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

                                   Form 10-QSB

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

                 For the quarterly period ended September 30, 2003


[ ] 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 0-10673


                       REAL ESTATE ASSOCIATES LIMITED III
             (Exact Name of Registrant 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)


<PAGE>


                         PART I - FINANCIAL INFORMATION


ITEM 1.     FINANCIAL STATEMENTS



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

                               September 30, 2003

                              ASSETS

Investment in limited partnerships (Note 2)                            $   102
Cash and cash equivalents                                                  640

            Total assets                                               $   742

          LIABILITIES AND PARTNERS' (DEFICIENCY) EQUITY

Liabilities:
   Accounts payable and accrued expenses                                $   51

Commitments and Contingencies (Note 5)

Partners' (Deficiency) Equity:
   General partners                                                       (149)
   Limited partners                                                        840
                                                                           691
            Total liabilities and partners' (deficiency) equity        $   742


                   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           Nine Months Ended
                                                 September 30,               September 30,
                                              2003          2002           2003          2002

Revenues:
<S>                                         <C>           <C>           <C>            <C>
  Interest income                           $     2       $    17       $      13      $     33

Operating expenses:
  Management fee - partners (Note 3)             32            32              94            97
  General and administrative (Note 3)             6            22              26            72
  Legal and accounting                           13            23              99            91
        Total operating expenses                 51            77             219           260

Loss from Partnership operations                (49)          (60)           (206)         (227)
Distributions from limited partnerships
  recognized as income (Note 2)                  --            --              29            34
Equity in income (loss) of limited
  partnerships and amortization of
  acquisition costs (Notes 1 and 2)              42            --              83          (308)

Net loss                                    $    (7)      $   (60)       $    (94)      $  (501)
Net loss allocated to general
 partners (1%)                              $    --       $    (1)       $     (1)      $    (5)
Net loss allocated to limited
 partners (99%)                                  (7)          (59)            (93)         (496)

                                            $    (7)      $   (60)       $    (94)      $  (501)
Net loss per limited
  partnership interest (Note 1)             $ (0.61)      $ (5.15)       $  (8.13)      $(43.30)
Distributions per limited partnership
  interest                                  $    --       $    --        $ 113.44       $    --



                   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                                     11,442

Partners' (deficiency) equity,
  December 31, 2002                      $ (148)         $ 2,231           $2,083

Distributions for the nine months
  ended September 30, 2003                   --           (1,298)          (1,298)

Net loss for the nine months
  ended September 30, 2003                   (1)             (93)             (94)

Partners' (deficiency) equity,
  September 30, 2003                     $ (149)          $ 840            $ 691

Percentage interest at
 September 30, 2003                           1%              99%             100%
                                                           (A)


(A)   Consists  of 5,716  limited  partnership  units (the  "Units")  (or 11,432
      limited  partnership  interests)  at September  30, 2003 and 5,721 limited
      partnership  units (or 11,442 limited  partnership  interests) at December
      31, 2002. A Unit consists of two limited partnership  interests (see "Note
      4 - Abandonment of Interests").


                   See Accompanying Notes to Financial Statements
</TABLE>


<PAGE>

                       REAL ESTATE ASSOCIATES LIMITED III

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                       Nine Months Ended
                                                                         September 30,
                                                                      2003            2002
Cash flows from operating activities:
<S>                                                                 <C>             <C>
  Net loss                                                          $  (94)         $ (501)
  Adjustments to reconcile net loss to net cash used in
    operating activities:
      Equity in (income) loss of limited partnerships and
        amortization of acquisition costs                              (83)            308
      Decrease in advances due to affiliates                            (5)             --
      Decrease in accounts payable and accrued expenses                (39)             (2)
         Net cash used in operating activities                        (221)           (195)

Cash flow provided by investing activities:
  Distributions from limited partnership recognized as
    as reduction of investment balance                                  83              --

Cash flow used in financing activities:
  Distributions to partners                                         (1,298)             --

Net decrease in cash and cash equivalents                           (1,436)           (195)
Cash and cash equivalents, beginning of period                       2,076           2,178

Cash and cash equivalents, end of period                           $   640         $ 1,983


                   See Accompanying Notes to Financial Statements
</TABLE>

<PAGE>


                       REAL ESTATE ASSOCIATES LIMITED III

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)
                               SEPTEMBER 30, 2003

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, 2002.  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 September 30,
2003 and the results of  operations  and changes in cash flows for the three and
nine months ended September 30, 2003 and 2002, 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.

