|**UNITED STATES**                                                                                    
|-----------------------------------------------------------------------------------------------------
|**SECURITIES AND EXCHANGE COMMISSION**                                                               
|**WASHINGTON, D.C.  20549**                                                                          
|FORM 10-Q                                                                                            
|                                                                                                     
|(Mark One)                                                                                           
|[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OF 15(D) OF THE                                          
|SECURITIES EXCHANGE ACT OF 1934                                                                      
|For the quarterly period ended September 30, 2004                                                    
|OR                                                                                                   
|[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF                                             
|THE SECURITIES EXCHANGE ACT OF 1934                                                                  
|For the transition period from ________ to _________                                                 
|                                                                                                     
|Commission file number  333-37173                                                                    
|                                                                                                     
|                                                                                                     
|**NATIONAL HEALTH REALTY, INC.**                                                                     
|(Exact name of registrant as specified in its charter)                                               
|                                                                                                     
|Maryland                                                                                             
|(State or other jurisdiction of incorporation or organization)                                       
|                                                                                                     
|52-2059888                                                                                           
|(I.R.S. Employer Identification No.)                                                                 
|                                                                                                     
|100 Vine Street                                                                                      
|Murfreesboro, TN                                                                                     
|37130                                                                                                
|(Address of principal executive offices)                                                             
|(Zip Code)                                                                                           
|                                                                                                     
|(615) 890-2020                                                                                       
|Registrant's telephone number, including area code                                                   
|                                                                                                     
|Indicate by check mark whether the registrant                                                        
|                                                                                                     
|(1)     Has filed all reports required to be filed by Section 13 or 15(d), of the Securities Exchange
|Act of 1934 during the preceding 12 months.                                                          
|Yes X                                                                                                
|                                                                                                     
|(2)     Has been subject to such filing requirements for the past 90 days.                           
|Yes X                                                                                                
|                                                                                                     
|Indicate by check mark whether the registrant is an accelerated filer.  Yes x  No                    
|                                                                                                     
|9,595,588 shares of common stock were outstanding as of October 31, 2004                             



|**Item 1.  Financial Statements.**             |               |             
|---------------------------------------------- | ------------- | ------------
|                                               |               |             
|NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES 
|                                               |               |             
|INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS 
|*(in thousands, except share amounts)*        
|                                               |               |             
|                                               | September 30, | December 31,
|                                               | 2004          | 2003        
|                                               | *(unaudited)* |             
|ASSETS                                         |               |             
|Real estate properties:                        |               |             
|Land                                           | $ 19,464      | $ 19,504    
|Buildings and improvements                     | 147,767       | 147,767     
|                                               | 167,231       | 167,271     
|Less accumulated depreciation                  | (44,814)      | (40,340)    
|Real estate properties, net                    | 122,417       | 126,931     
|                                               |               |             
|Mortgage and other notes receivable            | 13,650        | 44,595      
|Interest and rent receivable                   | 202           | 403         
|Cash and cash equivalents                      | 6,720         | 4,982       
|Marketable securities                          | 6,399         | 5,598       
|Deferred costs and other assets                | 245           | 369         
|Total Assets                                   | $149,633      | $182,878    
|                                               |               |             
|LIABILITIES                                    |               |             
|Debt                                           | $  16,575     | $ 47,820    
|Minority interest in consolidated subsidiaries | 14,034        | 14,174      
|Accounts payable and other accrued expenses    | 1,357         | 1,311       
|Accrued interest                               | 43            | 10          
|Dividends payable                              | 3,191         | 4,723       
|Distributions payable to partners              | 404           | 598         
|Total Liabilities                              | 35,604        | 68,636      
|                                               |               |             
|Commitments, contingencies and guarantees      |               |             
|                                               |               |             
|STOCKHOLDERS' EQUITY                           |               |             
|Cumulative convertible preferred stock,        |               |             
|$.01 par value; 5,000,000 shares               |               |             
|authorized; none issued and outstanding        | ---           | ---         
|Common stock, $.01 par value;                  |               |             
|75,000,000 shares authorized;                  |               |             
|9,595,588 shares issued and outstanding        | 96            | 96          
|Capital in excess of par value of common stock | 135,594       | 135,536     
|Cumulative net income                          | 62,705        | 54,206      
|Cumulative dividends                           | (87,282)      | (77,711)    
|Unrealized gains on marketable securities      | 2,916         | 2,115       
|Total Stockholders' Equity                     | 114,029       | 114,242     
|Total Liabilities and Stockholders' Equity     | $149,633      | $182,878    

*The accompanying notes to interim condensed consolidated financial statements are an integral part of these financial
statements.*

*The interim condensed balance sheet at December 31, 2003 is derived from the audited financial statements at that date.*

|NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES      
|---------------------------------------------------
|                                                   
|INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
|*(unaudited)*                                      
|                                                   
|                                                   
|                                                   
|                                                   
|                                                   
|REVENUES:                                          
|Rental income                                      
|Mortgage interest income                           
|                                                   
|EXPENSES:                                          
|Interest                                           
|Depreciation of real estate                        
|Amortization of loan costs                         
|General and administrative                         
|                                                   
|                                                   
|INCOME BEFORE MINORITY INTEREST                    
|IN CONSOLIDATED SUBSIDIARIES                       
|AND NON-OPERATING INCOME                           
|                                                   
|NON-OPERATING INCOME (investment                   
|and interest income)                               
|                                                   
|MINORITY INTEREST IN                               
|CONSOLIDATED SUBSIDIARIES                          
|                                                   
|NET INCOME                                         
|                                                   
|NET INCOME PER COMMON SHARE:                       
|Basic                                              
|Diluted                                            
|                                                   
|WEIGHTED AVERAGE COMMON                            
|SHARES OUTSTANDING:                                
|Basic                                              
|Diluted                                            
|                                                   
|Common dividends per share declared                

