UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   Form 10-QSB

(Mark One)
[X]    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934

                For the quarterly period ended March 31, 2005


[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT

           For the transition period from __________ to __________

                         Commission file number 0-10673


                      REAL  ESTATE  ASSOCIATES  LIMITED III
        (Exact Name of Small Business Issuer as Specified in Its Charter)


          California                                          95-3547611
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization                           Identification No.)

                          55 Beattie Place, PO Box 1089
                        Greenville, South Carolina 29602
                    (Address of principal executive offices)

                                 (864) 239-1000
                           (Issuer's telephone number)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the  registrant  was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days.
Yes  X   No ___

<PAGE>

                         PART I - FINANCIAL INFORMATION


ITEM 1.     FINANCIAL STATEMENTS


                       REAL ESTATE ASSOCIATES LIMITED III
                                  BALANCE SHEET
                                   (Unaudited)
                                 (in thousands)

                                 March 31, 2005



                              ASSETS

Investment in local partnership (Note 2)                               $   102
Cash and cash equivalents                                                  910
            Total assets                                               $ 1,012

          LIABILITIES AND PARTNERS' (DEFICIENCY) EQUITY

Liabilities:
   Accounts payable and accrued expenses                               $    27

Contingencies (Note 4)

Partners' (Deficiency) Equity:
   General partners                                                       (146)
   Limited partners                                                      1,131
                                                                             985
            Total liabilities and partners' (deficiency) equity        $ 1,012


                See Accompanying Notes to Financial Statements



<PAGE>



                       REAL ESTATE ASSOCIATES LIMITED III

                            STATEMENTS OF OPERATIONS
                                  (Unaudited)
                    (in thousands, except per interest data)

<TABLE>
<CAPTION>


                                                                     Three Months Ended
                                                                          March 31,
                                                                         2005     2004

<S>                                                                  <C>         <C>
Interest income                                                      $     4     $     3

Operating Expenses:
  Management fees - partners (Note 3)                                     29          32
  General and administrative (Note 3)                                     13           6
  Legal and accounting                                                    15          30
        Total operating expenses                                          57          68

Net loss                                                             $   (53)    $   (65)

Net loss allocated to general partners (1%)                          $    (1)    $    (1)
Net loss allocated to limited partners (99%)                             (52)        (64)

                                                                     $   (53)    $   (65)

Net loss per limited partnership interest (Note 1)                   $ (4.55)    $ (5.60)


                See Accompanying Notes to Financial Statements
</TABLE>



<PAGE>



                       REAL ESTATE ASSOCIATES LIMITED III

            STATEMENT OF CHANGES IN PARTNERS' (DEFICIENCY) EQUITY
                                   (Unaudited)
                      (in thousands, except interest data)

<TABLE>
<CAPTION>


                                        General          Limited
                                       Partners          Partners          Total

<S>                                                       <C>
Partnership interests                                     11,430

Partners' (deficiency) equity,
  December 31, 2004                     $ (145)          $ 1,183           $1,038

Net loss for the three months
  ended March 31, 2005                      (1)              (52)             (53)

Partners' (deficiency) equity,
  March 31, 2005                        $ (146)          $ 1,131           $ 985

Percentage interest at
  March 31, 2005                          1%               99%              100%


                See Accompanying Notes to Financial Statements
</TABLE>

<PAGE>



                       REAL ESTATE ASSOCIATES LIMITED III

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (in thousands)


<TABLE>
<CAPTION>

                                                                       Three Months Ended
                                                                           March 31,
                                                                      2005            2004
Cash flow from operating activities:
<S>                                                                 <C>             <C>
  Net loss                                                          $  (53)         $  (65)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
     Accounts payable and accrued expenses                              (6)             28
         Net cash used in operating activities                         (59)            (37)

Net decrease in cash and cash equivalents                              (59)            (37)
Cash and cash equivalents, beginning of period                         969           1,172

Cash and cash equivalents, end of period                           $   910         $ 1,135


                See Accompanying Notes to Financial Statements
</TABLE>

<PAGE>


                       REAL ESTATE ASSOCIATES LIMITED III

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)
                                 MARCH 31, 2004

Note 1 - Organization and Summary of Significant Accounting Policies

General

The  information  contained in the following  notes to the  unaudited  financial
statements  is  condensed  from that which  would  appear in the annual  audited
financial  statements;  accordingly,  the financial  statements  included herein
should be reviewed in  conjunction  with the  financial  statements  and related
notes  thereto  contained  in  the  Real  Estate  Associates  Limited  III  (the
"Partnership" or "Registrant")  annual report for the fiscal year ended December
31, 2004.  Accounting  measurements at interim dates inherently  involve greater
reliance  on  estimates  than at year end.  The  results of  operations  for the
interim periods presented are not necessarily indicative of the results expected
for the entire year.