 On December 3, 2001,  Casden  Properties Inc.,  entered into a merger agreement
and certain other transaction documents with Apartment Investment and Management
Company,  ("AIMCO"), a publicly traded real estate investment trust, and certain
of its subsidiaries, pursuant to which, on March 11, 2002, AIMCO acquired Casden
Properties Inc. and its subsidiaries,  including 100% of the outstanding capital
stock of NAPICO.
Prior to March 11, 2002, Casden Properties Inc. owned a 95.25% economic interest
in NAPICO, with the balance owned by Casden Investment Corporation ("CIC"). CIC,
which is wholly owned by Alan I. Casden, owned 95% of the voting common stock of
NAPICO prior to March 11, 2002.

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 Limited Partnerships

The  investment in limited  partnerships  is accounted for on the equity method.
Acquisition,  selection  and  other  costs  related  to the  acquisition  of the
projects  are  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 11,442 and 11,456 at December 31, 2002 and 2001.

Recent Accounting Pronouncements

In January 2003,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Interpretation  No. 46 ("FIN 46"),  Consolidation of Variable Interest Entities.
FIN 46 requires the  consolidation of entities in which an enterprise  absorbs a
majority of the entity's  expected  losses,  receives a majority of the entity's
expected  residual  returns,  or both, as a result of ownership,  contractual or
other  financial  interests  in the  entity.  Prior to the  issuance  of FIN 46,
entities were generally  consolidated by an enterprise when it had a controlling
financial  interest  through  ownership  of a majority  voting  interest  in the
entity.  FIN 46 applied  immediately to variable interest entities created after
January 31, 2003, and with respect to variable interests held before February 1,
2003, FIN 46 will apply beginning October 1, 2003.

The Partnership has not entered into any partnership  investments  subsequent to
January  31,  2003.  The  Partnership  is  in  the  process  of  evaluating  its
investments in unconsolidated  partnerships that may be deemed variable interest
entities under the provisions of FIN 46. The  Partnership has not yet determined
the anticipated  impact of adopting FIN 46 for its  partnership  agreements that
existed as of January 31, 2003. However, FIN 46 may require the consolidation of
the  assets,   liabilities  and  operations  of  certain  of  the  Partnership's
unconsolidated  partnership  investments.  Although  the  Partnership  does  not
believe  the full  adoption  of FIN 46 will  have an impact  on cash  flow,  the
Partnership cannot make any definitive  conclusion on the impact on net earnings
until it completes its evaluation,  including an evaluation of the Partnership's
maximum exposure to loss.

In May 2003,  the FASB issued SFAS 150, which  establishes  standards for how an
issuer   classifies   and   measures   certain   financial    instruments   with
characteristics  of both  liabilities and equity.  The  requirements of SFAS 150
apply  to  the   classification   and  measurement  of  freestanding   financial
instruments.  SFAS 150 is effective  for financial  instruments  entered into or
modified  after May 31, 2003, and otherwise is effective at the beginning of the
first interim period  beginning after June 15, 2003. The Partnership has adopted
SFAS 150 as of July 1, 2003.  Additionally,  in September  2003,  the FASB staff
indicated  that  SFAS 150  also  applies  to the  non-controlling  interests  in
consolidated  finite life partnerships.  However,  on October 29, 2003, the FASB
indefinitely  deferred the provisions of SFAS 150 for finite life  partnerships.
The  adoption  of SFAS 150 did not have a material  impact on the  Partnership's
results of operations taken as a whole.

Note 2 - Investments in Limited Partnerships

As of September 30, 2003, the Partnership holds limited partnership interests in
11 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 1,160 apartment  units. The mortgage loans
of these  projects are payable to or insured by various  governmental  agencies.
Subsequent to September 30, 2003, the Partnership  sold its limited  partnership
interests in two of the Local Partnerships (see Note 6 below).

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  September  30,  2003,  the  investment  balance in ten of the  eleven  Local
Partnerships had been reduced to zero.