***The accompanying notes to interim condensed consolidated financial statements are an integral part of
these financial statements.*



|NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIES          
|-------------------------------------------------------
|                                                       
|INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
|*(unaudited)*                                          
|                                                       
|                                                       
|                                                       
|                                                       
|                                                       
|CASH FLOWS FROM OPERATING ACTIVITIES:                  
|Net income                                             
|Depreciation of real estate                            
|Amortization of loan costs                             
|Minority interest in consolidated subsidiaries         
|Decrease in interest and rent receivable               
|(Increase) decrease in other assets                    
|Increase in accounts payable and accrued liabilities   
|NET CASH PROVIDED BY OPERATING ACTIVITIES              
|                                                       
|CASH FLOWS FROM INVESTING ACTIVITIES:                  
|Proceeds from disposal of property and equipment       
|Increase in deposit on real estate properties sold     
|Collection of mortgage notes receivable                
|Distribution from unconsolidated investment            
|NET CASH PROVIDED BY INVESTING ACTIVITIES              
|                                                       
|CASH FLOWS FROM FINANCING ACTIVITIES:                  
|Proceeds from long-term debt                           
|Payments on long-term debt                             
|Dividends paid to stockholders                         
|Distributions paid to partners                         
|Issuance of common shares                              
|NET CASH USED IN FINANCING ACTIVITIES                  
|                                                       
|INCREASE IN CASH AND CASH EQUIVALENTS                  
|CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD         
|CASH AND CASH EQUIVALENTS, END OF PERIOD               
|                                                       
|Supplemental Information:                              
|Cash payments for interest expense                     
|                                                       

*The accompanying notes to interim condensed consolidated financial statements are an integral part of these
financial statements.*

NATIONAL HEALTH REALTY, INC. AND SUBSIDIARIESINTERIM CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITYFOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003*(dollars in thousands)*UnrealizedCumulative Convertible

Capital in


Gains
TotalPreferred Stock
Common Stock
Excess of
Cumulative
Cumulative
on
Marketable
Stockholders'Shares
Amount
Shares
Amount
Par Value
Net Income
Dividends
Securities
EquityBALANCE AT 12/31/03
---
$        ---
9,590,588
$       96
$135,536
$ 54,206
$(77,711)
$   2,115
$114,242Net income
---
---
---
---
---
8,499
---
---
8,499Unrealized gains on market-able securities
---
---
---
---
---
---
---
801
801Total comprehensive income








9,300Shares sold
---
---
5,000
---
58
---
---
---
58Dividends to common share-holders ($.9975 per share)
---
---
---
---
---
---
(9,571)
---
(9,571)BALANCE AT 9/30/04
---
$        ---
9,595,588
$       96
$135,594
$ 62,705
$(87,282)
$   2,916
$114,029BALANCE AT 12/31/02
---
$        ---
9,570,323
$       96
$135,324
$ 42,361
$(63,440)
$     135
$114,476Net income
---
---
---
---
---
7,976
---
---
7,976Unrealized gains on
marketablesecurities
---
---
---
---
---
---
---
484
484Total comprehensive income








8,460Shares sold
---
---
11,265
---
81
---
--
---
81Dividends to common share-holders ($.9975 per share)
---
---
---
---
---
---
(9,549)
---
(9,549)BALANCE AT 9/30/03
---
$        ---
9,581,588
$       96
$135,405
$ 50,337
$(72,989)
$     619
$113,468

The accompanying notes to interim condensed consolidated financial statements are an integral part of these financial statements.

**NOTE 1.  SIGNIFICANT ACCOUNTING POLICIES**

The unaudited financial statements to which these notes are attached include, in our opinion, all
adjustments which are necessary to fairly present the financial position, results of operations and cash flows
of National Health Realty, Inc. (NHR or the Company) and its majority owned subsidiaries.  We assume that
users of these interim financial statements have read or have access to the audited December 31, 2003,
financial statements and Management's Discussion and Analysis of Financial Condition and Results of
Operations and that the adequacy of additional disclosure needed for a fair presentation, except in regard to
material contingencies, may be determined in that context.  See our web page at
www.nationalhealthrealty.com.  Accordingly, footnotes and other disclosures which would substantially
duplicate the disclosure contained in our most recent annual report to stockholders have been omitted.  This
quarter's interim financial information is not necessarily indicative of the results that may be expected for
a full year for a variety of reasons including , but not limited to, changes in interest rates, rents, operations
and the timing of debt and equity financings.

**NOTE 2.  EARNINGS PER SHARE**

Basic earnings per share is based on the weighted average number of common shares outstanding
during the year.

Diluted earnings per share assumes the exercise of stock options using the treasury stock method.

The following table summarizes the earnings and the average number of common shares and
common equivalent shares used in the calculation of basic and diluted earnings per share.

|                                            | Three Months Ended | Nine Months Ended
|------------------------------------------- | ------------------ | -----------------
|                                            | September 30       | September 30     
|                                            | 2004               | 2003             
|BASIC:                                      |                    |                  
|Weighted average common shares              | 9,595,588          | 9,575,496        
|Net income available to common stockholders | $2,825,000         | $ 2,636,000      
|                                            |                    |                  
|Net income per common share                 | $           .29    | $            .28 
|                                            |                    |                  
|DILUTED:                                    |                    |                  
|Weighted average common shares              | 9,595,588          | 9,575,496        
|Stock options                               | 222,138            | 186,224          
|Adjusted weighted-average common            |                    |                  
|shares outstanding                          | 9,817,726          | 9,761,720        
|                                            |                    |                  
|Net income available to common stockholders | $2,825,000         | $ 2,636,000      
|                                            |                    |                  
|Net income per common share                 | $           .29    | $            .27 

**NOTE 3.  COMMITMENTS, CONTINGENCIES AND GUARANTEES**

NHR began operating on December 31, 1997 after the exchange of NHR common stock for certain
assets of NHC including mortgage notes receivable and real property.  In order to protect the REIT status
of NHR, certain NHC unitholders received limited partnership units of NHR/OP, L.P. rather than shares of
common stock of NHR.  As a result of certain unitholders' involuntary acceptance of NHR/OP, L.P.
partnership units to benefit all other unitholders, we have indemnified those certain unitholders for any tax
consequence resulting from any involuntary conversion of NHR/OP, L.P. partnership units into shares of
NHR common stock.  The indemnification expires at such time as the NHR/OP, L.P. unitholders are in a
position to voluntarily convert their partnership units into NHR common stock on a tax free basis without
violating applicable REIT requirements.