In  the  opinion  of  the  Partnership,  the  accompanying  unaudited  financial
statements  contain all adjustments  (consisting  primarily of normal  recurring
accruals)  necessary to present  fairly the  financial  position as of March 31,
2005 and the  results  of  operations  and  changes  in cash flows for the three
months ended March 31, 2005 and 2004, respectively.

The general  partners  collectively  have a one percent  interest in profits and
losses of the  Partnership.  The limited  partners have the remaining 99 percent
interest  which  is  allocated  in  proportion  to their  respective  individual
investments.  The general  partners of the Partnership are National  Partnership
Investments  Corporation  ("NAPICO"  or the  "Corporate  General  Partner")  and
National  Partnership  Investment  Associates  ("NAPIA").  The Corporate General
Partner is a subsidiary of Apartment Investment and Management Company (AIMCO"),
a publicly traded real estate investment trust.

Basis of Presentation

The  accompanying  financial  statements  have been prepared in conformity  with
accounting principles generally accepted in the United States.

Method of Accounting for Investment in Local Partnerships

The  investment  in local limited  partnerships  (the "Local  Partnerships")  is
accounted for on the equity method. Acquisition,  selection fees and other costs
related to the  acquisition  of the  projects  were  capitalized  as part of the
investment  account and are being amortized by the straight line method over the
estimated lives of the underlying assets, which is generally 30 years.

Net Loss Per Limited Partnership Interest

Net loss per limited  partnership  interest was computed by dividing the limited
partners'  share of net loss by the  number  of  limited  partnership  interests
outstanding  at the beginning of the period.  The number of limited  partnership
interests was 11,430 at December 31, 2004 and 2003.

FASB Interpretation No. 46

As of December 31, 2004,  the  Partnership  adopted FASB  Interpretation  No. 46
"Consolidation  of  Variable  Interest  Entities"  (or "FIN 46") and applied its
requirements to all Local  Partnerships in which the Partnership held a variable
interest. FIN 46 addresses the consolidation by business enterprises of variable
interest entities.  Generally,  a variable interest entity, or VIE, is an entity
with  one or  more  of the  following  characteristics:  (a)  the  total  equity
investment  at risk is not  sufficient  to  permit  the  entity to  finance  its
activities without additional subordinated financial support; (b) as a group the
holders of the equity  investment at risk lack (i) the ability to make decisions
about  an  entity's  activities  through  voting  or  similar  rights,  (ii) the
obligation  to absorb the expected  losses of the entity,  or (iii) the right to
receive the expected residual returns of the entity; or (c) the equity investors
have voting rights that are not  proportional  to their  economic  interests and
substantially all of the entity's activities either involve, or are conducted on
behalf of, an investor that has  disproportionately  few voting  rights.  FIN 46
requires a VIE to be consolidated in the financial statements of the entity that
is determined to be the primary beneficiary of the VIE.

Upon adoption of FIN 46, the Partnership  determined it held variable  interests
in nine VIE's for which the Partnership was not the primary  beneficiary.  Those
nine VIE's consist of Local  Partnerships in which the  Partnership  acquired an
interest  prior to the  adoption  of FIN 46 that  are  directly  engaged  in the
ownership and  management  of nine  apartment  properties  with a total of 1,094
units. The Partnership is involved with those VIEs as a non-controlling  limited
partner equity holder.  As of March 31, 2005, the Partnership  continued to hold
veriable interests in the same nine VIE's as determined upon adoption of FIN 46.
The  Partnership's  maximum exposure to loss as a result of its involvement with
unconsolidated VIE's is limited to the Partnership's recorded investments in and
receivables from those VIEs, which was approximately $102,000 at March 31, 2005.
The  Partnership  may be  subject  to  additional  losses  to the  extent of any
financial support that the Partnership voluntarily provides in the future.

Note 2 - Investments in Local Partnerships

As of March 31, 2005, the  Partnership  holds limited  partnership  interests in
nine  limited  partnerships  (the  "Local   Partnerships").   In  addition,  the
Partnership holds a general partner interest in Real Estate Associates  ("REA").
NAPICO is also a general partner in REA. The Local  Partnerships own residential
low income rental  projects  consisting of 1,094 apartment  units.  The mortgage
loans of these  projects  are  payable to or  insured  by  various  governmental
agencies.