The following is a summary of the investments in Local Partnerships for the nine
months ended September 30, 2003 (in thousands):

Balance, beginning of period                                $ 102
Amortization of acquisition costs                              (1)
Equity in income of limited partnerships                       84
Distribution from limited partners recognized as a
  reduction of investment balance                             (83)
Balance, end of period                                      $ 102

The  following  are  unaudited   condensed  combined  estimated   statements  of
operations  for the three and nine months ended  September 30, 2003 and 2002 for
the Local Partnerships in which the Partnership has investments (in thousands):

<TABLE>
<CAPTION>

                                     Three Months Ended           Nine Months Ended
                                       September 30,                September 30,
                                    2003            2002          2003         2002
                                                 (Restated)                 (Restated)
Revenues
<S>                                <C>            <C>            <C>          <C>
  Rental and other                 $ 1,848        $ 1,640        $ 5,064      $ 4,921
Expenses
  Depreciation                         220            302            660          906
  Interest                             393            384          1,178        1,153
  Operating                          1,046          1,102          3,220        3,305
                                     1,659          1,788          5,058        5,364
Income (loss) from
 continuing operations                 189           (148)             6         (443)
Income from
 discontinued operations                --              5             --           14
Net income (loss)                   $ 189          $ (143)         $ 6        $ (429)
</TABLE>

The  September  30, 2002 amounts  have been  restated to reflect the sale of the
investment in Sunset Grove in October 2002.

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 limited  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>

Note 3 - Transactions with Affiliated Parties

Under  the  terms  of  the  Restated   Certificate   and  Agreement  of  Limited
Partnership, the Partnership is obligated to NAPICO for an annual management fee
approximately  equal to 0.4 percent of the original  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  Partnership.  The
management  fee incurred for the nine months ended  September  30, 2003 and 2002
was approximately $94,000 and $97,000, respectively.

The Partnership  reimburses NAPICO for certain expenses.  The reimbursement paid
to NAPICO was  approximately  $11,000 for both of the nine month  periods  ended
September  30, 2003 and 2002,  and is  included  in general  and  administrative
expenses.

Note 4 - Abandonment of Interests

During  the nine  months  ended  September  30,  2003,  the  number  of  limited
partnership  interests  decreased  by 10 interests  due to the limited  partners
abandoning   their  units.   In  abandoning  his  or  her  limited   partnership
interest(s), a limited partner relinquishes all right, title and interest in the
Partnership  as of the date of  abandonment.  However,  the  limited  partner is
allocated  his or her share of net income or loss for that  year.  The income or
loss  per  limited  partnership  unit  is  calculated  based  on the  number  of
outstanding units at the beginning of the year.

Note 5 - Contingencies

On August 27, 1998, two investors holding an aggregate of eight units of limited
partnership  interests in the Partnership and two investors holding an aggregate
of five units of limited partnership interests in Real Estate Associates Limited
VI (an affiliated  partnership in which NAPICO is the corporate general partner)
commenced an action in the United States District Court for the Central District
of California against the Partnership,  NAPICO and certain other defendants. The
complaint  alleged that the  defendants  breached  their  fiduciary  duty to the
limited partners of certain NAPICO managed  partnerships and violated securities
laws by  making  materially  false  and  misleading  statements  in the  consent
solicitation  statements  sent to the  limited  partners  of  such  partnerships
relating  to  approval  of the  transfer  of  partnership  interests  in limited
partnerships,  owning  certain  of  the  properties,  to  affiliates  of  Casden
Properties  Inc.,  organized by an affiliate of NAPICO.  The  plaintiffs  sought
equitable relief, as well as compensatory  damages and litigation related costs.
On August 4, 1999, one investor holding one unit of limited partnership interest
in Housing Programs Limited (another  affiliated  partnership in which NAPICO is
the corporate  general  partner)  commenced a virtually  identical action in the
United States District Court for the Central District of California  against the
Partnership,  NAPICO and certain other entities.  The second action was subsumed
in the first action,  and was  certified as a class action.  On August 21, 2001,
plaintiffs filed a supplemental complaint,  which added new claims,  including a
rescission of the transfer of partnership interests and an accounting.

In November 2002, the jury returned  special verdicts against NAPICO and certain
other defendants in the amount of approximately  $25.2 million for violations of
securities laws and against NAPICO for approximately  $67.3 million for breaches
of fiduciary duty. In addition, the jury awarded the plaintiffs punitive damages
against  NAPICO of  approximately  $92.5  million.  On April 29, 2003, the Court
entered  judgment  against NAPICO and certain other  defendants in the amount of
$25.2 million for  violations of  securities  laws and against  NAPICO for $67.3
million for breaches of  fiduciary  duty,  both  amounts plus  interest of $25.6
million, and for punitive damages against NAPICO in the amount of $2.6 million.