We believe that we have operated our business so as to qualify as a REIT under Sections 856 through
860 of the Internal Code of 1986, as amended (the "Code") and we intend to continue to operate in such a
manner, but no assurance can be given that we will be able to qualify at all times.  If we qualify as a REIT,
we will generally not be subject to federal corporate income taxes on our net income that is currently
distributed to stockholders.  This treatment substantially eliminates the "double taxation" (at the corporate
and stockholder levels) that typically applies to corporate dividends.  Our failure to continue to qualify under
the applicable REIT qualification rules and regulations would cause us to owe state and federal income taxes
and would have a material adverse impact on our financial position, results of operations and cash flows.

NHC HealthCare/Nashville, LLC, a wholly owned subsidiary of our investment advisor, National
HealthCare Corporation ("NHC"), is the operator of a long-term care facility in Nashville, Tennessee which
sustained extensive fire damage on September 25, 2003.There have been an undetermined number of deaths
and other personal injuries related to the fire.NHR has no ownership or involvement in the damaged facility.
	Although NHR does not own the damaged facility, NHR currently owns or leases 14 facilities to
NHC subsidiaries.  The leases require the operator to maintain replacement cost property and casualty
insurance, including business interruption coverage, with NHR being the loss payee.  NHR is also an
additional named insured on a professional and general liability policy issued by a subsidiary of NHC.
Under the terms of the leases, the operator is required to maintain limits of not less than $1,000,000 per
occurrence and $1,000,000 in the aggregate.  NHR is advised that the current policy limits exceed these
requirements.  NHC and its subsidiaries are the largest group of tenants of NHR and their potential liability
from this incident and the impact, if any, on NHR cannot be determined at this time.

**NOTE 4. MORTGAGE NOTE RECEIVABLE**

The following is a summary of the terms and amounts of mortgage and other notes receivable:

|Final        |                                             | Interest Rate | Principal Amount
|------------ | ------------------------------------------- | ------------- | ----------------
|Payment Date | Payment Terms                               | at 9/30/04    | *(In Thousands)*
|             |                                             |               |                 
|2016         | Monthly payments of $43,318, which          |               |                 
|             | includes interest at the prime rate plus 2% | 6.25%         | $ 4,736         
|             |                                             |               |                 
|2014         | Monthly payments of $38,250, which          |               |                 
|             | includes interest at 8.5%                   | 8.50%         | 4,354           
|             |                                             |               |                 
|2016         | Monthly payments of $7,845, which includes  |               |                 
|             | interest at the prime rate plus 2%          | 6.25%         | 579             
|             |                                             |               |                 
|2014         | Monthly payments of $5,396, which includes  |               |                 
|             | interest at 9.0%                            | 9.00%         | 106             
|             |                                             |               |                 
|2005         | Monthly payments of $72,800, which          |               |                 
|             | includes interest at 10.5%                  | 10.25%        | 2,088           
|             |                                             |               |                 
|2005         | Monthly payments of $10,400, which          |               |                 
|             | includes interest at 10.5%                  | 10.25%        | 434             
|             |                                             |               |                 
|2005         | Monthly payments of $46,800, which          |               |                 
|             | includes interest at 10.5%                  | 10.25%        | 1,353           
|             |                                             |               |                 
|             | Weighted Average Interest and Total         | 8.39%         | $13,650         
|             |                                             |               |                 

*FCC Notes Receivable Prepayments*

On February 27, 2004, we received prepayments of the balance (approximately $30,384,000) of our
10.25% notes receivable from Florida Convalescent Centers, Inc. or affiliates (FCC) of Sarasota, Florida.
The notes were scheduled to mature on October 31, 2004.

The proceeds of the prepayments plus cash on hand were used to pay 100% (approximately
$31,175,000) of the credit facility debt, which had a current interest rate of 3.10%.

**NOTE 5.  INVESTMENT IN MARKETABLE SECURITIES**

On September 17, 2002, we purchased 225,000 shares of National Health Investors, Inc. ("NHI")
common stock for approximately $3,483,000.  At September 30, 2004, the fair value of the shares is
$6,399,000.  This investment in marketable securities is classified as an investment in securities available
for sale. Unrealized gains and losses on available for sale securities are recorded in stockholders' equity in
accordance with SFAS No. 115.

**NOTE 6.  STOCK OPTION PLAN**

Our stockholders have approved the 1997 Stock Option and Appreciation Rights Plan under which
options to purchase shares of our common stock are available for grant to our consultants, advisors, directors
and employees at a price no less than the market value of the stock on the date the option is granted.  The
vesting period and term of the options is from five to six years.  The following table summarizes option
activity:

|                                       |           | Weighted      
|-------------------------------------- | --------- | --------------
|                                       | Number    | Average       
|                                       | of Shares | Exercise Price
|Outstanding December 31, 2000          | 397,000   | $  8.42       
|Options granted                        | 15,000    | 10.74         
|Outstanding December 31, 2001          | 412,000   | 8.51          
|Options granted                        | 10,000    | 16.95         
|Outstanding December 31, 2002          | 422,000   | 8.71          
|Options granted                        | 15,000    | 14.80         
|Options exercised                      | (25,000)  | 11.67         
|Outstanding December 31, 2003          | 412,000   | 8.75          
|Options granted                        | 20,000    | 16.50         
|Options exercised                      | (5,000)   | 11.50         
|Options forfeited                      | (20,000)  | 11.42         
|Outstanding September 30, 2004         | 407,000   | 8.97          
|                                       |           |               
|Options exercisable September 30, 2004 | 40,000    | $14.37        

At September 30, 2004, options to purchase 40,000 shares of common stock are outstanding and
exercisable.  Exercise prices on the options range from $6.50 to $16.95 per share.  The weighted average
contractual life of options outstanding at September 30, 2004 is 1.3  years.  We have reserved 500,000 shares
of common stock for issuance under the stock option plan.  At September 30, 2004, options to purchase
36,802 additional shares of common stock may be issued under the stock option plan.