The  Partnership,  as a limited  partner,  does not  exercise  control  over the
activities and operations,  including  refinancing or selling decisions,  of the
Local Partnerships. Accordingly, the Partnership accounts for its investments in
the Local  Partnerships  using the equity method.  The  Partnership is allocated
profits and losses of the Local Partnerships based upon its respective ownership
percentage  (between 94.9% and 99%). The  Partnership is also entitled to 99% of
the profits and losses of REA.  Distributions  of surplus  cash from  operations
from most of the Local  Partnerships  are restricted by the Local  Partnerships'
Regulatory  Agreements  with the United  States  Department of Housing and Urban
Development  ("HUD").  These  restrictions  limit the distribution to a portion,
generally  less than 10%, of the initial  invested  capital.  The excess surplus
cash is  deposited  into a  residual  receipts  reserve,  of which the  ultimate
realization by the  Partnership  is uncertain as HUD frequently  retains it upon
sale or  dissolution  of the Local  Partnership.  The  Partnership  is allocated
profits and losses and receives  distributions  from  refinancings  and sales in
accordance with the Local Partnerships' partnership agreements. These agreements
usually limit the Partnership's  distributions to an amount  substantially  less
than its ownership percentage in the Local Partnership.

The individual  investments are carried at cost plus the Partnership's  share of
the  Local  Partnership's  profits  less the  Partnership's  share of the  Local
Partnership's  losses,  distributions and impairment charges. The Partnership is
not legally  liable for the  obligations  of the Local  Partnerships  and is not
otherwise  committed to provide additional support to them.  Therefore,  it does
not  recognize  losses  once its  investment  in each of the Local  Partnerships
reaches zero.  Distributions  from the Local Partnerships are accounted for as a
reduction of the investment  balance until the investment  balance is reduced to
zero.  When  the  investment  balance  has  been  reduced  to  zero,  subsequent
distributions  received are recognized as income in the accompanying  statements
of operations.

For those  investments  where the  Partnership  has determined that the carrying
value  of its  investments  approximates  the  estimated  fair  value  of  those
investments,  the  Partnership's  policy is to recognize equity in income of the
Local Partnerships only to the extent of distributions received and amortization
of acquisition costs from those Local Partnerships.  Therefore,  the Partnership
limits its recognition of equity earnings to the amount it expects to ultimately
realize.

At  March  31,  2005,  the  investment  balance  in  eight  of  the  nine  Local
Partnerships had been reduced to zero.

The  following is a summary of the  investments  in Local  Partnerships  for the
three months ended March 31, 2005 (in thousands):

           Balance, beginning of period                   $ 102
           Amortization of acquisition costs                 (1)
           Equity in income of Local Partnerships             1
           Balance, end of period                         $ 102

The  following  are  unaudited   condensed  combined  estimated   statements  of
operations  for the three  months  ended  March 31,  2005 and 2004 for the Local
Partnerships in which the Partnership has investments (in thousands):

                                         Three Months Ended
                                             March 31,
                                        2005            2004

Rental and other income               $ 1,556          $ 1,532
Expenses:
  Operating expenses                    1,069            1,049
  Financial expenses                      337              356
  Depreciation                            204              223
                                        1,610            1,628
Net loss                               $ (54)           $ (96)

Under recently adopted law and policy,  the United States  Department of Housing
and Urban Development ("HUD") has determined not to renew the Housing Assistance
Payment  ("HAP")  Contracts  on a  long-term  basis on the  existing  terms.  In
connection with renewals of the HAP Contracts under such new law and policy, the
amount of rental  assistance  payments under renewed HAP Contracts will be based
on market rentals instead of above market  rentals,  which may be the case under
existing HAP Contracts.  The payments under the renewed HAP Contracts may not be
in an amount  that  would  provide  sufficient  cash  flow to  permit  owners of
properties  subject to HAP  Contracts to meet the debt service  requirements  of
existing  loans  insured by the Federal  Housing  Administration  of HUD ("FHA")
unless such mortgage loans are  restructured.  In order to address the reduction
in  payments  under HAP  Contracts  as a result of this new  policy,  the Multi-
family Assisted Housing Reform and Affordability Act of 1997 ("MAHRAA") provides
for the  restructuring  of  mortgage  loans  insured by the FHA with  respect to
properties  subject  to the  Section 8 program.  Under  MAHRAA,  an  FHA-insured
mortgage  loan can be  restructured  into a first  mortgage  loan  which will be
amortized on a current basis and a low interest  second mortgage loan payable to
FHA which will only be payable on  maturity  of the first  mortgage  loan.  This
restructuring results in a reduction in annual debt service payable by the owner
of the  FHA-insured  mortgage  loan and is  expected  to result in an  insurance
payment from FHA to the holder of the  FHA-insured  loan due to the reduction in
the principal amount. MAHRAA also phases out project-based subsidies on selected
properties  serving  families not located in rental markets with limited supply,
converting such subsidies to a tenant-based subsidy.

