|                                                           | PAGE   |
|----------------------------------------------------------------|--------|
|                                                           |   |
| Independent      auditors' report                              | 1      |
|                                                           |   |
| Financial      statements:                                     |   |
|                                                           |   |
|  Balance      sheets                                      | 2-3    |
|                                                           |   |
|  Statements      of operations                            | 4      |
|                                                           |   |
|  Statements      of changes in partners' equity (deficit) | 5      |
|                                                           |   |
|  Statements      of cash flows                            | 6      |
|                                                           |   |
|  Notes      to financial statements                       | 7-9    |
|                                                           |   |
| Supplemental      information:                                 |   |
|                                                           |   |
|  Schedules      of operations                             | 11-12  |

----

----

|                                                 | 2006                      |   | 2005                      |
|------------------------------------------------------|---------------------------|--------|---------------------------|
| Current      assets                                  |                      |   |                      |
|  Cash                                           | $   46,443 |   | $   38,111 |
|  Prepaid      expenses                          | 520                       |   | 3,112                     |
|  Miscellaneous      current assets              |   480           |   |   480           |
|                                                 |                      |   |                      |
|    Total      current assets          | 47,443                    |   | 41,703                    |
|                                                 |                      |   |                      |
| Restricted deposits      and funded reserves         |                      |   |                      |
|  Tenant      security deposits                  | 15,325                    |   | 15,133                    |
|  Tax      and insurance escrow                  | 29,503                    |   | 41,793                    |
|  Operating      deficit reserve                 | 70,308                    |   | 65,290                    |
|  Replacement      reserve                       | 62,351                    |   | 65,775                    |
|                                                 |                      |   |                      |
|                                                 | 177,487                   |   | 187,991                   |
|                                                 |                      |   |                      |
| Property and      equipment, at cost                 |                      |   |                      |
|  Land                                           | 130,650                   |   | 130,650                   |
|  Building      and improvements                 | 1,877,954                 |   | 1,877,954                 |
|                                                 | 2,008,604                 |   | 2,008,604                 |
|  Accumulated      depreciation                  | (765,404)                 |   | (697,115)                 |
|                                                 |                      |   |                      |
|                                                 | 1,243,200                 |   | 1,311,489                 |
| Other      assets                                    |                      |   |                      |
|  Monitoring      fees, net of accumulated       |                      |   |                      |
|   amortization      of $11,308 and $10,280 |                      |   |                      |
|   for      2006 and 2005, respectively     | 4,111                     |   | 5,139                     |
|  Miscellaneous      other assets                | 11,536                    |   |     0 |
|                                                 |                      |   |                      |
|                                                 | $1,483,777                |   | $1,546,322                |

----

|                                                 | 2006                                                           |   | 2005                      |
|------------------------------------------------------|----------------------------------------------------------------|--------|---------------------------|
| Current      liabilities                             |                                                           |   |                      |
|  Accrued      property taxes                    | $               0 |   | $   16,299 |
|  Accrued      interest payable                  | 130                                                            |   | 253                       |
|  Current      portion of mortgage notes payable | 55,123                                                         |   | 61,078                    |
|  Tenant      security deposits                  | 15,325                                                         |   | 15,133                    |
|                                                 |                                                           |   |                      |
|    Total      current liabilities     | 70,578                                                         |   | 92,763                    |
|                                                 |                                                           |   |                      |
| Long-term      debt                                  |                                                           |   |                      |
|  Mortgage      payable, net of current portion  | 576,614                                                        |   | 624,364                   |
|                                                 |                                                           |   |                      |
| Partners' equity      (deficit)                      | 836,585                                                        |   | 829,195                   |
|                                                 |                                                           |   |                      |
|                                                 | $1,483,777                                                     |   | $1,546,322                |
|                                                 |                                                           |   |                      |

----

|                                     | 2006                     |   | 2005                      |
|------------------------------------------|--------------------------|--------|---------------------------|
| Revenues                            |                     |   |                      |
|  Rental      income                 | $ 205,761           |   | $ 204,272            |
|  Miscellaneous      service revenue | 4,453                    |   | 2,409                     |
|  Interest      income               |   831          |   | 1,282                     |
|                                     |                     |   |                      |
|                                     | 211,045                  |   | 207,963                   |
|                                     |                     |   |                      |
| Expenses                                 |                     |   |                      |
|  Administrative                     | 3,438                    |   | 2,754                     |
|  Amortization                       | 1,028                    |   | 1,028                     |
|  Depreciation                       | 68,289                   |   | 68,289                    |
|  Employee      benefits             | 283                      |   | 202                       |
|  Management      fees               | 16,800                   |   | 14,400                    |
|  Mortgage      interest             | 3,380                    |   | 5,387                     |
|  Office      expense                | 7,376                    |   | 2,941                     |
|  Payroll      taxes                 | 1,198                    |   | 1,216                     |
|  Professional      services         | 11,586                   |   | 11,552                    |
|  Property      insurance            | 8,900                    |   | 8,736                     |
|  Real      estate taxes             | 16,440                   |   | 18,366                    |
|  Repairs      and maintenance       | 39,270                   |   | 32,336                    |
|  Salaries                           | 14,172                   |   | 13,605                    |
|  Utilities                          | 8,998                    |   | 8,740                     |
|  Miscellaneous                      | 2,497                    |   |     0 |
|                                     |                     |   |                      |
|                                     | 203,655                  |   | 189,552                   |
|                                     |                     |   |                      |
|    Net      income        | $   7,390 |   | $  18,411       |
|                                     |                     |   |                      |