Based on the number of options granted and the historical and expected future trends of factors
affecting valuation of those options, management believes that the additional compensation cost, as
calculated in accordance with SFAS 123, has no effect on our net income or earnings per share.

**NOTE 7. TERM NOTE PAYABLE**

In May 2004, we entered into a $17,000,000 bank term loan agreement ($16,575,000 outstanding
at September 30, 2004).  The proceeds of the loan were used to repay a note payable to NHC in the
approximate amount of $14,922,000 (interest rate of LIBOR +2.25% with a floor of 4%) and a senior secured
note payable to NHC in the approximate amount of $1,723,000 (interest rate of 8.4%).  The term note
payable requires monthly interest payments at the interest rate of 30 day LIBOR plus 1.50%.  Quarterly
principal payments in the amount of $425,000 are required until maturity (May 14, 2007) at which time the
entire outstanding principal balance shall be due.

**NOTE 8.  NEW ACCOUNTING PRONOUNCEMENTS**

In May 2003 the FASB issued Statement of Financial Accounting Standards No. 150, "Accounting
for Certain Financial Instruments with Characteristics of both Liabilities and Equity."  SFAS 150 establishes
standards for classifying and measuring as liabilities certain financial instruments that embody obligations
of the issuer and have characteristics of both liabilities and equity.  SFAS 150 was generally effective for
NHR July 1, 2003.  As originally issued, SFAS 150 would have required NHR to measure the minority
interests in NHR/OP, L.P. on the consolidated balance sheet at estimated fair value at the balance sheet date,
with a charge or credit to income (specifically, interest expense) for the change in carrying value during the
period.  In November 2003, the FASB deferred for an indefinite period the application of the classification
and measurement guidance in SFAS 150 to non-controlling interests in limited-life subsidiaries (such as
NHR/OP, L.P.).  Measurement of the minority interests in NHR/OP, L.P. at estimated fair value at each
balance sheet date, if and when required, would result in significant volatility in NHR's financial position
and results of operations.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities"
(FIN 46), which requires the consolidation of variable interest entities by the primary beneficiary of such
variable interest entity.  FIN 46, as revised by the FASB, generally requires that variable interest entities
must be consolidated by their primary beneficiary effective March 31, 2004.  NHR has adopted all provisions
of FIN 46 effective March 31, 2004.  The implementation of FIN 46 has not had a material effect on our
financial position, results of operations or cash flows.

**NOTE 9.  EVENT SUBSEQUENT TO BALANCE SHEET DATE**

On November 4, 2004, Mr. W. Andrew Adams resigned his position as President.  He retains his
position as Chairman of the Board focusing on strategic planning, but will have no day to day managerial
duties with NHR.

The Board has elected NHR Director and Senior Vice President, Mr. Robert G. Adams, to fill the
position of President.  Mr. Robert. G. Adams, brother of W. Andrew Adams, has been with NHR as Director
and as Senior Vice President or Vice President since the company began operations in 1998.

**Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.**

OVERVIEW

National Health Realty, Inc. (NHR or the Company) is a real estate investment trust (REIT) that
began operations on January 1, 1998.  Currently our assets, through our subsidiary NHR/OP, L.P. (the
Operating Partnership), include the real estate of 26 health care facilities, including 19 licensed skilled
nursing facilities, six assisted living facilities and one independent living center (the Health Care Facilities).
We also own eight first and second mortgage promissory notes with principal balances totaling $13,650,000
(the Notes) at September 30, 2004 and secured by the real property of health care facilities.  Our revenues
are derived primarily from rent and interest income from these real estate properties and mortgages
receivable.  Our primary lessee is National HealthCare Corporation (NHC) which leases 14 of our 23
properties and guarantees the lease payments on the remaining nine properties.

*Competitive Restrictions-*

We have an Advisory Services Agreement with National HealthCare Corporation (NHC) pursuant
to which NHC will provide us with investment advice, office space and personnel.  NHC owns or manages
74 long-term care health care facilities with 9,208 beds in 10 states.  The advisory services agreement
provides that prior to the earlier to occur of (i) the termination of the advisory agreement for any reason or
(ii) NHC ceasing to be actively engaged as the investment advisor for National Health Investors, Inc. (NHI),
we will not (without the prior approval of NHI) transact business with any party, person, company or firm
other than NHC. It is the intent of the foregoing restriction that we will not be actively or passively engaged
in the pursuit of additional investment opportunities, but rather will focus upon our capacities as landlord
and note holder of those certain assets we currently hold.

*Areas of Focus-*

On February 27, 2004, we received a prepayment of $30.3 million on our 10.25% notes receivable
from Florida Convalescent Centers, Inc.  The notes were scheduled to mature on October 31, 2004.

The proceeds of the prepayment plus cash on hand were used to pay 100% of NHR's $31.2 million
credit facility debt, which had a current interest rate of 3.10%.

Based on these transactions, NHR's net cash inflows for the period from March 1, 2004 through the
scheduled maturity of the FCC notes will be increased by $1.3 million due to the reduction of principal and
interest payments required under the credit facility, offset by the reduction of principal and interest that
would have been received from the FCC notes.  However, due to the prepayment of the FCC notes and the
credit facility and the difference between the interest rates of each instrument, NHR's net income will be
reduced by $1.5 million for this same period in 2004.

NHR's quarterly common stock dividend of 33.25 cents per share is expected to remain unchanged
for the near future.

ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with accounting principles generally accepted
in the United States requires us to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from
those estimates and cause our reported net income to vary significantly from period to period.

Our significant accounting policies and the associated estimates and the issues which impact these
estimates are as follows:

*Revenue Recognition - Mortgage Interest and Rental Income*

We collect interest and rent from our customers.  Generally our policy is to recognize revenues on
an accrual basis as earned.  However, we may in the future determine that, based on insufficient historical
collections and the lack of expected future collections, revenue for interest or rent is not realizable.  For any
such nonperforming investments, our policy is to recognize interest or rental income only in the period when
payments are received.  If conclusions as to the realizibility of revenue change, our revenues could vary
significantly from period to period.

