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 March 31, 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)

                                 March 31, 2003

                              ASSETS

Investment in limited partnership (Note 2)                             $   102
Due from affiliate                                                          26
Cash and cash equivalents                                                2,065

            Total assets                                               $ 2,193

          LIABILITIES AND PARTNERS' (DEFICIENCY) EQUITY

Liabilities:
   Accrued fees due to partners                                        $     4
   Accounts payable and accrued expenses                                   106
   Advances due to affiliates                                                5
                                                                           115
Commitments and Contingencies (Note 4)

Partners' (Deficiency) Equity:
   General partners                                                       (148)
   Limited partners                                                      2,226
                                                                         2,078
            Total liabilities and partners' (deficiency) equity        $ 2,193

                   See Accompanying Notes to Financial Statements


<PAGE>

                       REAL ESTATE ASSOCIATES LIMITED III

                            STATEMENTS OF OPERATIONS

                                   (Unaudited)
                      (in thousands, except per unit data)

<TABLE>
<CAPTION>

                                                             Three Months Ended
                                                                  March 31,
                                                             2003           2002

<S>                                                       <C>              <C>
Interest income                                           $     7          $     7

Operating Expenses:
  Management fee - partners (Note 3)                           32               32
  General and administrative (Note 3)                           8               40
  Legal and accounting                                         32               33
        Total operating expenses                               72              105

Loss from Partnership operations                              (65)             (98)
Distributions from limited partnerships
  recognized as income (Note 2)                                19               34
Equity in income (loss) of limited
  partnerships and amortization of
  acquisition costs (Notes 1 and 2)                            41             (155)

Net loss                                                  $    (5)         $  (219)
Net loss allocated to general
 partners (1%)                                            $    --          $    (2)
Net loss allocated to limited
 partners (99%)                                                (5)            (217)

                                                          $    (5)         $  (219)
Net loss per limited
  partnership interest (Note 1)                           $   (--)         $   (19)

                   See Accompanying Notes to Financial Statements

</TABLE>

<PAGE>

                       REAL ESTATE ASSOCIATES LIMITED III

               STATEMENT OF CHANGES IN PARTNERS' (DEFICIENCY) EQUITY

                                   (Unaudited)
                        (in thousands, except unit 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

Net loss for the three months
  ended March 31, 2003                       --               (5)              (5)

Partners' (deficiency) equity,
  March 31, 2003                        $ (148)          $ 2,226           $2,078


                   See Accompanying Notes to Financial Statements

</TABLE>

<PAGE>
                       REAL ESTATE ASSOCIATES LIMITED III

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)
                                 (in thousands)

<TABLE>
<CAPTION>

                                                                       Three Months Ended
                                                                           March 31,
                                                                      2003            2002
Cash flow from operating activities:
<S>                                                                 <C>             <C>
  Net loss                                                          $   (5)         $ (219)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
     Equity in (income) loss of limited partnerships and
      amortization of acquisition costs                                (41)            155
     Increase in fee due to partners                                     4              --
     Increase in due from affiliate                                    (26)             --
     Increase in accounts payable and accrued expenses                  16              10
         Net cash used in operating activities                         (52)            (54)

Cash flow from investing activities:
     Distributions from limited partnership recognized
       as reduction of investment balance                               41              --

Net decrease in cash and cash equivalents                              (11)            (54)
Cash and cash equivalents, beginning of period                       2,076           2,178

Cash and cash equivalents, end of period                           $ 2,065         $ 2,124


                   See Accompanying Notes to Financial Statements

</TABLE>

<PAGE>
                       REAL ESTATE ASSOCIATES LIMITED III

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)
                                 MARCH 31, 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 March 31,
2003 and the  results  of  operations  and  changes  in cash flows for the three
months ended March 31, 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 during the period. The number of limited  partnership  interests was
11,442 for the three months ended March 31, 2003 and 11,456 for the three months
ended March 31, 2002, respectively.

Recent Accounting Pronouncements

In  January  2003,  the  FASB  issued  FASB  Interpretation  No.  46  ("FIN46"),
Consolidation of Variable  Interest  Entities,  an Interpretation of ARB No. 51.
FIN46 requires  certain  variable  interest  entities to be  consolidated by the
primary  beneficiary of the entity if the equity  investors in the entity do not
have the  characteristics  of a  controlling  financial  interest or do not have
sufficient  equity at risk for the  entity to  finance  its  activities  without
additional subordinated financial support from other parties. FIN46 is effective
for all new variable  interest  entities  created or acquired  after January 31,
2003. For variable  interest  entities  created or acquired prior to February 1,
2003,  the  provisions  of FIN46 must be applied for the first interim or annual
period  beginning after June 15, 2003. The  Partnership is currently  evaluating
the  effect,  if any,  that the  adoption  of FIN46 will have on its  results of
operations and financial condition.

Note 2 - Investments in Limited Partnerships

As of March 31, 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.

The  Partnership,  as a limited  partner,  does not  exercise  control  over the
activities and operations,  including  refinancing or selling decisions,  of the
Local Partnerships. Accordingly, the Partnership accounts for its investments in
the Local  Partnerships  using the equity method.  The  Partnership is allocated
profits and losses of the Local Partnerships based upon its respective ownership
percentage  (between 94.9% and 99%). The  Partnership is also entitled to 99% of
the profits and losses of REA.

