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| TABLE OF CONTENTS                                   |   |
|-----------------------------------------------------|--------|
|                                                |   |
|                                                |   |
|                                                |   |
|                                                |   |
|                                                | PAGE   |
|                                                |   |
| Independent auditors' report                        | 1      |
|                                                |   |
|                                                |   |
| Financial statements:                               |   |
|                                                |   |
|                                                |   |
| Balance sheets                                      | 2      |
|                                                |   |
|                                                |   |
| Statements of operations                            | 3      |
|                                                |   |
|                                                |   |
| Statements of changes in partners' equity (deficit) | 4      |
|                                                |   |
|                                                |   |
| Statements of cash flows                            | 5      |
|                                                |   |
|                                                |   |
| Notes to financial statements                       | 6-8    |
|                                                |   |
|                                                |   |
| Supplemental information:                           |   |
|                                                |   |
|                                                |   |
| Schedule of certain expenses                        | 10-11  |

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| ASSETS                                            |   |      |   |      |
|---------------------------------------------------|--------|-----------|--------|-----------|
|                                              |   | 2005      |   | 2004      |
| Property and equipment, at cost                   |   |      |   |      |
| Land                                              | $      | 1,038,645 | $      | 1,038,645 |
| Building                                          |   | 3,531,798 |   | 3,531,798 |
| Equipment                                         |   | 238,717   |   | 238,717   |
|                                              |   | 4,809,160 |   | 4,809,160 |
| Accumulated depreciation                          |   | -352,223  |   | -201,107  |
|                                              |   |      |   |      |
|                                              |   | 4,456,937 |   | 4,608,053 |
|                                              |   |      |   |      |
| Other assets                                      |   |      |   |      |
| Cash, operating                                   |   | 9,144     |   | 67,140    |
| Cash, tax and insurance                           |   | 35,968    |   | 29,894    |
| Accounts receivable                               |   | 139       |   | 1         |
| Tenant security deposits                          |   | 14,698    |   | 16,564    |
| Prepaid expenses                                  |   | 7,737     |   | 7,608     |
| Monitoring fee, net of accumulated amortization   |   |      |   |      |
| $4,387 and $2,507 for 2005 and 2004, respectively | 23,813 |      | 25,693 |
| Replacement reserve                               |   | 23,821    |   | 11,056    |
| Operating deficit reserve                         |   | 94,803    |   | 91,953    |
|                                              |   |      |   |      |
|                                              |   | 210,123   |   | 249,909   |
|                                              |   |      |   |      |
|                                              | $      | 4,667,060 | $      | 4,857,962 |

| LIABILITIES AND PARTNERS' EQUITY (DEFICIT) |   |      |   |      |
|--------------------------------------------|--------|-----------|--------|-----------|
|  Current liabilities                  |   |      |   |      |
| Accounts payable and accrued expenses      | $      | 529       | $      | 529       |
| Current portion long term debt             |   | 17656     |   | 17,480    |
| Prepaid rents                              |   | 0         |   | 1         |
| Tenant security deposits                   |   | 14,698    |   | 16,564    |
|                                       |   |      |   |      |
| Total current liabilities                  |   | 32883     |   | 34,597    |
|                                       |   |      |   |      |
| Long-term debt                             |   |      |   |      |
|                                       |   | 48,831    |   | 98,831    |
|                                       |   | 2,330,965 |   | 2,348,636 |
|                                       |   |      |   |      |
|                                       |   | 2,379,796 |   | 2,447,467 |
|                                       |   |      |   |      |
| Partners' equity (deficit)                 |   | 2,254,381 |   | 2,375,898 |
|                                       |   |      |   |      |
|                                       | $      | 4,667,060 | $      | 4,857,962 |