*Valuations of and Impairments to Our Investment*s

Since the passage of the Balanced Budget Act of 1997 affecting SNFs January 1999, the long-term
care industry has experienced material reductions in government and private insurance reimbursement.
Some legislative relief was granted in 2000 and 2001 as a result of the Balanced Budget Refinement Act of
1999, but some of those add-on provisions expired October 1, 2002 materially reducing reimbursement.
Effective October 1, 2003, the Centers for Medicare and Medicaid Services (CMS) increased reimbursement
for Medicare Part A by 3.26% in addition to the annual inflationary increase of 3%.  No material changes
to reimbursement are expected until CMS refines the current RUG III case-mix methodology.  The long-term
health care industry has also experienced a dramatic increase in professional liability claims and in the cost
of insurance to cover such claims.  These factors have combined to cause a number of bankruptcy filings,
bankruptcy court rulings and court judgments about refinancing which have affected some of our lessees and
mortgagees.

Decisions about valuations and impairments of our investments require significant judgements and
estimates on the part of management.  We monitor the liquidity and credit worthiness of our tenants and
borrowers on an on-going basis.  For real estate properties, the need to recognize an impairment is evaluated
on a property by property basis in accordance with Statement of Financial Accounting Standards No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" (SFAS 144).  Recognition of an
impairment is based upon estimated future cash flows from a property compared to the carrying value of the
property.  For notes receivable, impairment recognition is based upon an evaluation of the estimated
collectibility of loan payments on a specific loan basis in accordance with Statement of Financial Accounting
Standards No. 114, "Accounting by Creditors for Impairment of a Loan - An Amendment of FASB
Statements No. 5 and 15".  While we believe that the carrying amounts of our properties and notes receivable
are realizable, it is possible that future events could require us to make significant adjustments or revisions
to these estimates.

*REIT Status and Taxes*

We believe that we have operated our business so as to qualify as a REIT under Sections 856 through
860 of the Internal Revenue Code of 1986, as amended (the "Code") and we intend to continue to operate
in such a manner, but no assurance can be given that we will be able to qualify at all times.  If we qualify
as a REIT, we will generally not be subject to federal corporate income taxes on our net income that is
currently distributed to its stockholders.  This treatment substantially eliminates the "double taxation" (at
the corporate and stockholder levels) that typically applies to corporate dividends.  Our failure to continue
to qualify under the applicable REIT qualification rules and regulations would cause us to owe state and
federal income taxes and would have a material adverse impact on our financial position, results of
operations and cash flows.

CAPITAL RESOURCES AND LIQUIDITY

*FCC Notes and Bank Credit Facility Prepayments*

On February 27, 2004, we received prepayment of the balance (approximately $30,384,000) of our
10.25% notes receivable from Florida Convalescent Centers, Inc. or affiliates (FCC) of Sarasota, Florida.
The notes were scheduled to mature on October 31, 2004.

The proceeds of the prepayments plus cash on hand were used to pay 100% (approximately
$31,175,000) of the credit facility debt, which had a current interest rate of 3.10%.

*Term Note Payable*

In May 2004, we borrowed $17,000,000 ($16,575,000 outstanding at September 30, 2004) under a
bank term loan with an interest rate of 30 day LIBOR plus 1.5% and a three year term.  The proceeds of the
loan were used to repay a note payable to NHC in the approximate amount of $14,922,000 (interest rate of
LIBOR + 2.25% with a floor of 4%) and a senior secured note payable to NHC in the approximate amount
of $1,723,000 (interest rate of 8.4%).  The new  term note payable requires monthly interest payments plus
quarterly principal payments in the amount of $425,000 until maturity on May 14, 2007 at which time the
entire outstanding principal balance is due.

*Leases*

We lease our 23 health care facilities to various lessees: 14 properties are leased to NHC, and nine
properties that were previously leased to NHC are leased to nine separate lessees not related to NHC.  With
respect to these nine properties, NHC remains obligated under its master lease agreement and continues to
remain obligated to make the lease payments to us.  Lease payments made to us from the new lessees are
credited against NHC's overall rent obligation.  At September 30, 2004, all payments are current.  Our leases
with NHC and the nine separate lessees have initial five or ten year terms with provisions for two five year
renewal terms.

*Contractual Cash Obligations*

Our contractual cash obligations for periods subsequent to September 30, 2004 are as follows:

|                                   |         | Less than |           |           |              
|---------------------------------- | ------- | --------- | --------- | --------- | -------------
|(in thousands)                     | Total   | 1 Year    | 2-3 Years | 4-5 Years | After 5 Years
|Long-term debt                     | $16,575 | $1,700    | $14,875   | $---      | $---         
|Total Contractual Cash Obligations | $16,575 | $1,700    | $14,875   | $     --- | $     ---    

Interest expense has not been included in the above table due to the difficulty in projecting variable
rate interest.  During the nine months ended September 30, 2004, our cash payments for interest were
$598,000.

We expect that current cash on hand, marketable securities, short-term notes receivable, operating
cash flows, and as needed, our borrowing capacity will be adequate to finance our operating and financing
requirements for 2004 and 2005.

*Sources and Uses of Funds*

Our leasing and mortgage services generated net cash from operating activities during the nine
months ended September 30, 2004 in the amount of $14,384,000 compared to $14,427,000 in the prior period.
Net cash from operating activities generally includes net income plus non-cash expenses, such as depreciation
and amortization and provision for loan losses, if any, and working capital changes.  The period to period
increase is due primarily to reduced interest expense offset in part by reduced mortgage interest income.

Cash flows provided by investing activities totaled $31,052,000 during the nine months ended
September 30, 2004 compared to $3,180,000 in the prior period.  Collection of mortgage notes receivable
provided $30,945,000 of cash flow in the current period compared to $2,015,000 in the same period last year.
An increase in distributions from an unconsolidated investment provided $67,000 of cash flow in the current
period compared to no cash flow in the prior period.  A decrease in the deposit on real estate properties sold
provided no cash flow this year compared to $1,140,000 last year.