----

|                                                         | Limited        |   | General              |   | Total          |
|--------------------------------------------------------------|----------------|--------|----------------------|--------|----------------|
| Partners'      equity (deficit), December      31, 2004 | $ 846,729 |   | $ (20,945)      |   | $ 825,784 |
|                                                         |           |   |                 |   |           |
| Less:  Distributions                               | (3,300)        |   | (11,700)             |   | (15,000)       |
|                                                         |           |   |                 |   |           |
| Net      income                                              | 18,227         |   |   184      |   | 18,411         |
|                                                         |           |   |                 |   |           |
| Partners'      equity (deficit), December      31, 2005 | 861,656        |   | (32,461)             |   | 829,195        |
|                                                         |           |   |                 |   |           |
| Net      income                                              | 7,316          |   |    74 |   | 7,390          |
|                                                         |           |   |                 |   |           |
| Partners'      equity (deficit), December      31, 2006 | $ 868,972 |   | $ (32,387)      |   | $ 836,585 |
|                                                         |           |   |                 |   |           |

----

|                                                                                                  | 2006                      |   | 2005             |
|-------------------------------------------------------------------------------------------------------|---------------------------|--------|------------------|
| Cash flows from      operating activities                                                             |                      |   |             |
|  Net      income                                                                                 | $ 7,390              |   | $18,411          |
|  Adjustments      to reconcile net income to net cash      provided by operating activities |                      |   |             |
|   Amortization                                                                              | 1,028                     |   | 1,028            |
|   Depreciation                                                                              | 68,289                    |   | 68,289           |
|   Changes      in assets and liabilities                                                    |                      |   |             |
|    Decrease      in prepaid expenses                                                   | 2,592                     |   | 624              |
|    (Increase)      Decrease in tax and insurance escrow                                | 12,290                    |   | (16,514)         |
|    Increase      in miscellaneous assets                                               | (11,536)                  |   | (480)            |
|    Decrease      in accounts payable                                                   | 0                         |   | (7,271)          |
|    Increase      (Decrease) in accrued property taxes                                  | (16,299)                  |   | 16,299           |
|    Decrease      in accrued interest payable                                           |  (123)               |   |   (37) |
|                                                                                                  |                      |   |             |
|     Total      adjustments                                                        | 56,241                    |   | 61,938           |
|                                                                                                  |                      |   |             |
|       Net      cash provided by operating activities                    | 63,631                    |   | 80,349           |
|                                                                                                  |                      |   |             |
|                                                                                                  |                      |   |             |
| Cash flows from      investing activities                                                             |                      |   |             |
|  Net      (deposits) releases to/from reserve for      replacement                          | 3,424                     |   | (638)            |
|  Net      deposits to operating deficit reserve                                                  | (5,018)                   |   | (4,912)          |
|                                                                                                  |                      |   |             |
|       Net      cash used by investing activities                        | (1,594)                   |   | (5,550)          |
|                                                                                                  |                      |   |             |
|                                                                                                  |                      |   |             |
| Cash flows from      financing activities                                                             |                      |   |             |
|  Principal      payments on mortgage notes                                                       | (53,705)                  |   | (58,453)         |
|  Distributions      to partners                                                                  |     0 |   | (15,000)         |
|                                                                                                  |                      |   |             |
|       Net      cash used by financing activities                        | (53,705)                  |   | (73,453)         |
|                                                                                                  |                      |   |             |
|       Net      increase in cash                                         | 8,332                     |   | 1,346            |
|                                                                                                  |                      |   |             |
| Cash,      beginning of year                                                                          | 38,111                    |   | 36,765           |
|                                                                                                  |                      |   |             |
|    Cash,      end of year                                                              | $46,443                   |   | $38,111          |
|                                                                                                  |                      |   |             |
|                                                                                                  |                      |   |             |
| SUPPLEMENTAL      DISCLOSURES OF CASH FLOW INFORMATION                                                |                      |   |             |
|                                                                                                  |                      |   |             |
| Cash      paid during the years for interest                                                          | $ 3,503              |   | $ 5,424     |

----

----

| December 31, |   | Bank Mortgage |   | State Home Mortgage |   | Totals        |
|--------------|--------|---------------|--------|---------------------|--------|---------------|
|         |   |          |   |                |   |          |
| 2007         |   | $ 23,959 |   | $ 31,164       |   | $ 55,123 |
| 2008         |   | 0             |   | 31,164              |   | 31,164        |
| 2009         |   | 0             |   | 31,164              |   | 31,164        |
| 2010         |   | 0             |   | 31,164              |   | 31,164        |
| 2011         |   | 0             |   | 31,164              |   | 31,164        |
| Thereafter   |   | 0             |   | 451,958             |   | 451,958       |
|         |   |          |   |                |   |          |
|         |   | $ 23,959 |   | $607,778            |   | $631,737      |
|         |   |          |   |                |   |          |