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|                          |                             |   | 2005      |   | 2004      |
|-------------------------------|----------------------------------|--------|-----------|--------|-----------|
| Income from rental operations |                             |   |      |   |
|                          | Gross rent potential             | $      | 220,706   | $      | 219,170   |
|                          | Vacancies and rental concessions |   | (2974)    |   | (3,801)   |
|                          | Other rental income              |   | 400       |   | 520       |
|                          |                             |   | 218,132   |   | 215,889   |
|                          |                             |   |      |   |      |
| Operating expenses            |                             |   |      |   |
|                          | Administrative and marketing     |   | 57        |   | 2,064     |
|                          | Management fees                  |   | 22,072    |   | 21,731    |
|                          | Repairs and maintenance          |   | 50,062    |   | 39,423    |
|                          | Utilities                        |   | 20,126    |   | 19,801    |
|                          | Real estate taxes                |   | 24,494    |   | 24,632    |
|                          | Insurance                        |   | 13,657    |   | 9,608     |
|                          | Administrative                   |   | 34,667    |   | 39,999    |
|                          |                             |   |      |   |      |
|                          |                             |   | 167,135   |   | 157,258   |
|                          |                             |   |      |   |      |
|                          | Net operating income             |   | 50,997    |   | 58,631    |
|                          |                             |   |      |   |      |
| Other income (expenses)       |                             |   |      |   |
|                          | Interest income                  |   | 5,063     |   | 961       |
|                          | Amortization                     |   | -(1,880)  |   | -(1,880)  |
|                          | Depreciation                     |   | (151,116) |   | (150,830) |
|                          | Interest                         |   | (23,581)  |   | (21,769)  |
|                          |                             |   |      |   |      |
|                          |                             |   | (172,514) |   | (173,518) |
|                          |                             |   |      |   |      |
|                          | Net loss                         | $      | (121,517) | $      | (114,887) |

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|                        |   |     |   |      |   |      |
|-----------------------------|--------|----------|--------|-----------|--------|-----------|
| ,                           |   |     |   |      |   |      |
| ,                           |   | General  |   | Limited   |   |      |
|                        |   | Partners |   | Partners  |   | Total     |
|                        |   |     |   |      |   |      |
| Partners' equity (deficit), |   |     |   |      |   |      |
| December 31, 2003           | $      | 6        | $      | 1,960,997 | $      | 1,961,003 |
|                        |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
| Contributions               |   | 0        |   | 529,782   |   | 529,782   |
|                        |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
| Net income(loss)            |   | (11)     |   | (114,876) |   | (14,887)  |
|                        |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
| Partners' equity (deficit), |   |     |   |      |   |      |
| December 31, 2004           |   | (5)      |   | 2,375,903 |   | 2,375,898 |
|                        |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
| Net income(loss)            |   | 12       |   | (121,505) |   | (121,517) |
|                        |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
| Partners' equity (deficit), |   | (17)     |   | 2,254,398 |   | 2,254,381 |
| December 31, 2005           |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
|                        |   |     |   |      |   |      |
|                        | $      |     | $      |      |   |      |
|                        |   |     |   |      |   |      |

----

| Increase (Decrease) In Cash                                                                                                                                                   |   |      |   |      |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------|--------|-----------|
|                                                                                                                                                                          |   |      |   |      |
|                                                                                                                                                                          |   | 2005      |   | 2004      |
| Cash flows from operating activities                                                                                                                                          |   |      |   |      |
|   Net income(loss)                                                                                                                                                  | $      | (121,517) | $      | (114,887) |
|    Adjustments to reconcile net income(loss) to                                                                                                                |   |      |   |      |
|     net cash provided(used) by operating activities                                                                                                       |   |      |   |      |
|      Amortization                                                                                                                                    |   | 1,880     |   | 1,880     |
|      Depreciation                                                                                                                                    |   | 151,116   |   | 50,277    |
|      Change in accounts receivable                                                                                                                   |   | (138)     |   | 18        |
|      Change in prepaid expenses                                                                                                                      |   | (129)     |   | (1,269)   |
|      Change in accounts payable and accrued expenses                                                                                                 |   | (23       |   | (3,082)   |
|      Change in prepaid rent                                                                                                                          |   | (1)       |   | (3,370)   |
|                                                                                                                                                                          |   |      |   |      |
|                                                                                                                                                                          |   |      |   |      |
|            Total adjustments                                                                                           |   | 152,705   |   | 145,007   |
|                                                                                                                                                                          |   |      |   |      |
|                  Net cash provided (used)                                                |   |      |   |      |
|                          by operating activities |   | 31,188    |   | 30,120    |
|                                                                                                                                                                          |   |      |   |      |
| Cash flows from investing activities                                                                                                                                          |   |      |   |      |
|  Investment in rental property                                                                                                                                           |   | 0         |   | (1,450)   |
|  Net (deposits) releases to/from tax and insurance escrow                                                                                                                |   | (6,074)   |   | (6,853)   |
|  Net (deposits) releases to/from replacement reserve                                                                                                                     |   | (12,765)  |   | 963       |
|                                                                                                                                                                          |   |      |   |      |
|    Net cash provided (used) by investing activities                                                                                                            |   | (21,689)  |   | (24,581)  |
|                                                                                                                                                                          |   |      |   |      |
| Cash flows from financing activities                                                                                                                                          |   |      |   |      |
|  Principal payment on State Home loan                                                                                                                                    |   | (17,495)  |   | (15,884)  |
|  Payment to developer                                                                                                                                                    |   | (50,000)  |   | (475,169) |
|  Capital contribution                                                                                                                                                    |   | 0         |   | 529,782   |
|                                                                                                                                                                          |   |      |   |      |
|   Net cash provided (used) by financing activities                                                                                                                  |   | (67,495)  |   | 38,729    |
|                                                                                                                                                                          |   |      |   |      |
|    Net increase (decrease) in cash                                                                                                                             |   | (57,996)  |   | 44,268    |
|                                                                                                                                                                          |   |      |   |      |
| Cash, beginning of year                                                                                                                                                       |   | 67,140    |   | 22,872    |
|                                                                                                                                                                          |   |      |   |      |
|    Cash, end of year                                                                                                                                           | $      | 9,144     | $      | 67,140    |