When the HAP  Contracts are subject to renewal,  there can be no assurance  that
the  Local  Partnerships  in which the  Partnership  has an  investment  will be
permitted to restructure its mortgage  indebtedness  under MAHRAA.  In addition,
the  economic  impact  on the  Partnership  of the  combination  of the  reduced
payments  under  the  HAP  Contracts  and  the  restructuring  of  the  existing
FHA-insured mortgage loans under MAHRAA is uncertain.

Note 3 - Transactions with Affiliated Parties

Under the terms of the Restated  Certificate  and Agreement of Limited  Partner,
the Partnership is obligated to NAPICO for an annual management fee equal to 0.4
percent of the  invested  assets.  Invested  assets are  defined as the costs of
acquiring project interests,  including the proportionate amount of the mortgage
loans  related to the  Partnership's  interests  in the capital  accounts of the
respective Local Partnerships.  The management fee incurred for the three months
ended  March  31,  2005  and  2004  was   approximately   $29,000  and  $32,000,
respectively.

The Partnership  reimburses NAPICO for certain expenses.  The reimbursement paid
to NAPICO was  approximately  $4,000 for both of the three month  periods  ended
March 31, 2005 and 2004, and is included in general and administrative expenses.

Note 4 - Contingencies

The  Corporate  General  Partner is involved in various  lawsuits  arising  from
transactions  in the ordinary  course of business.  In the opinion of management
and the Corporate  General  Partner,  the claims will not result in any material
liability to the Partnership.

The  Central  Regional  Office of the  United  States  Securities  and  Exchange
Commission (the "SEC") is conducting a formal investigation  relating to certain
matters.  Although  the staff of the SEC is not limited in the areas that it may
investigate,   AIMCO  believes  the  areas  of  investigation   include  AIMCO's
miscalculated   monthly  net  rental  income  figures  in  third  quarter  2003,
forecasted  guidance,  accounts  payable,  rent  concessions,   vendor  rebates,
capitalization of payroll and certain other costs, and tax credit  transactions.
At the end of the first quarter of 2005, the SEC added certain tender offers for
limited partnership interests as an area of investigation.  AIMCO is cooperating
fully.  AIMCO is not able to predict  when the  investigation  will be resolved.
AIMCO does not believe  that the ultimate  outcome will have a material  adverse
effect  on its  consolidated  financial  condition  or  results  of  operations.
Similarly,  the  Corporate  General  Partner  does not believe that the ultimate
outcome  will have a  material  adverse  effect on the  Partnership's  financial
condition or results of operations.

<PAGE>

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government  regulations.  Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including,  without limitation:  national and local
economic  conditions;  the terms of  governmental  regulations  that  affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates;  financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest;  real estate risks, including variations of real estate values and
the general  economic  climate in local markets and  competition  for tenants in
such markets;  litigation,  including  costs  associated  with  prosecuting  and
defending  claims  and  any  adverse   outcomes,   and  possible   environmental
liabilities.   Readers  should  carefully  review  the  Registrant's   financial
statements and the notes thereto,  as well as the risk factors  described in the
documents  the  Registrant  files  from  time to time  with the  Securities  and
Exchange Commission.

The Corporate  General  Partner  monitors  developments in the area of legal and
regulatory  compliance.  For example, the Sarbanes-Oxley Act of 2002 mandates or
suggests additional  compliance measures with regard to governance,  disclosure,
audit and other areas. In light of these changes,  the Partnership  expects that
it will incur higher expenses related to compliance.

Liquidity and Capital Resources

The properties in which the Partnership has invested, through its investments in
the Local Partnerships, receive one or more forms of assistance from the Federal
Government.  As a result,  the Local  Partnerships'  ability to  transfer  funds
either to the Partnership or among themselves in the form of cash distributions,
loans  or  advances  is  generally  restricted  by these  government  assistance
programs.   These  restrictions,   however,  are  not  expected  to  impact  the
Partnership's ability to meet its cash obligations.