----

----

----

|                                            | 2006                                       |   | 2005                                       |
|-------------------------------------------------|--------------------------------------------|--------|--------------------------------------------|
| REVENUE                                         |                                       |   |                                       |
|  Gross      rental revenue                 | $   228,912                 |   | $   219,312                 |
|  Less:      Vacancies                      | (23,151)                                   |   | (15,040)                                   |
|  Less:      Miscellaneous                  |    0                        |   |    0                        |
|                                            |                                       |   |                                       |
|   Subtotal                            | 205,761                                    |   | 204,272                                    |
|                                            |                                       |   |                                       |
|  Vacancy      percentage                   | 10.11%                                     |   | 6.86%                                      |
|                                            |                                       |   |                                       |
|  Security      deposit                     | 1,050                                      |   | 0                                          |
|  Laundry      income                       | 0                                          |   | 0                                          |
|  Interest      income                      | 831                                        |   | 1,282                                      |
|  Miscellaneous      income                 | 3,403                                      |   | 2,409                                      |
|                                            |                                       |   |                                       |
|   Total      revenue                  | 211,045                                    |   | 207,963                                    |
|                                            |                                       |   |                                       |
| EXPENSES                                        |                                       |   |                                       |
|  Professional      fees                    | 4,772                                      |   | 5,321                                      |
|  Telephone                                 |    65                       |   | 1,088                                      |
|                                            |                                       |   |                                       |
| General      and administrative subtotal        | 5,637                                      |   | 6,409                                      |
|                                            |                                       |   |                                       |
|  Decorating/improvements                   | 7,761                                      |   | 6,718                                      |
|  Fees      and permits                     | 148                                        |   | 110                                        |
|  Garbage      and trash                    | 6,141                                      |   | 6,177                                      |
|  Electric                                  | 8,998                                      |   | 8,740                                      |
|  Insurance                                 | 9,183                                      |   | 8,938                                      |
|  Lawn                                      | 9,785                                      |   | 10,330                                     |
|  Miscellaneous                             | 19,112                                     |   | 10,728                                     |
|  Payroll                                   | 3,164                                      |   | 2,920                                      |
|  Pest      control                         | 600                                        |   | 600                                        |
|  Repairs      and maintenance              | 14,983                                     |   | 8,511                                      |
|  Real      estate taxes                    | 16,440                                     |   | 18,366                                     |
|  Manager      payroll                      | 12,206                                     |   | 11,902                                     |
|  Management      fee                       | 16,800                                     |   | 14,400                                     |
|                                            |                                       |   |                                       |
|   Operating      expenditure subtotal | 125,321                                    |   | 108,440                                    |
|                                            |                                       |   |                                       |
|   Total      expenses                 | 130,958                                    |   | 114,849                                    |
|                                            |                                       |   |                                       |
|   Net      operating income           | $    80,087            |   | $    93,114            |
|                                            |                                       |   |                                       |
|   Replacement      reserve            | $           8,004 |   | $           8,004 |
|                                            |                                       |   |                                       |
|   Income      to service debt         | $    72,083            |   | $    85,110            |
|                                            |                                       |   |                                       |
|   Debt      service #1                | $    31,164            |   | $    31,164            |
|                                            |                                       |   |                                       |
|   Debt      service #2                | $    25,921            |   | $    32,676            |
|                                            |                                       |   |                                       |

----

|   General      and administrative                           | $  5,637           |   | $  6,409           |
|-----------------------------------------------------------------------|------------------------------|--------|------------------------------|
|                                                                  |                         |   |                         |
|   Utilities                                                 | 15,139                       |   | 14,917                       |
|                                                                  |                         |   |                         |
|   Payroll                                                   | 15,370                       |   | 14,822                       |
|                                                                  |                         |   |                         |
|   Maintenance                                               | 52,389                       |   | 36,997                       |
|                                                                  |                         |   |                         |
|   Management      fees                                      | 16,800                       |   | 14,400                       |
|                                                                  |                         |   |                         |
|   Tax                                                       | 16,440                       |   | 18,366                       |
|                                                                  |                         |   |                         |
|   Insurance                                                 | 9,183                        |   | 8,938                        |
|                                                                  |                         |   |                         |
|     Total      expenses                           | $130,958                     |   | $114,849                     |
|                                                                  |                         |   |                         |
| Revenue      growth rate                                              | 1.48%                        |   | 3.09%                        |
|                                                                  |                         |   |                         |
| Expense      growth rate                                              | 14.03%                       |   | (2.72)%                      |
|                                                                  |                         |   |                         |
| Total      number of units: 40                                        |                         |   |                         |
|       Per-unit      replacement reserve | $    200 |   | $    200 |
|                                                                  |                         |   |                         |