On August 11,  2003,  NAPICO  entered  into a  Stipulation  of  Settlement  (the
"Stipulation of Settlement")  with the plaintiff  class (the  "Plaintiffs")  and
their counsel relating to the settlement of the litigation.  On August 25, 2003,
the  court  granted  preliminary  approval  of the  Stipulation  of  Settlement.
Pursuant to the Stipulation of Settlement, Alan I. Casden, on behalf of himself,
NAPICO  and  other  defendants  in the  litigation,  caused  $29  million  to be
deposited  into  an  escrow  account  for the  benefit  of the  Plaintiffs.  The
Stipulation of Settlement remains subject to the final approval of the court, as
well as the approval of the Plaintiffs, which hearing is currently scheduled for
November 24, 2003. Upon final court approval, approval by the Plaintiffs and the
lapse of any time to appeal the court approval of the settlement,  the following
shall occur:

      1.    Alan I. Casden, on behalf of himself, NAPICO and other defendants in
            the litigation,  will transfer to an agent for the Plaintiffs shares
            of common stock  ("Class A Common  Stock") of AIMCO owned by certain
            affiliates  of Alan I. Casden with an aggregate  market value of $19
            million,  subject to certain  transfer  restrictions,  or at Alan I.
            Casden's option, $19 million in cash.

      2.    NAPICO will issue an  aggregate of $35 million in  promissory  notes
            for the benefit of the  Plaintiffs.  An  aggregate  of $7 million of
            notes are to be paid each year.  The notes will bear interest  based
            on applicable rates of U.S. Treasury bills with similar  maturities.
            The notes will be guaranteed by AIMCO Properties, L.P., an affiliate
            of AIMCO.

      3.    The parties to the Stipulation of Settlement will release each other
            and  related  parties  from any and all claims  associated  with the
            litigation and the Plaintiffs' investment in the Partnership and the
            other affiliated partnerships.

      4.    The $29 million in the escrow account  established by Alan I. Casden
            will be released to the Plaintiffs.

Pursuant to the Stipulation of Settlement, upon final approval of the settlement
by the court,  the parties shall jointly  request that a new judgment be entered
in the litigation that will, among other things, expunge the judgment originally
entered against NAPICO and the other defendants on April 29, 2003.

On  September  24,  2003,  Battle  Fowler,  LLP filed a request to  intervene to
challenge  the  portion  of the  Stipulation  of  Settlement  that would lead to
expungement of the judgment  originally entered on April 29, 2003 against NAPICO
and the other  defendants.  All parties to the  Stipulation  of Settlement  have
opposed this request to  intervene.  A hearing  regarding  the request  occurred
November 10, 2003; however, the court has not yet ruled on the matter.

On August 12, 2003, in connection with the proposed  settlement  pursuant to the
Stipulation of Settlement, NAPICO and AIMCO executed a Settlement Agreement (the
"Settlement  Agreement") with the prior  shareholders of Casden  Properties Inc.
The principal terms of the Settlement Agreement include:

      1.    NAPICO will  voluntarily  discontinue the action it commenced on May
            13, 2003 against the former  shareholders of Casden  Properties Inc.
            and other  indemnitors  in AIMCO's March 2002  acquisition of Casden
            Properties Inc. (the "Casden Merger").

      2.    Alan I. Casden and certain  related  entities  will resolve  certain
            pending claims for indemnification  made by NAPICO,  AIMCO and their
            affiliates.  These  claims  include  indemnification  related to the
            litigation  and certain other matters in connection  with the Casden
            Merger.