The  Partnership's  primary sources of funds include interest income earned from
investing  available cash and distributions from Local Partnerships in which the
Partnership has invested.

As of  March  31,  2005,  the  Partnership  had cash  and  cash  equivalents  of
approximately $910,000. Substantially all of this amount is on deposit primarily
with high credit quality  financial  institutions,  earning  interest.  Interest
income  earned  during  the  three  months  ended  March  31,  2005 and 2004 was
approximately  $4,000 and $3,000,  respectively.  The amount of interest  income
varies  with market  rates  available  on deposits  and with the amount of funds
available  for  investment.  Cash  equivalents  can be converted to cash to meet
obligations  of the  Partnership  as they  arise.  The  Partnership  intends  to
continue investing available funds in this manner.

Results of Operations

At March 31, 2005, the Partnership  has investments in nine Local  Partnerships.
The  Partnership,  as a limited  partner,  does not  exercise  control  over the
activities and  operations,  including  refinancing or selling  decisions of the
Local Partnerships.  Accordingly, the Partnership accounts for its investment in
the Local Partnerships using the equity method. Thus the individual  investments
are  carried  at cost plus the  Partnership's  share of the Local  Partnership's
profits  less  the  Partnership's  share  of  the  Local  Partnership's  losses,
distributions  and impairment  charges.  However,  since the  Partnership is not
legally  liable  for  the  obligations  of  the  Local  Partnerships,  or is not
otherwise committed to provide additional support to them, it does not recognize
losses  once its  investment  in each of the Local  Partnerships  reaches  zero.
Distributions  from the Local  Partnerships  are accounted for as a reduction of
the  investment  balance  until  the  investment  balance  is  reduced  to zero.
Subsequent  distributions  received are recognized as income in the accompanying
statements  of  operations.  For those  investments  where the  Partnership  has
determined that the carrying value of its investments approximates the estimated
fair value of those investments, the Partnership's policy is to recognize equity
in  income  of the  Local  Partnerships  only  to the  extent  of  distributions
received,  and amortization of acquisition costs from those Local  Partnerships.
The  Partnership  did not  recognize  any  equity in income or loss from a Local
Partnership  during  the  three  months  ended  March  31,  2005  or  2004.  The
Partnership did not receive any distributions from Local Partnerships during the
three months ended March 31, 2005 or 2004.

At  March  31,  2005,  the  investment  balance  in  eight  of  the  nine  Local
Partnerships had been reduced to zero.

Partnership  revenues consist of interest income earned on temporary  investment
of funds not required for investment in Local Partnerships.

An annual  management  fee is payable to the  Corporate  General  Partner of the
Partnership  and is  calculated  at 0.4  percent of the  Partnership's  invested
assets.  The  management  fee is paid to the Corporate  General  Partner for its
continuing management of the Partnership's affairs. The fee is payable beginning
with  the  month  following  the  Partnership's  initial  investment  in a Local
Partnership.  Management  fees were  approximately  $29,000  and $32,000 for the
three months ended March 31, 2005 and 2004, respectively.

Operating  expenses,  exclusive  of the  management  fee,  consist  of legal and
accounting  fees for  services  rendered  to the  Partnership  and  general  and
administrative  expenses.  Legal and accounting fees were approximately  $15,000
and $30,000 for the three  months  ended March 31, 2005 and 2004,  respectively.
Legal and accounting  fees decreased due to a decrease in the cost of the annual
audit. General and administrative expenses were approximately $13,000 and $6,000
for the three months ended March 31, 2005 and 2004, respectively.