Cash flows used in financing activities totaled $43,698,000 ($13,773,000 last year) and included
payments on long-term debt of $48,245,000 ($3,098,000 last year), payments for dividends to stockholders
of $11,103,000 ($9,545,000 last year), and payments for cash distributions to partners of $1,408,000
($1,211,000 last year) offset in part by $17,000,000 in proceeds from long-term debt (- 0 - last year).

*Dividends*

We intend to pay quarterly distributions to our stockholders in an amount at least sufficient to satisfy
the distribution requirements of a real estate investment trust.  Such requirements necessitate that at least 90%
of our taxable income be distributed annually.  The primary source for distributions will be rental and interest
income we earn on the real property and mortgage notes receivable.

*Debt to Equity Ratio*

At September 30, 2004, our debt as a percentage of total liabilities and capital was 12.7%.

Our current cash on hand, marketable securities, collections on leases and notes receivable, operating
cash flows and, as needed, our borrowing capacity are expected to be adequate to pay or finance any
scheduled debt reduction, plus our operating requirements for 2004 and into 2005.

RESULTS OF OPERATIONS

*Three Months Ended September 30, 2004 Compared to Three Months Ended September 30, 2003*

Net income for the three months ended September 30, 2004 is $2,825,000 versus $2,636,000 for the
same period in 2003, a increase of 7.2%.  Diluted earnings per common share is 29 cents in the 2004 period,
compared to 27 cents in the 2003 period.

Total revenues for the three months ended September 30, 2004 decreased $932,000 to $4,892,000
from $5,824,000 for the three months ended September 30, 2003.  Revenues from rental income increased
$62,000 or 1.5% when compared to the same period in 2003.  Revenues from mortgage interest decreased
$994,000 or 62.9% in 2004 as compared to the same period in 2003.

The increase in rental income is due to increased percentage rent.   Percentage rent is calculated at
3% of the amount by which gross revenues of each leased health care center in each quarter of each year after
1999 exceed the gross revenues of such health care facility in the applicable quarter of 1999.

The decrease in mortgage income is the result of lower balances of notes receivable.  We received
prepayments on mortgages receivable totaling $30,384,000 in February 2004 and totaling $21,982,000 in
November 2003.  Mortgage interest decreased also because of the reductions in the principal of mortgage
notes receivable due to regular monthly amortization.

Total expenses for the 2004 three month period decreased $1,145,000 or 38.7% to $1,816,000 from
$2,961,000 for the 2003 three month period.  Interest expense decreased $913,000 or 87.5% in the 2004 three
month period as compared to the 2003 period.  Depreciation of real estate decreased $99,000 or 6.2%.
General and administrative costs decreased $17,000 or 8.1%.

Interest expense decreased due primarily to principal paydowns in the fourth quarter of 2003 ($22
million) and the first quarter of 2004 ($31 million) on the credit facility and the senior secured notes payable
to NHC ($4 million).  There was an additional principal paydown of approximately $1,723,000 on the senior
secured notes payable to NHC in the second quarter of 2004.  In addition, interest expense decreased due to
the decreased rate effective December 31, 2003 and May 14, 2004 on approximately $14,922,000 of debt.

*Nine Months Ended September 30, 2004 Compared to Nine Months Ended September 30, 2003*

Net income for the nine months ended September 30, 2004 is $8,499,000 versus $7,976,000 for the
same period in 2003, an increase of 6.6%.  Diluted earnings per common share is 87 cents in the 2004 period,
compared to 82 cents in the 2003 period.

Total revenues for the nine months ended September 30, 2004 decreased $2,406,000 to $15,188,000
from $17,594,000 for the nine months ended September 30, 2003.  Revenues from rental income increased
$105,000 or .8% when compared to the same period in 2003.  Revenues from mortgage interest decreased
$2,511,000 or 52.9% in 2004 as compared to the same period in 2003.

The increase in rental income is due to increased percentage rent offset in part by adjustments in the
first quarter of 2003 which had not been previously determined.  Percentage rent is calculated at 3% of the
amount by which gross revenues of each leased health care center in each quarter of each year after 1999
exceed the gross revenues of such health care facility in the applicable quarter of 1999.

The decrease in mortgage income is the result of lower balances of notes receivable.  We received
prepayments on mortgages receivable totaling $30,384,000 in February 2004 and totaling $21,982,000 in
November 2003.  Mortgage interest decreased also because of the reductions in the principal of mortgage
notes receivable due to regular monthly amortization.

Total expenses for the 2004 nine month period decreased $2,999,000 or 37.6% to $5,926,000 from
$8,925,000 for the 2003 nine month period.  Interest expense decreased $2,547,000 or 80.1% in the 2004 nine
month period as compared to the 2003 period.  Depreciation of real estate decreased $295,000 or 6.2%.
General and administrative costs increased $186,000 or 30.0%.

Interest expense decreased due primarily to principal paydowns in the fourth quarter of 2003 ($22
million) and the first quarter of 2004 ($31 million) on the credit facility and the senior secured notes payable
to NHC ($4 million).  There was an additional principal paydown of approximately $1,723,000 on the senior
secured notes payable to NHC in the second quarter of 2004.  In addition, interest expense decreased due to
the decreased rates effective December 31, 2003 and May 14, 2004 on approximately $14,922,000 of debt.
General and administrative costs increased due to a writeoff of $252,000 of previously capitalized costs for
a transaction that did not materialize.

**Non-Operating Income**

Revenues from investment and interest income for the three months ended September 30, 2004
increased $106,000 which is unchanged when compared to the same period in 2003.  Investment and interest
income for the three months ended September 30, 2004 includes $90,000 of dividend and $16,000of bank
interest income.

Revenues from investment and interest income for the nine months ended September 30, 2004
decreased $5,000 or 1.6% compared to the same period in 2003.  Investment and interest income for the nine
months ended September 30, 2004 includes $287,000 of dividend and $24,000 of bank interest income.

**Funds From Operations**

Our funds from operations ("FFO") for the nine months ended September 30, 2004, on a diluted basis
was $12,470,000, an increase of $262,000 as compared to $12,208,000 for the same period in 2003.  FFO
represents net earnings available to common stockholders, excluding the effects of asset dispositions, plus
depreciation associated with real estate investments.  Diluted FFO assumes, if dilutive, the conversion of
convertible subordinated debentures, the conversion of cumulative convertible preferred stock and the
exercise of stock options using the treasury stock method.