3.   AIMCO,  or an  affiliate,  will deposit $25 million of the $29 million that
     Alan I. Casden is responsible  for  depositing  into the escrow account for
     the benefit of the Plaintiffs  pursuant to the terms of the  Stipulation of
     Settlement.  In connection  with this deposit by AIMCO,  The Casden Company
     will transfer to AIMCO  531,915  shares of AIMCO Class A Common Stock owned
     by The Casden Company, which shares are to be held in escrow by AIMCO until
     final  approval  of the  Stipulation  of  Settlement  by the  court and the
     Plaintiffs.  Upon such approval, AIMCO will become the owner of the 531,915
     shares.  If final approval by the court and the Plaintiffs is not obtained,
     the $25 million deposited by AIMCO into the escrow account will be returned
     to AIMCO and AIMCO will return to The Casden Company the 531,915 shares. On
     August 25, 2003, AIMCO caused the $25 million to be deposited in the escrow
     account for the benefit of the  Plaintiffs  and The Casden Company and Alan
     I. Casden  deposited in escrow the 531,915  shares in  accordance  with the
     Settlement Agreement.

4.   The Casden  Company will promise to pay an aggregate  amount of $35 million
     on a secured,  nonrecourse  basis to NAPICO.  The  Casden  Company  will be
     obligated to pay an aggregate  of $7 million of the  obligation  each year.
     The  obligation  to pay the $35  million  will bear the same  interest  and
     mature on the same schedule as the promissory notes issued by NAPICO to the
     plaintiffs  pursuant to the  Stipulation  of  Settlement.  Payment of these
     obligations  will be  secured  by (i) a pledge of  744,681  shares of AIMCO
     Class A Common Stock owned by Alan I. Casden or an affiliated entity,  plus
     up to 60,000 additional shares for accrued interest, and (ii) cash proceeds
     of recoveries or settlements  that Alan I. Casden or any of his affiliates,
     or any of the former  shareholders of Casden  Properties  Inc.,  receive in
     connection with or related to the litigation (collectively,  "Recoveries").
     The payment  obligations  to NAPICO will be required to be prepaid with any
     Recoveries  received.  Payment  may be made in cash or in  shares  of AIMCO
     Class A Common  Stock  having a value based on the greater of $47 per share
     or the market value of such shares at the time of payment,  except payments
     with respect to Recoveries must be made in cash.

In addition to the litigation  discussed above, the Corporate General Partner is
involved in various other  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.

Note 6 - Subsequent Event

On October 1, 2003 the  Partnership  sold its limited  partnership  interests in
Hidden Pines and Sunshine  Canyon and realized gains of  approximately  $457,000
and $245,000,  respectively. The gains are equal to the net proceeds received by
the Partnership as the Partnership  had no remaining  investment  related to the
two Local Partnerships.

<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  and  is  studying  new  federal  laws,   including  the
Sarbanes-Oxley  Act of 2002. 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, including increased legal and audit
fees.

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.

The Partnership  distributed the following  amounts during the nine months ended
September 30, 2003 and 2002 (in thousands, except per unit data):

<TABLE>
<CAPTION>

                     Nine Months                       Nine Months
                        Ended         Per Limited         Ended         Per Limited
                    September 30,     Partnership     September 30,     Partnership
                         2003             Unit             2002             Unit

<S>        <C>         <C>              <C>              <C>               <C>
Operations (2)         $1,088           $ 95.09          $   --            $    --
Sale (1)                  210             18.35              --                 --
                       $1,298           $113.44          $   --            $    --
</TABLE>

(1)   Proceeds from the sale of Sunset Grove in 2002.

(2)   During the nine months ended  September 30, 2003, it was determined that a
      limited partner was overpaid  approximately  $1,500 of distributions.  The
      limited  partner  returned  this  amount  during  the  nine  months  ended
      September 30, 2003.


<PAGE>


Cash and cash  equivalents are on deposit with a financial  institution  earning
interest at market  rates.  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

Partnership  revenues consist of interest income earned on temporary  investment
of funds not required for investment in Local Partnerships.  Interest income for
the three and nine months ended September 30, 2003 decreased as a result of cash
distributions to partners.

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 $94,000 and $97,000 for the nine
months ended September 30, 2003 and 2002, 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  $13,000
and $99,000 for the three and nine months ended  September  30, 2003 compared to
approximately  $23,000 and $91,000 for the three and nine months ended September
30, 2002,  respectively.  General and administrative expenses were approximately
$6,000 and  $26,000 for the three and nine months  ended  September  30, 2003 as
compared  to  approximately  $22,000  and  $72,000 for the three and nine months
ended   September   30,  2002,   respectively.   The  decrease  in  general  and
administrative  expenses for the three and nine months ended  September 30, 2003
is attributable  to a decrease in the costs  associated with the preparation and
filing of the  Partnership's  quarterly and annual  financial  statements  and a
decrease  in  costs  associated  with  the  consent  solicitation  lawsuit  that
originated  in  April  2001  and was  dismissed  in  November  2002.  Legal  and
accounting fees for the nine months ended September 30, 2003 increased due to an
increase in professional services.