Under recently adopted law and policy,  the United States  Department of Housing
and Urban Development ("HUD") has determined not to renew the Housing Assistance
Payment  ("HAP")  Contracts  on a long  term  basis on the  existing  terms.  In
connection with renewals of the HAP Contracts under such new law and policy, the
amount of rental  assistance  payments under renewed HAP Contracts will be based
on market rentals instead of above market  rentals,  which may be the case under
existing HAP Contracts.  The payments under the renewed HAP Contracts may not be
in an amount  that  would  provide  sufficient  cash  flow to  permit  owners of
properties  subject to HAP  Contracts to meet the debt service  requirements  of
existing  loans  insured by the Federal  Housing  Administration  of HUD ("FHA")
unless such mortgage loans are  restructured.  In order to address the reduction
in payments under HAP Contracts as a result of this new policy, the Multi-family
Assisted Housing Reform and  Affordability  Act of 1997 ("MAHRAA")  provides for
the  restructuring  of  mortgage  loans  insured  by the  FHA  with  respect  to
properties  subject  to the  Section 8 program.  Under  MAHRAA,  an  FHA-insured
mortgage  loan can be  restructured  into a first  mortgage  loan  which will be
amortized on a current basis and a low interest  second mortgage loan payable to
FHA which will only be payable on  maturity  of the first  mortgage  loan.  This
restructuring results in a reduction in annual debt service payable by the owner
of the  FHA-insured  mortgage  loan and is  expected  to result in an  insurance
payment from FHA to the holder of the  FHA-insured  loan due to the reduction in
the principal amount. MAHRAA also phases out project-based subsidies on selected
properties  serving  families not located in rental markets with limited supply,
converting such subsidies to a tenant-based subsidy.

When the HAP  Contracts are subject to renewal,  there can be no assurance  that
the  Local  Partnerships  in which the  Partnership  has an  investment  will be
permitted to restructure its mortgage  indebtedness  under MAHRAA.  In addition,
the  economic  impact  on the  Partnership  of the  combination  of the  reduced
payments  under  the  HAP  Contracts  and  the  restructuring  of  the  existing
FHA-insured mortgage loans under MAHRAA is uncertain.

<PAGE>

Other

AIMCO and its affiliates owned 492 limited  partnership  units (the "Units") (or
984 limited partnership interests) in the Partnership  representing 8.61% of the
outstanding  Units  as of  March  31,  2005.  A Unit  consists  of  two  limited
partnership  interests. A number of these Units were acquired pursuant to tender
offers  made by  AIMCO  or its  affiliates.  It is  possible  that  AIMCO or its
affiliates will acquire  additional  Units in exchange for cash or a combination
of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO,
either through private  purchases or tender offers.  Pursuant to the Partnership
Agreement,  unitholders  holding a majority  of the Units are  entitled  to take
action with  respect to a variety of matters that  include,  but are not limited
to,  voting on certain  amendments  to the  Partnership  Agreement and voting to
remove the Corporate  General  Partner.  Although the Corporate  General Partner
owes fiduciary duties to the limited partners of the Partnership,  the Corporate
General Partner also owes fiduciary duties to AIMCO as its sole stockholder.  As
a result,  the duties of the Corporate  General  Partner,  as corporate  general
partner, to the Partnership and its limited partners may come into conflict with
the duties of the Corporate General Partner to AIMCO as its sole stockholder.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted  in the  United  States  requires  the  Partnership  to make
estimates  and  assumptions.  Judgments and  assessments  of  uncertainties  are
required in applying the  Partnership's  accounting  policies in many areas. The
following may involve a higher degree of judgment and complexity.

Method of Accounting for Investments in Local Partnerships

The  Partnership,  as a limited  partner,  does not  exercise  control  over the
activities and operations,  including  refinancing or selling decisions,  of the
Local Partnerships. Accordingly, the Partnership accounts for its investments in
the Local  Partnerships  using the equity method.  The  Partnership is allocated
profits and losses of the Local Partnerships based upon its respective ownership
percentage  (between 94.9% and 99%). The  Partnership is also entitled to 99% of
the profits and losses of REA.  Distributions  of surplus  cash from  operations
from most of the Local  Partnerships  are restricted by the Local  Partnerships'
Regulatory  Agreements  with the United  States  Department of Housing and Urban
Development  ("HUD").  These  restrictions  limit the distribution to a portion,
generally  less than 10%, of the initial  invested  capital.  The excess surplus
cash is  deposited  into a  residual  receipts  reserve,  of which the  ultimate
realization by the  Partnership  is uncertain as HUD frequently  retains it upon
sale or  dissolution  of the Local  Partnership.  The  Partnership  is allocated
profits and losses and receives  distributions  from  refinancings  and sales in
accordance with the Local Partnerships' partnership agreements. These agreements
usually limit the Partnership's  distributions to an amount  substantially  less
than its ownership percentage in the Local Partnership.

The individual  investments are carried at cost plus the Partnership's  share of
the  Local  Partnership's  profits  less the  Partnership's  share of the  Local
Partnership's  losses,  distributions and impairment charges. The Partnership is
not legally  liable for the  obligations  of the Local  Partnerships  and is not
otherwise  committed to provide additional support to them.  Therefore,  it does
not  recognize  losses  once its  investment  in each of the Local  Partnerships
reaches zero.  Distributions  from the Local Partnerships are accounted for as a
reduction of the investment  balance until the investment  balance is reduced to
zero.  When  the  investment  balance  has  been  reduced  to  zero,  subsequent
distributions  received are recognized as income in the accompanying  statements
of operations.