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|   SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
|---------------------------------------------------------------|
|                                                          |   |   |   |   |
|                                                          |   | 2005 |   | 2004 |
|                                                          |   |   |   |   |
| Cash paid during the years for interest on mortgage           | $ | 23,581 | $ | 21,769 |
|                                                          |   |   |   |   |

|   | The financial statements of the Partnership are prepared on the accrual basis of accounting and in accordance with generally accepted accounting principles. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | Management considers tenant rent receivables to be fully collectible; accordingly, no allowance for doubtful accounts is required.  Uncollectible rent receivables are charged to operations upon management's determination that collection of the receivable is unlikely. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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|   | Income or loss of the Partnership is allocated 0.01% to the general partner and 99.99% to the limited partners.  No income tax provision has been included in the financial statements since income or loss of the Partnership is required to be reported by the partners on their respective income tax returns. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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| f. | Rental Income: |
|----|----------------|

|   | Rental income is recognized for residential units as they accrue.  Rental payments received in advance are deferred until earned.  All leases between the Partnership and tenants of the property are operating leases. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| g. | Amortization: |
|----|---------------|

|   | Compliance monitoring fees are being amortized on the straight-line method of 15 years, which approximates the effective yield, over the life of the related loans. |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| 2005 |   | 2,348,621 |
|------|--------|-----------|
| 2004 | $      | 2,366,116 |

|   | The Partnership has a mortgage note with the Georgia Department of Community Affairs (State Home Bank) in the original amount of $2,382,000 secured by a deed of trust on the rental  property.  The mortgage bears an interest rate of 1% per annum with monthly installments of $3,423.01 for 240 months maturing March 1, 2024. |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| December 31,   |   | Amount    |
|----------------|--------|-----------|
|           |   |      |
| 2006           | $      | 17,656    |
| 2007           |   | 17,833    |
| 2008           |   | 18,012    |
| 2009           |   | 33,610    |
| 2010           | $      | 2,224,801 |
| 2011thereafter |   |      |
|           |   | 2,330,965 |
|           |   |      |
|           |   |      |
|           | $      | 2,348,621 |
|           |   |      |
|           |   |      |