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.
During the nine months ended  September  30, 2003,  the  Partnership  recognized
equity in income of approximately  $83,000 from a Local Partnership.  During the
nine months ended September 30, 2002, the Partnership  recognized equity in loss
of approximately $308,000 from a Local Partnership. During the nine months ended
September 30, 2003 and 2002, the Partnership received  approximately $29,000 and
$34,000,  respectively,  in  distributions  from  Local  Partnerships  that were
recognized as income in the  statements of  operations  since the  Partnership's
investment in the Local Partnerships has been reduced to zero.

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.

Other

AIMCO and its affiliates owned 239 limited  partnership  units (the "Units") (or
478 limited partnership interests) in the Partnership  representing 4.18% of the
outstanding  Units as of  September  30,  2003.  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 Limited 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.

Recent Accounting Pronouncements

In January 2003,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Interpretation  No. 46 ("FIN 46"),  Consolidation of Variable Interest Entities.
FIN 46 requires the  consolidation of entities in which an enterprise  absorbs a
majority of the entity's  expected  losses,  receives a majority of the entity's
expected  residual  returns,  or both, as a result of ownership,  contractual or
other  financial  interests  in the  entity.  Prior to the  issuance  of FIN 46,
entities were generally  consolidated by an enterprise when it had a controlling
financial  interest  through  ownership  of a majority  voting  interest  in the
entity.  FIN 46 applied  immediately to variable interest entities created after
January 31, 2003, and with respect to variable interests held before February 1,
2003, FIN 46 will apply beginning October 1, 2003.

The Partnership has not entered into any partnership  investments  subsequent to
January  31,  2003.  The  Partnership  is  in  the  process  of  evaluating  its
investments in unconsolidated  partnerships that may be deemed variable interest
entities under the provisions of FIN 46. The  Partnership has not yet determined
the anticipated  impact of adopting FIN 46 for its  partnership  agreements that
existed as of January 31, 2003. However, FIN 46 may require the consolidation of
the  assets,   liabilities  and  operations  of  certain  of  the  Partnership's
unconsolidated  partnership  investments.  Although  the  Partnership  does  not
believe  the full  adoption  of FIN 46 will  have an impact  on cash  flow,  the
Partnership cannot make any definitive  conclusion on the impact on net earnings
until it completes its evaluation,  including an evaluation of the Partnership's
maximum exposure to loss.

In May 2003,  the FASB issued SFAS 150, which  establishes  standards for how an
issuer   classifies   and   measures   certain   financial    instruments   with
characteristics  of both  liabilities and equity.  The  requirements of SFAS 150
apply  to  the   classification   and  measurement  of  freestanding   financial
instruments.  SFAS 150 is effective  for financial  instruments  entered into or
modified  after May 31, 2003, and otherwise is effective at the beginning of the
first interim period  beginning after June 15, 2003. The Partnership has adopted
SFAS 150 as of July 1, 2003.  Additionally,  in September  2003,  the FASB staff
indicated  that  SFAS 150  also  applies  to the  non-controlling  interests  in
consolidated  finite life partnerships.  However,  on October 29, 2003, the FASB
indefinitely  deferred the provisions of SFAS 150 for finite life  partnerships.
The  adoption  of SFAS 150 did not have a material  impact on the  Partnership's
results of operations taken as a whole.