For those  investments  where the  Partnership  has determined that the carrying
value  of its  investments  approximates  the  estimated  fair  value  of  those
investments,  the  Partnership's  policy is to recognize equity in income of the
Local Partnerships only to the extent of distributions received and amortization
of acquisition costs from those Local Partnerships.  Therefore,  the Partnership
limits its recognition of equity earnings to the amount it expects to ultimately
realize.

FASB Interpretation No. 46

As of December 31, 2004,  the  Partnership  adopted FASB  Interpretation  No. 46
"Consolidation  of  Variable  Interest  Entities"  (or "FIN 46") and applied its
requirements to all Local  Partnerships in which the Partnership held a variable
interest. FIN 46 addresses the consolidation by business enterprises of variable
interest entities.  Generally,  a variable interest entity, or VIE, is an entity
with  one or  more  of the  following  characteristics:  (a)  the  total  equity
investment  at risk is not  sufficient  to  permit  the  entity to  finance  its
activities without additional subordinated financial support; (b) as a group the
holders of the equity  investment at risk lack (i) the ability to make decisions
about  an  entity's  activities  through  voting  or  similar  rights,  (ii) the
obligation  to absorb the expected  losses of the entity,  or (iii) the right to
receive the expected residual returns of the entity; or (c) the equity investors
have voting rights that are not  proportional  to their  economic  interests and
substantially all of the entity's activities either involve, or are conducted on
behalf of, an investor that has  disproportionately  few voting  rights.  FIN 46
requires a VIE to be consolidated in the financial statements of the entity that
is determined to be the primary beneficiary of the VIE.

Upon adoption of FIN 46, the Partnership  determined it held variable  interests
in nine VIE's for which the Partnership was not the primary  beneficiary.  Those
nine VIE's consist of Local  Partnerships in which the  Partnership  acquired an
interest  prior to the  adoption  of FIN 46 that  are  directly  engaged  in the
ownership and  management  of nine  apartment  properties  with a total of 1,094
units. The Partnership is involved with those VIEs as a non-controlling  limited
partner equity holder.  As of March 31, 2005, the Partnership  continued to hold
variable interests in the same nine VIE's as determined upon adoption of FIN 46.
The  Partnership's  maximum exposure to loss as a result of its involvement with
unconsolidated VIE's is limited to the Partnership's recorded investments in and
receivables from those VIEs, which was approximately $102,000 at March 31, 2005.
The  Partnership  may be  subject  to  additional  losses  to the  extent of any
financial support that the Partnership voluntarily provides in the future.

ITEM 3.     CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures.  The Partnership's management,  with the
participation of the principal executive officer and principal financial officer
of the Corporate  General Partner,  who are the equivalent of the  Partnership's
principal executive officer and principal financial officer,  respectively,  has
evaluated  the  effectiveness  of  the  Partnership's  disclosure  controls  and
procedures (as such term is defined in Rules  13a-15(e) and 15d-15(e)  under the
Securities  Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report.  Based on such  evaluation,  the principal
executive  officer and  principal  financial  officer of the  Corporate  General
Partner, who are the equivalent of the Partnership's principal executive officer
and principal  financial officer,  respectively,  have concluded that, as of the
end of such period,  the  Partnership's  disclosure  controls and procedures are
effective.

(b) Internal Control Over Financial  Reporting.  There have not been any changes
in the Partnership's  internal control over financial reporting (as such term is
defined in Rules  13a-15(f)  and  15d-15(f)  under the Exchange  Act) during the
fiscal quarter to which this report relates that have  materially  affected,  or
are reasonably likely to materially affect,  the Partnership's  internal control
over financial reporting.


<PAGE>



                           PART II - OTHER INFORMATION

ITEM 5.     OTHER INFORMATION

            None.

ITEM 6.     EXHIBITS

            See Exhibit Index.


