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 September 30, 2005


[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE 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 ___

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes __ No X_

<PAGE>

                         PART I - FINANCIAL INFORMATION


ITEM 1.     FINANCIAL STATEMENTS



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

                               September 30, 2005
<TABLE>
<CAPTION>

                           ASSETS

<S>                                      <C>                                    <C>
Investment in limited partnerships (Note 2)                                     $   102
Cash and cash equivalents                                                         1,069
Receivable - limited partners                                                         8

            Total assets                                                        $ 1,179

        LIABILITIES AND PARTNERS' (DEFICIENCY) EQUITY

Liabilities:
   Accounts payable and accrued expenses                                         $   34

Contingencies (Note 4)

Partners' (Deficiency) Equity:
   General partners                                               $  (144)
   Limited partners                                                 1,289
                                                                                  1,145

            Total liabilities and partners' (deficiency)
               equity                                                           $ 1,179

                See Accompanying Notes to Financial Statements
</TABLE>

<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,
                                              2005          2004           2005          2004
Revenues:
<S>                                         <C>           <C>           <C>            <C>
  Interest income                           $     9       $     3       $      20      $       8
Operating expenses:
  Management fee - partners (Note 3)             28            28              86             86
  General and administrative (Note 3)             7             9              21             20
  Legal and accounting                           19            33              56             81
        Total operating expenses                 54            70             163            187

Loss from partnership operations                (45)          (67)           (143)          (179)
Distributions from Local Limited
  Partnership sale of investment
   property (Note 2)                             --            --             250             --

Net (loss) income                           $   (45)      $   (67)       $    107       $   (179)
Net (loss) income allocated to general
 partners (1%)                              $    (1)      $    (1)       $      1       $     (2)
Net (loss) income allocated to limited
 partners (99%)                                 (44)          (66)            106           (177)

                                            $   (45)      $   (67)       $    107       $   (179)
Net (loss) income per limited
  partnership interest (Note 1)             $ (3.85)      $ (5.77)       $   9.27       $ (15.48)


                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)



                                         General         Limited
                                        Partners         Partners          Total

Partnership interests                                     11,430

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

Net income for the nine months
  ended September 30, 2005                    1              106             107

Partners' (deficiency) equity,
  September 30, 2005                     $ (144)         $ 1,289          $1,145

Percentage interest at
  September 30, 2005                       1%              99%              100%

                See Accompanying Notes to Financial Statements
<PAGE>

                       REAL ESTATE ASSOCIATES LIMITED III

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                           Nine Months Ended
                                                                             September 30,
                                                                           2005          2004
Cash flows from operating activities:
<S>                                                                       <C>            <C>
  Net income (loss)                                                       $  107         $ (179)
  Adjustments to reconcile net income (loss) to net
    cash used in operating activities:
      Distributions from Local Limited Partnership
       Sale of investment property                                          (250)            --
      Increase in receivable - limited partners                               (8)            --
      Increase in accounts payable and accrued expenses                        1             50
         Net cash used in operating activities                              (150)          (129)

Cash flows provided by investing activities:
  Distributions from Local Limited Partnership
     Sale of investment property                                             250             --

Net increase (decrease) in cash and cash equivalents                         100           (129)
Cash and cash equivalents, beginning of period                               969          1,172

Cash and cash equivalents, end of period                                 $ 1,069        $ 1,043

                See Accompanying Notes to Financial Statements
</TABLE>
<PAGE>

                       REAL ESTATE ASSOCIATES LIMITED III

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)
                               September 30, 2005

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 annual report for the fiscal year ended December
31, 2004 prepared by Real Estate  Associates  Limited III (the  "Partnership" or
"Registrant").  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,
2005 and the results of  operations  and changes in cash flows for the three and
nine months ended September 30, 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 unaudited 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) Income Per Limited Partnership Interest

Net (loss) income per limited partnership  interest was computed by dividing the
limited  partners'  share  of  net  (loss)  income  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 VIEs for which the Partnership was not the primary  beneficiary.  During
the nine  months  ended  September  30,  2005,  one  Local  Limited  Partnership
previously  determined to be a VIE sold its investment  property,  consisting of
553 units.  The remaining eight VIEs 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 eight apartment  properties
with a total of 541 units.  The  Partnership  is  involved  with those VIEs as a
non-controlling  limited  partner equity  holder.  As of September 30, 2005, the
Partnership  continued to hold variable interests in eight of the same nine VIEs
as determined  upon adoption of FIN 46. The  Partnership's  maximum  exposure to
loss as a result of its involvement with  unconsolidated  VIEs is limited to the
Partnership's recorded investments in and receivables from those VIEs, which was
approximately  $102,000 at September 30, 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 September 30, 2005, the Partnership holds limited partnership interests in
eight  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 541 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.