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 1.     LEGAL PROCEEDINGS

On August 27, 1998, two investors holding an aggregate of eight units of limited
partnership  interests in the Partnership and two investors holding an aggregate
of five units of limited partnership interests in Real Estate Associates Limited
VI (an affiliated  partnership in which NAPICO is the corporate general partner)
commenced an action in the United States District Court for the Central District
of California against the Partnership,  NAPICO and certain other defendants. The
complaint  alleged that the  defendants  breached  their  fiduciary  duty to the
limited partners of certain NAPICO managed  partnerships and violated securities
laws by  making  materially  false  and  misleading  statements  in the  consent
solicitation  statements  sent to the  limited  partners  of  such  partnerships
relating  to  approval  of the  transfer  of  partnership  interests  in limited
partnerships,  owning  certain  of  the  properties,  to  affiliates  of  Casden
Properties  Inc.,  organized by an affiliate of NAPICO.  The  plaintiffs  sought
equitable relief, as well as compensatory  damages and litigation related costs.
On August 4, 1999, one investor holding one unit of limited partnership interest
in Housing Programs Limited (another  affiliated  partnership in which NAPICO is
the corporate  general  partner)  commenced a virtually  identical action in the
United States District Court for the Central District of California  against the
Partnership,  NAPICO and certain other entities.  The second action was subsumed
in the first action,  and was  certified as a class action.  On August 21, 2001,
plaintiffs filed a supplemental complaint,  which added new claims,  including a
rescission of the transfer of partnership interests and an accounting.

In November 2002, the jury returned  special verdicts against NAPICO and certain
other defendants in the amount of approximately  $25.2 million for violations of
securities laws and against NAPICO for approximately  $67.3 million for breaches
of fiduciary duty. In addition, the jury awarded the plaintiffs punitive damages
against  NAPICO of  approximately  $92.5  million.  On April 29, 2003, the Court
entered  judgment  against NAPICO and certain other  defendants in the amount of
$25.2 million for  violations of  securities  laws and against  NAPICO for $67.3
million for breaches of  fiduciary  duty,  both  amounts plus  interest of $25.6
million, and for punitive damages against NAPICO in the amount of $2.6 million.

On August 11,  2003,  NAPICO  entered  into a  Stipulation  of  Settlement  (the
"Stipulation of Settlement")  with the plaintiff  class (the  "Plaintiffs")  and
their counsel relating to the settlement of the litigation.  On August 25, 2003,
the  court  granted  preliminary  approval  of the  Stipulation  of  Settlement.
Pursuant to the Stipulation of Settlement, Alan I. Casden, on behalf of himself,
NAPICO  and  other  defendants  in the  litigation,  caused  $29  million  to be
deposited  into  an  escrow  account  for the  benefit  of the  Plaintiffs.  The
Stipulation of Settlement remains subject to the final approval of the court, as
well as the approval of the Plaintiffs, which hearing is currently scheduled for
November 24, 2003. Upon final court approval, approval by the Plaintiffs and the
lapse of any time to appeal the court approval of the settlement,  the following
shall occur:

      1.    Alan I. Casden, on behalf of himself, NAPICO and other defendants in
            the litigation,  will transfer to an agent for the Plaintiffs shares
            of common stock  ("Class A Common  Stock") of AIMCO owned by certain
            affiliates  of Alan I. Casden with an aggregate  market value of $19
            million,  subject to certain  transfer  restrictions,  or at Alan I.
            Casden's option, $19 million in cash.

      2.    NAPICO will issue an  aggregate of $35 million in  promissory  notes
            for the benefit of the  Plaintiffs.  An  aggregate  of $7 million of
            notes are to be paid each year.  The notes will bear interest  based
            on applicable rates of U.S. Treasury bills with similar  maturities.
            The notes will be guaranteed by AIMCO Properties, L.P., an affiliate
            of AIMCO.

      3.    The parties to the Stipulation of Settlement will release each other
            and  related  parties  from any and all claims  associated  with the
            litigation and the Plaintiffs' investment in the Partnership and the
            other affiliated partnerships.

      4.    The $29 million in the escrow account  established by Alan I. Casden
            will be released to the Plaintiffs.

Pursuant to the Stipulation of Settlement, upon final approval of the settlement
by the court,  the parties shall jointly  request that a new judgment be entered
in the litigation that will, among other things, expunge the judgment originally
entered against NAPICO and the other defendants on April 29, 2003.

On  September  24,  2003,  Battle  Fowler,  LLP filed a request to  intervene to
challenge  the  portion  of the  Stipulation  of  Settlement  that would lead to
expungement of the judgment  originally entered on April 29, 2003 against NAPICO
and the other  defendants.  All parties to the  Stipulation  of Settlement  have
opposed this request to  intervene.  A hearing  regarding  the request  occurred
November 10, 2003; however, the court has not yet ruled on the matter.