<PAGE>

                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the Registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


                                    REAL ESTATE ASSOCIATES LIMITED III
                                    (a California limited partnership)


                                    By:   National Partnership Investments Corp.
                                          Corporate General Partner


                                    By:   /s/David R. Robertson
                                          David R. Robertson
                                          President and Chief Executive
                                          Officer

                                    By:   /s/Brian H. Shuman
                                          Brian H. Shuman
                                          Senior  Vice   President  and  Chief
                                          Financial Officer


                                    Date: May 16, 2005


<PAGE>


                       REAL ESTATE ASSOCIATES LIMITED III
                                  EXHIBIT INDEX


Exhibit     Description of Exhibit


3           Restated  Certificate and Agreement of Limited  Partnership herein
            dated   January  5,  1981   incorporated   by   reference  to  the
            Partnership's Form S-11 No. 268983.

3.1         Amendments  to  Restated   Certificate   and  Agreement  of  Limited
            Partnership,  incorporated by reference to the Registrant's Form 8-K
            dated January 24, 2005.

3.2         Restated   Certificate   and   Agreement   of  Limited   Partnership
            incorporated by reference to the Registrant's Form 8-K dated January
            24, 2005.

31.1        Certification  of equivalent of Chief Executive  Officer pursuant to
            Securities  Exchange  Act  Rules  13a-14(a)/15d-14(a),   as  Adopted
            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2        Certification  of equivalent of Chief Financial  Officer pursuant to
            Securities  Exchange  Act  Rules  13a-14(a)/15d-14(a),   as  Adopted
            Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1        Certification  Pursuant  to  18  U.S.C.  Section  1350,  as  Adopted
            Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.


<PAGE>



Exhibit 31.1


                                  CERTIFICATION


I, David R. Robertson, certify that:


1.    I have  reviewed  this  quarterly  report on Form  10-QSB  of Real  Estate
      Associates Limited III;

2.    Based on my knowledge,  this 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
      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 small  business  issuer as of, and for, the periods  presented in this
      report;

4.    The  small  business  issuer's  other  certifying  officer(s)  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)) for
      the small business issuer 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
            small business issuer, 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)   Evaluated  the   effectiveness   of  the  small  business   issuer'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

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

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

      (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 small business  issuer'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 small  business
            issuer's internal control over financial reporting.


Date:  May 16, 2005

                                    /s/David R. Robertson
                                    David R. Robertson
                                    President and Chief  Executive  Officer of
                                    National Partnership Investments Corp.,
                                    equivalent of the chief executive  officer
                                    of the Partnership


<PAGE>



Exhibit 31.2


                                  CERTIFICATION


I, Brian H. Shuman, certify that:


1.    I have  reviewed  this  quarterly  report on Form  10-QSB  of Real  Estate
      Associates Limited III;

2.    Based on my knowledge,  this 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
      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 small  business  issuer as of, and for, the periods  presented in this
      report;

4.    The  small  business  issuer's  other  certifying  officer(s)  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)) for
      the small business issuer 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
            small business issuer, 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)   Evaluated  the   effectiveness   of  the  small  business   issuer'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

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

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

      (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 small business  issuer'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 small  business
            issuer's internal control over financial reporting.


Date:  May 16, 2005

                                    /s/Brian H. Shuman
                                    Brian H. Shuman
                                    Senior Vice President and Chief Financial
                                    Officer of National Partnership  Investments
                                    Corp., equivalent of the chief financial
                                    officer of the Partnership


<PAGE>





Exhibit 32.1


                          Certification of CEO and CFO
                       Pursuant to 18 U.S.C. Section 1350,
                             As Adopted Pursuant to
                Section 906 of the Sarbanes-Oxley Act of 2002



In connection with the Quarterly Report on Form 10-QSB of Real Estate Associates
Limited III (the  "Partnership"),  for the quarterly period ended March 31, 2005
as filed with the  Securities  and Exchange  Commission  on the date hereof (the
"Report"),  David R. Robertson, as the equivalent of the chief executive officer
of the  Partnership,  and  Brian  H.  Shuman,  as the  equivalent  of the  chief
financial  officer of the  Partnership,  each hereby  certifies,  pursuant to 18
U.S.C.  Section 1350, as adopted  pursuant to Section 906 of the  Sarbanes-Oxley
Act of 2002, that, to the best of his knowledge:

      (1)   The Report fully complies with the  requirements of Section 13(a) or
            15(d) of the Securities Exchange Act of 1934; and

      (2)   The  information  contained in the Report  fairly  presents,  in all
            material respects, the financial condition and results of operations
            of the Partnership.


                                           /s/David R. Robertson
                                    Name:  David R. Robertson
                                    Date:  May 16, 2005


                                           /s/Brian H. Shuman
                                    Name:  Brian H. Shuman
                                    Date:  May 16, 2005


This  certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley  Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.