We believe that funds from operations is an important supplemental measure of operating
performance for a real estate investment trust.  Because the historical cost accounting convention used for real
estate assets requires straight-line depreciation (except on land), such accounting presentation implies that
the value of real estate assets diminishes predictably over time.  Since real estate values instead have
historically risen and fallen with market conditions, presentations of operating results for a real estate
investment trust that use historical cost accounting for depreciation could be less informative, and should be
supplemented with a measure such as FFO.  The term FFO was designed by the real estate investment trust
industry to address this issue.  Our measure may not be comparable to similarly titled measures used by other
REITs.  Consequently, our funds from operations may not provide a meaningful measure of our performance
as compared to that of other REITs.  Since other REITs may not use our definition of FFO, caution should
be exercised when comparing our Company's FFO to that of other REITs.  Funds from operations in and of
itself does not represent cash generated from operating activities in accordance with GAAP (funds from
operations does not include changes in operating assets and liabilities) and therefore should not be considered
an alternative to net earnings as an indication of operating performance, or to net cash flow from operating
activities as determined by GAAP in the United States, as a measure of liquidity and is not necessarily
indicative of cash available to fund cash needs.

The following table reconciles net income to funds from operations:

|                                             | Three Months Ended | Nine Months Ended
|-------------------------------------------- | ------------------ | -----------------
|                                             | September 30       | September 30     
|                                             | 2004               | 2003             
|                                             |                    |                  
|Net income applicable to common stockholders | $2,825             | $2,636           
|Adjustments:                                 |                    |                  
|Real estate depreciation                     | 1,491              | 1,590            
|Minority interest in NHR/OP, L.P. share      |                    |                  
|of add back for real estate depreciation     | (168)              | (179)            
|Funds from operations                        | $4,148             | $4,047           
|                                             |                    |                  
|Weighted average shares:                     |                    |                  
|Basic                                        | 9,595,588          | 9,575,496        
|Diluted                                      | 9,817,726          | 9,761,720        

FUTURE RENTAL AND MORTGAGE INTEREST INCOME UNCERTAINTIES

Our rental and mortgage interest income revenues are believed by management to be secure.
However, the majority of the income of our lessees and borrowers is derived from the lessees' participation
in the Medicare and Medicaid programs.  Adverse changes in these programs or the inability of our lessees
and borrowers to participate in these programs would have a material adverse impact on the financial position,
results of operations and cash flows of our lessees and borrowers and their resultant ability to service their
obligations to us.  Additionally, prepayment by our borrowers of their mortgage notes to us would reduce our
future income.

INCOME TAXES

We intend at all times to qualify as a REIT under Sections 856 through 860 of the Internal Revenue
Code of 1986, as amended. Therefore, we will not be subject to federal income tax provided we distribute at
least 90% of our annual REIT taxable income to our stockholders and meet other requirements to continue
to qualify as a REIT.  Accordingly, no provision for federal income taxes has been made in the consolidated
financial statements. Our failure to continue to qualify under the applicable REIT qualification rules and
regulations would have a material adverse impact on our financial position, results of operations and cash
flows.

IMPACT OF INFLATION

Inflation may affect us in the future by changing the underlying value of our real estate or by
impacting our cost of financing operations.

Our revenues are primarily from long-term investments.  Our leases with NHC require increases in
rent income based on increases in the revenues of the leased facilities.

FORWARD-LOOKING STATEMENTS

References throughout this document to the Company, "we" or "us" include National Health Realty,
Inc. and its subsidiaries.  In accordance with the Securities and Exchange Commission's "Plain English"
guidelines, this Quarterly Report on Form 10-Q has been written in the first person.  In this document, the
words "we", "our", "ours" and "us" refer only to National Health Realty, Inc. and its subsidiaries and not any
other person.

This Quarterly Report on Form 10-Q and other information we provide from time to time, contains
certain "forward-looking" statements as that term is defined by the Private Securities Litigation Reform Act
of 1995.  All statements regarding our expected future financial position, results of operations, cash flows,
funds from operations, continued performance improvements, ability to service and refinance our debt
obligations, ability to finance growth opportunities, and similar statements including, without limitations,
those containing words such as "believes", "anticipates", "expects", "intends", "estimates", "plans", and other
similar expressions are forward-looking statements.

Forward-looking statements involve known and unknown risks and uncertainties that may cause our
actual results in future periods to differ materially from those projected or contemplated in the forward-looking statements as a result of, but not limited to, the following factors:

- national and local economic conditions, including their effect on the availability and cost of labor,
utilities and materials;
- the effect of government regulations and changes in regulations governing the healthcare industry,
including compliance with such regulations by us and our borrowers and/or lessees;
- changes in Medicare and Medicaid payment levels and methodologies and the application of such
methodologies by the government and its fiscal intermediaries;
- the ability to pay when due or refinance certain debt obligations maturing within the next nine
months;
- the competitive environment in which we operate;

See the notes to the quarterly financial statement, and "Item 1.  Business" as is found in our 2003
Annual Report on Form 10-K for a discussion of various governmental regulations and other operating factors
relating to the healthcare industry and the risk factors inherent in them.  The Annual Report and Form 10-Q's
are available on our web site at www.nationalhealthrealty.com.  You should carefully consider those risks
before making any investment decisions in the Company.  These risks and uncertainties are not the only ones
facing the Company.  There may be additional risks that we do not presently know of or that we currently
deem immaterial.  If any of the risks actually occur, our business, financial condition or results of operations
could be materially adversely affected.  In that case, the trading price of our Common Stock could decline,
and you may lose all or part of your investment.  Given these risks and uncertainties, we can give no
assurances that these forward-looking statements will, in fact, transpire and, therefore, caution investors not
to place undue reliance on them.

**Item 3.	Quantitative and Qualitative Disclosures About Market Risk.**

INTEREST RATE RISK

Our cash and cash equivalent consist of highly liquid investments with a maturity of less than three
months.  All of our mortgage and other notes receivable bear interest at fixed interest rates.  As a result of the
short-term nature of our cash instruments and because the interest rates on our investments in notes receivable
are fixed, a hypothetical 10% change in interest rates would have no impact on our future earnings and cash
flows related to these instruments.