----

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|                                |   | 2005           |   | 2004    |
|-------------------------------------|--------|------------------------------------------------------------------|--------|---------|
| REVENUE                             |   |                                                             |   |    |
| Gross rental revenue                | $      | 220,706                                                          | $      | 219,170 |
| Less: Vacancies                     |   | (2,974)                                                          |   | (3,801) |
| Less: Miscellaneous                 |   | 0                                                                |   | 0       |
|                                |   |                                                             |   |    |
| Subtotal                            |   | 217,732                                                          |   | 215,369 |
|                                |   |                                                             |   |    |
| Vacancy percentage                  |   | 1.35%                                                            |   | 1.73%   |
|                                |   |                                                             |   |    |
| Tenant late fees                    |   | 10                                                               |   | 50      |
| Tenant charges for damages          |   | 0                                                                |   | 468     |
| Interest income                     |   | 5,063                                                            |   | 961     |
| Miscellaneous income                |   | 390                                                              |   | 2       |
|                                |   |                                                             |   |    |
| Total revenue                       |   | 223,195                                                          |   | 216,850 |
|                                |   |                                                             |   |    |
| EXPENSES                            |   |                                                             |   |    |
| Advertising                         |   | 57                                                               |   | 2,064   |
| Professional fees                   |   | 4,748                                                            |   | 5,090   |
| Office expenses                     |   | 2,018                                                            |   | 2,776   |
| Other                               |   | 3,679                                                            |   | 4,90    |
| Payroll taxes                       |   | 3,659                                                            |   | 3,870   |
| Telephone                           |   | 4,943                                                            |   | 5,462   |
| Travel                              |   | 574                                                              |   | 737     |
| Credit reports                      |   | 520                                                              |   | 660     |
|                                |   |                                                             |   |    |
| General and administrative subtotal |   | 20,198                                                           |   | 25,565  |
|                                |   |                                                             |   |    |
| Cable                               |   | 544                                                              |   | 387     |
| Cleaning                            |   | 1,150                                                            |   | 1,000   |
| Decorating/improvements             |   | 2,159                                                            |   | 761     |
| Garbage and trash                   |   | 2,337                                                            |   | 2,613   |
| Electric                            |   | 11,875                                                           |   | 12,51   |
| Insurance                           |   | 13,657                                                           |   | 9,608   |
| Grounds                             |   | 9,046                                                            |   | 7,1     |
| Maintenance                         |   | 10,9                                                             |   | 4,588   |
| Payroll                             |   | 22,065                                                           |   | 22,20   |
| Pest control                        |   | 2,375                                                            |   | 1,155   |
| Water and sewer                     |   | 7,707                                                            |   | 6,897   |
| Real estate taxes                   |   | 26,494                                                           |   | 24,632  |
| Manager payroll                     |   | 14,526                                                           |   | 16,499  |
| Management fee                      |   | 22,072                                                           |   | 21,731  |
|                                |   |                                                             |   |    |
| Operating expenditure subtotal      |   | 146,937                                                          |   | 131,693 |
|                                |   |                                                             |   |    |
| Total expenses                      |   | 167,135                                                          |   | 157,258 |
|                                |   |                                                             |   |    |
| Net operating income                |   | 56,060                                                           |   | 59,592  |
|                                |   |                                                             |   |    |
| Replacement reserve                 | $      | 12,360                                                           | $      | 12,360  |
|                                |   |                                                             |   |    |
| Income to service debt              | $      | 43,700                                                           | $      | 47,232  |
|                                |   |                                                             |   |    |
| Debt service #1                     | $      | $41,076                                                          | $      | 37,653  |

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|                                             |   |    |   |    |
|--------------------------------------------------|--------|---------|--------|---------|
| Summary of Operating and Administrative Expenses |   |    |   |    |
|                                             |   |    |   |    |
| General and administrative                       | $      | 20,198  | $      | 25,565  |
|                                             |   |    |   |    |
| Utilities                                        |   | 20,126  |   | 19,801  |
|                                             |   |    |   |    |
| Payroll                                          |   | 36,591  |   | 38,699  |
|                                             |   |    |   |    |
| Maintenance                                      |   | 27,997  |   | 17,222  |
|                                             |   |    |   |    |
| Management fees                                  |   | 22,072  |   | 21,731  |
|                                             |   |    |   |    |
| Tax                                              |   | 26,494  |   | 24,632  |
|                                             |   |    |   |    |
| Insurance                                        |   | 13,657  |   | 9,608   |
|                                             |   |    |   |    |
| Total expenses                                   | $      | 167,135 | $      | 157,258 |

| Revenue growth rate       |                         |   | 2.93%  |   | 144.00% |
|---------------------------|------------------------------|--------|--------|--------|---------|
|                      |                         |   |   |   |    |
| Expense growth rate       |                         |   | 6.28%  |   | 104.00% |
|                      |                         |   |   |   |    |
| Total number of units: 60 | Per-unit replacement reserve | $      | 206    | $      | 206     |

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