.

         The Advisor agrees that if any of the events specified in subsections
(b) and (c) of this Section 22 shall occur, it will give written notice thereof
to the Directors within seven days after the occurrence of such event.



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<PAGE>

         23. ACTION UPON TERMINATION. From and after the effective date of
termination of this Agreement, pursuant to Sections 19, 21 or 22 hereof, the
Advisor shall not be entitled to compensation for further services hereunder but
shall be paid all compensation accruing to the date of termination. The Advisor
shall forthwith upon such termination:

                  (a) pay over to the Company all monies collected and held for
         the account of the Company pursuant to this Agreement;

                  (b) deliver to the Directors a full accounting, including a
         statement showing all payments collected by it and a statement of any
         monies held by it, covering the period following the date of the last
         accounting furnished to the Directors; and

                  (c) deliver to the Directors all property and documents of the
         Company then in the custody of the Advisor.

         24. MISCELLANEOUS. The Advisor shall be deemed to be in a fiduciary
relationship to the stockholders of the Company. The Advisor assumes no
responsibility under this Agreement other than to render the services called for
hereunder in good faith, and shall not be responsible for any action of the
Directors in following or declining to follow any advice or recommendations of
the Advisor. Neither the Advisor nor any of its shareholders, directors,
officers, or employees shall be liable to the Company, the Directors, the
holders of securities of the Company or to any successor or assign of the
Company for any losses arising from the operation of the Company if the Advisor
had determined, in good faith, that the course of conduct which caused the loss
or liability was in the best interests of the Company and the liability or loss
was not the result of negligence or misconduct by the Advisor. However, in no
event will the directors, officers or employees of the Advisor be personally
liable for any act or failure to act unless it was the result of such person's
willful misfeasance, bad faith, gross negligence or reckless disregard of duty.


                                       21
<PAGE>

         25. NOTICES. Any notice, report, or other communication required or
permitted to be given hereunder shall be in writing unless some other method of
giving such notice, report, or other communication is accepted by the party to
whom it is given, and shall be given by being delivered at the following
addresses of the parties hereto:

         The Directors and/or the Company:

              Transcontinental Realty Investors, Inc.
              1800 Valley View Lane
              Suite 300
              Dallas, Texas 75234
              Attention: President

         The Advisor:

              Prime Asset Management, Inc.
              1800 Valley View Lane
              Suite 300
              Dallas, Texas 75234
              Attention: Executive Vice President and Chief Financial Officer

         Either party may at any time give notice in writing to the other party
of a change of its address for the purpose of this Section 25.

         26. HEADINGS. The section headings hereof have been inserted for
convenience of reference only and shall not be construed to affect the meaning,
construction, or effect of this Agreement.

         27. GOVERNING LAW. This Agreement has been prepared, negotiated and
executed in the State of Texas. The provisions of this Agreement shall be
construed and interpreted in accordance with the laws of the State of Texas
applicable to agreements made and to be performed entirely in the State of
Texas.

         28. EXECUTION. This instrument is executed and made on behalf of the
Company by an officer of the Company, not individually but solely as an Officer,
and the obligations under this Agreement are not binding upon, nor shall resort
be had to the private property of, any of the Directors, stockholders, officers,


                                       22
<PAGE>

employees, or agents of the Company personally, but bind only the Company
property.


                                       23
<PAGE>

         IN WITNESS WHEREOF, TRANSCONTINENTAL REALTY INVESTORS, INC. and PRIME
ASSET MANAGEMENT, INC., by their duly authorized officers, have signed these
presents all as of the day and year first above written.

                                         TRANSCONTINENTAL REALTY
                                         INVESTORS, INC.



                                         By:      /s/ Ronald E. Kimbrough
                                              ---------------------------------
                                                  Ronald E. Kimbrough
                                                  Executive Vice President



                                         PRIME ASSET MANAGEMENT, INC.



                                         By:      /s/ Mark W. Branigan
                                              ---------------------------------
                                                  Mark W. Branigan
                                                  Executive Vice President


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