As of September 30, 2004, all of our long-term debt ($16,575,000) bears interest at floating interest
rates.  Because the interest rates of these instruments are variable, a hypothetical 10% increase in interest rates
would result in additional annual interest expense of $55,000 and a 10% reduction in interest rates would
result in annual interest expense declining $55,000.

We currently do not use any derivative instruments to hedge our interest rate expense or for trading
purposes. The use of such instruments would be subject to strict approvals by our senior officers.  Therefore,
our exposure related to such derivative instruments is not material to our financial position, results of
operations or cash flows.

**Item 4.  Controls and Procedures**

As of September 30, 2004, an evaluation was performed under the supervision and with the
participation of the Company's management, including the Chief Executive Officer ("CEO") and Principal
Accounting Officer ("PAO"), of the effectiveness of the design and operation of the Company's disclosure
controls and procedures.  Based on that evaluation, the Company's management, including the CEO and PAO,
concluded that the Company's disclosure controls and procedures were effective as of September 30, 2004.
There have been no significant changes in the Company's internal controls or in other factors that could
significantly affect internal controls during the quarterly period ended or subsequent to September 30, 2004. **PART II.  OTHER INFORMATION**

Item 1.	Legal Proceedings.  None

Item 2.	Unregistered sales of Equity Securities and Use of Proceeds.  Not applicable

Item 3.	Defaults Upon Senior Securities.  None

Item 4.	Submission of Matters to a Vote of Security Holders.  None

Item 5.	Other Information.  None

Item 6.	Exhibits.

(a)	List of exhibits

|Exhibit No. | Description                            
|----------- | ---------------------------------------
|31          | Rule 13a-14(a)/15d-14(a) Certifications
|            | 302 Certification of W. Andrew Adams   
|            | 302 Certification of Donald K. Daniel  
|            |                                        
|99          | Additional Exhibits                    
|            | 906 Certification of W. Andrew Adams   
|            | 906 Certification of Donald K. Daniel  



**SIGNATURES**

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.

|                      | NATIONAL HEALTH REALTY, INC.
|--------------------- | ----------------------------
|                      | (Registrant)                
|                     
|                     
|                     
|Date November 8, 2004 | /s/W. Andrew Adams          
|                      | W. Andrew Adams             
|                      | Chairman                    
|                     
|                     
|                     
|Date November 8, 2004 | /s/Donald K. Daniel         
|                      | Donald K. Daniel            
|                      | Principal Accounting Officer

**Exhibit 31**

**CERTIFICATION**

I, W. Andrew Adams, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of National Health Realty, Inc.;

2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
quarterly report;

3.	Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant's other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;

b.	Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;

c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and

d.	Disclosed in this report any change in the registrant's internal control over financial reporting
that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent function);

a.	All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial information; and

b.	Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrant's internal control over financial reporting.

|Date: November 8, 2004 |                   
|---------------------- | ------------------
|                       | /s/W. Andrew Adams
|                       | W. Andrew Adams   
|                       | Chairman          
|                       |                   

**CERTIFICATION**

I, Donald K. Daniel, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of National Health Realty, Inc.;

2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to the period covered by this
quarterly report;

3.	Based on my knowledge, the financial statements, and other financial information included in this
report, fairly present in all material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant's other certifying officer and I are responsible for establishing and maintaining
disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and
internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and
procedures to be designed under our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this report is being prepared;

b.	Designed such internal control over financial reporting, or caused such internal control over
financial reporting to be designed under our supervision, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;

c.	Evaluated the effectiveness of the registrant's disclosure controls and procedures and
presented in this report our conclusions about the effectiveness of the disclosure controls and
procedures, as of the end of the period covered by this report based on such evaluation; and

d.	Disclosed in this report any change in the registrant's internal control over financial reporting
that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal
quarter in the case of an annual report) that has materially affected, or is reasonably likely
to materially affect, the registrant's internal control over financial reporting; and

5.	The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent function);

a.	All significant deficiencies and material weaknesses in the design or operation of internal
control over financial reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report financial information; and

b.	Any fraud, whether or not material, that involves management or other employees who have
a significant role in the registrant's internal control over financial reporting.

|Date: November 8, 2004 |                                    
|---------------------- | -----------------------------------
|                       | /s/Donald K. Daniel                
|                       | Donald K. Daniel                   
|                       | SeniorVice President and Controller
|                       | Principal Accounting Officer       

**Exhibit 99**

|******Certification of Quarterly Report on Form 10-Q**
|------------------------------------------------------
|**of National Health Realty, Inc.**                   
|**For The Quarter Ended September 30, 2004**          

The undersigned hereby certify, pursuant to 18 U.S.C. Section 906 of the Sarbanes-Oxley Act of
2002, that, to the undersigned's best knowledge and belief, the Quarterly Report on Form 10-Q for National
Health Realty, Inc. ("Issuer") for the period ending September 30, 2004 as filed with the Securities and
Exchange Commission on the date hereof (the "Report"):

|(a)                                                                        | fully complies with the requirements of section 13(a) or 15(d) of the   
|-------------------------------------------------------------------------- | ------------------------------------------------------------------------
|Securities Exchange Act of 1934; and                                      
|                                                                          
|(b)                                                                        | the information contained in the Report fairly presents, in all material
|respects, the financial condition and results of operations of the Issuer.
|                                                                          

This Certification accompanies the Quarterly Report on Form 10-Q of the Issuer for the quarterly
period ended September 30, 2004.

This Certification is executed as of November 8, 2004.

| | /s/W. Andrew Adams          
| | ----------------------------
| | W. Andrew Adams             
| | Chairman                    
|
|
| | /s/Donald K. Daniel         
| | Donald K. Daniel            
| | Principal Accounting Officer

A signed original of this written statement required by Section 906 has been provided to National
Health Realty, Inc. and will be retained by National Health Realty, Inc. and furnished to the Securities and
Exchange Commission or its staff upon request.