On August 12, 2003, in connection with the proposed  settlement  pursuant to the
Stipulation of Settlement, NAPICO and AIMCO executed a Settlement Agreement (the
"Settlement  Agreement") with the prior  shareholders of Casden  Properties Inc.
The principal terms of the Settlement Agreement include:

      1.    NAPICO will  voluntarily  discontinue the action it commenced on May
            13, 2003 against the former  shareholders of Casden  Properties Inc.
            and other  indemnitors  in AIMCO's March 2002  acquisition of Casden
            Properties Inc. (the "Casden Merger").

      2.    Alan I. Casden and certain  related  entities  will resolve  certain
            pending claims for indemnification  made by NAPICO,  AIMCO and their
            affiliates.  These  claims  include  indemnification  related to the
            litigation  and certain other matters in connection  with the Casden
            Merger.

3.   AIMCO,  or an  affiliate,  will deposit $25 million of the $29 million that
     Alan I. Casden is responsible  for  depositing  into the escrow account for
     the benefit of the Plaintiffs  pursuant to the terms of the  Stipulation of
     Settlement.  In connection  with this deposit by AIMCO,  The Casden Company
     will transfer to AIMCO  531,915  shares of AIMCO Class A Common Stock owned
     by The Casden Company, which shares are to be held in escrow by AIMCO until
     final  approval  of the  Stipulation  of  Settlement  by the  court and the
     Plaintiffs.  Upon such approval, AIMCO will become the owner of the 531,915
     shares.  If final approval by the court and the Plaintiffs is not obtained,
     the $25 million deposited by AIMCO into the escrow account will be returned
     to AIMCO and AIMCO will return to The Casden Company the 531,915 shares. On
     August 25, 2003, AIMCO caused the $25 million to be deposited in the escrow
     account for the benefit of the  Plaintiffs  and The Casden Company and Alan
     I. Casden  deposited in escrow the 531,915  shares in  accordance  with the
     Settlement Agreement.

4.   The Casden  Company will promise to pay an aggregate  amount of $35 million
     on a secured,  nonrecourse  basis to NAPICO.  The  Casden  Company  will be
     obligated to pay an aggregate  of $7 million of the  obligation  each year.
     The  obligation  to pay the $35  million  will bear the same  interest  and
     mature on the same schedule as the promissory notes issued by NAPICO to the
     plaintiffs  pursuant to the  Stipulation  of  Settlement.  Payment of these
     obligations  will be  secured  by (i) a pledge of  744,681  shares of AIMCO
     Class A Common Stock owned by Alan I. Casden or an affiliated entity,  plus
     up to 60,000 additional shares for accrued interest, and (ii) cash proceeds
     of recoveries or settlements  that Alan I. Casden or any of his affiliates,
     or any of the former  shareholders of Casden  Properties  Inc.,  receive in
     connection with or related to the litigation (collectively,  "Recoveries").
     The payment  obligations  to NAPICO will be required to be prepaid with any
     Recoveries  received.  Payment  may be made in cash or in  shares  of AIMCO
     Class A Common  Stock  having a value based on the greater of $47 per share
     or the market value of such shares at the time of payment,  except payments
     with respect to Recoveries must be made in cash.

In addition to the litigation  discussed above, the Corporate General Partner is
involved in various other  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.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

   (a)   Exhibits:

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.

Exhibit 10  Material  contracts:  The  registrant  is not party to any  material
     contracts,  other than the Restated  Certificate  and  Agreement of Limited
     Partnership   dated  January  5,  1981,  and  the  thirty-three   contracts
     representing the Partnership investment in Local Partnerships as previously
     filed at the Securities  and Exchange  Commission,  File #268983,  which is
     hereby incorporated by reference.

Exhibit 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.

Exhibit 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.

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

   (b) Reports on Form 8-K filed during the quarter ended September 30, 2003:

         Current  Report on Form 8-K dated  August 11,  2003 and filed on August
         13, 2003,  disclosing the Stipulation of Settlement  between NAPICO and
         the plaintiffs.


<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: November 13, 2003


<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 registrant as of, and for, the periods presented in this report;

4.    The  registrant'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 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)   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

      (c)   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(s) 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
      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  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 13, 2003

                                 /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 registrant as of, and for, the periods presented in this report;

4.    The  registrant'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 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)   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

      (c)   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(s) 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
      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  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 13, 2003

                               /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 September 30,
2003 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:  November 13, 2003


                                           /s/Brian H. Shuman
                                    Name:  Brian H. Shuman
                                    Date:  November 13, 2003


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.