In June 2005,  the  property in one of the Local  Partnerships,  Charlotte  Lake
River Associates, was sold to a third party. Proceeds from the sale were used to
satisfy the  outstanding  mortgage and other  obligations  of the property.  The
remaining  proceeds from the sale were distributed and the Partnership  received
approximately $250,000.  This amount was recognized as distributions  recognized
as income  because the  Partnership's  investment in the Local  Partnership  had
previously been reduced to zero.

At  September  30,  2005,  the  investment  balance in seven of the eight  Local
Partnerships had been reduced to zero.

The following is a summary of the investment in Local  Partnerships for the nine
months ended September 30, 2005 (in thousands):

           Balance, beginning of period                   $ 102
           Amortization of acquisition costs                 (2)
           Equity in income of Local Partnerships             2
           Balance, end of period                         $ 102

The following are unaudited combined estimated  statements of operations for the
three  and  nine  months  ended  September  30,  2005  and  2004  for the  Local
Partnerships in which the Partnership has invested (in thousands):
<TABLE>
<CAPTION>

                                     Three Months Ended          Nine months Ended
                                       September 30,               September 30,
                                     2005         2004          2005          2004
                                               (Restated)                  (Restated)
Revenues
<S>                                <C>            <C>          <C>           <C>
  Rental and other                 $ 1,050        $ 871        $ 2,767       $ 2,617

Expenses
  Operating                            411           392         1,302         1,335
  Depreciation                         145           160           435           479
  Interest                             283           298           849           894
                                       839           850         2,586         2,708

Net income (loss)                   $ 211         $ 21          $ 181         $ (91)
</TABLE>

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the combined results of operations for the three and nine months ended September
30, 2005 and 2004 exclude the operations of Charlotte Lakes as this property was
sold in 2005.

The  current  policy  of the  United  States  Department  of  Housing  and Urban
Development  ("HUD")  is to not 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 current 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 current  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>

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  original  invested  assets of the  limited  partnerships  at the
beginning  of each year.  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 both of the nine month
periods ended September 30, 2005 and 2004 was approximately $86,000.

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, 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")  continues its 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  have included  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, tax credit  transactions and
tender offers for limited  partnership  interests.  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 September  30, 2005,  the  Partnership  had cash and cash  equivalents  of
approximately  $1,069,000.  Substantially  all  of  this  amount  is on  deposit
primarily with high credit quality  financial  institutions,  earning  interest.
Interest  income earned during the nine months ended September 30, 2005 and 2004
was  approximately  $20,000  and  $8,000,  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  September  30,  2005,  the   Partnership  has  investments  in  eight  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  Local
Partnership  during  the nine  months  ended  September  30,  2005 or 2004.  The
Partnership did not receive any distributions from Local Partnerships during the
nine months ended September 30, 2004.

In June 2005,  the  property in one of the Local  Partnerships,  Charlotte  Lake
River Associates, was sold to a third party. Proceeds from the sale were used to
satisfy the  outstanding  mortgage and other  obligations  of the property.  The
remaining  proceeds from the sale were distributed and the Partnership  received
approximately $250,000.  This amount was recognized as distributions  recognized
as income  because the  Partnership's  investment in the Local  Partnership  had
previously been reduced to zero.

At  September  30,  2005,  the  investment  balance in seven of the eight  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  original
remaining  invested  assets at the beginning of each year. 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  $86,000 for both the nine  months  ended  September  30, 2005 and
2004.

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  $56,000
and $81,000 for the nine months ended September 30, 2005 and 2004, respectively.
Legal and accounting  fees decreased due to a decrease in legal fees  associated
with  amending the  partnership  agreement in 2004.  General and  administrative
expenses  were  approximately  $21,000 and  $20,000  for the nine  months  ended
September 30, 2005 and 2004, respectively.

The  current  policy  of the  United  States  Department  of  Housing  and Urban
Development  ("HUD")  is to not 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 current 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 current  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 492 limited  partnership  units (the "Units") (or
984 limited partnership interests) in the Partnership  representing 8.61% of the
outstanding  Units as of  September  30,  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 unaudited 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 VIEs for which the Partnership was not the primary  beneficiary.  During
the nine  months  ended  September  30,  2005,  one  Local  Limited  Partnership
previously  determined to be a VIE sold its investment  property,  consisting of
553 units.  The remaining eight VIEs 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 eight apartment  properties
with a total of 541 units.  The  Partnership  is  involved  with those VIEs as a
non-controlling  limited  partner equity  holder.  As of September 30, 2005, the
Partnership  continued to hold variable interests in eight of the same nine VIEs
as determined  upon adoption of FIN 46. The  Partnership's  maximum  exposure to
loss as a result of its involvement with  unconsolidated  VIEs is limited to the
Partnership's recorded investments in and receivables from those VIEs, which was
approximately  $102,000 at September 30, 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: November 14, 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  of the equivalent of the Chief Executive  Officer and
            Chief  Financial  Officer  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:  November 14, 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:  November 14, 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 September 30,
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:  November 14, 2005


                                           /s/Brian H. Shuman
                                    Name:  Brian H. Shuman
                                    Date:  November 14, 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.