Distributions   of  surplus  cash  from   operations  from  most  of  the  Local
Partnerships  are restricted by the Local  Partnerships'  Regulatory  Agreements
with the United  States  Department  of Housing and Urban  Development  ("HUD").
These restrictions limit the distribution to a portion, generally less than 10%,
of the initial  invested  capital.  The excess  surplus cash is deposited into a
residual receipts reserve, of which the ultimate  realization by the Partnership
is uncertain as HUD frequently  retains it upon sale or dissolution of the Local
Partnership.  The  Partnership  is  allocated  profits  and losses and  receives
distributions   from  refinancings  and  sales  in  accordance  with  the  Local
Partnerships'  partnership  agreements.   These  agreements  usually  limit  the
Partnership's  distributions to an amount  substantially less than its ownership
percentage in the Local Partnership.

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

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

At  March  31,  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
three months ended March 31, 2003 (in thousands):

           Balance, beginning of year                     $ 102
           Amortization of acquisition costs                 (1)
           Equity in income of limited partnerships          42
           Distributions from limited partnerships
            recognized as a reduction of investment
             balance                                        (41)
           Balance, end of period                         $ 102

The  following  are  unaudited   condensed  combined  estimated   statements  of
operations  for the three  months  ended  March 31,  2003 and 2002 for the Local
Partnerships in which the Partnership has investments (in thousands):

                                              Three Months Ended
                                                   March 31,
                                             2003             2002
Revenues
  Rental and other                          $ 1,651          $ 1,681

Expenses
  Depreciation                                  305              273
  Interest                                      446              367
  Operating                                   1,058            1,384

                                              1,809            2,024

Net loss                                    $ (158)          $ (343)

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.

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 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 partnership.  The management fee incurred for
both the three months ended March 31, 2003 and 2002 was approximately $32,000.

The Partnership  reimburses NAPICO for certain expenses.  The reimbursement paid
to NAPICO was approximately  $4,000 for both the three month periods ended March
31, 2003 and 2002, and is included in general and administrative expenses.

Note 4 - 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 judge
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.
NAPICO has appealed the judgment. Since the amount of the judgment substantially
exceeds NAPICO's net worth, NAPICO cannot post a bond for the full amount of the
judgment in order to stay execution of the judgment  during the appeal  process.
NAPICO has asserted its right to indemnification  from the prior shareholders of
Casden   Properties   Inc.   pursuant  to   documents,   including   the  Master
Indemnification  Agreement  dated as of December 3, 2001,  related to the NAPICO
acquisition,  which  was  completed  in  March  2002.  On May 13,  2003,  NAPICO
commenced  an action  in New York  against  the  former  shareholders  of Casden
Properties Inc. for damages  relating to the litigation.  In connection with the
judgment,  the plaintiffs  issued a press release  indicating their intention to
file a motion to seek to have a court-appointed  receiver take possession of all
of NAPICO's assets,  liquidate or operate  NAPICO's assets,  recover assets that
allegedly   may  have  been  conveyed  by  NAPICO  for  improper  or  inadequate
consideration  prior to the receivership,  and enforce NAPICO's rights under the
Master Indemnification Agreement.  NAPICO will vigorously oppose the motion. The
Corporate  General  Partner cannot  predict the outcome of these  matters,  what
other actions that may be pursued by the plaintiffs to satisfy the judgment,  or
the impact, if any, on the Partnership.

The Corporate General Partner of the Partnership 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.

Millenium   Management,   LLC  ("Millenium")  and  Everest  Properties  II,  LLC
("Everest") have filed with the SEC a preliminary Consent Solicitation Statement
requesting the consent of the limited partners of Real Estate Associates Limited
III  (the   "Partnership")  to  remove  the  current  general  partners  of  the
Partnership and to elect Millenium as the new general  partner.  The Partnership
has filed  with the SEC a  preliminary  Consent  Revocation  Statement  opposing
Millenium's and Everest's efforts to remove the general  partners.  An affiliate
of the  general  partner  has  purchased  Everest's  partnership  interests  and
Everest's consent solicitation has been terminated.

Note 5 - Subsequent Event

Subsequent to March 31, 2003, the Partnership distributed approximately $210,000
from  proceeds  received from the sale of the  Partnership's  interest in Sunset
Grove during 2002 and approximately $90,000 from excess cash reserves. With this
distribution,  the Partnership paid approximately $3,000 to the general partners
and approximately $297,000 to the limited partners.

<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.  The discussions of the  Registrant's
business  and  results  of  operations,   including  forward-looking  statements
pertaining to such matters,  do not take into account the effects of any changes
to the  Registrant's  business  and results of  operations.  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; 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 Limited  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.  It is not expected that any of the Local Partnerships
in which the  Partnership  has invested will  generate  cash flow  sufficient to
provide for distributions to limited partners in any material amount.

Except for money  market  funds,  the  Partnership's  investments  are  entirely
interests in other Local Partnerships owning government assisted projects. Funds
temporarily not required for such  investments in projects are invested in money
market funds which  provide  interest  income as reflected in the  statements of
operations.  These  investments  can  be  readily  converted  to  cash  to  meet
obligations as they arise.

Results of Operations

Partnership  revenues  consist  primarily of interest income earned on temporary
investment of funds not required for investment in Local Partnerships.  Interest
income  for the three  months  ended  March  31,  2003 was  comparable  with the
corresponding period for the three months ended March 31, 2002.

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  $32,000  for both the three
months ended March 31, 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  $32,000
and $33,000 for the three  months  ended March 31, 2003 and 2002,  respectively.
General and administrative  expenses were  approximately  $8,000 and $40,000 for
the three  months ended March 31, 2003 and 2002,  respectively.  The decrease in
general and  administrative  expenses 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.

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 three months ended March 31, 2003, the Partnership  recognized equity
in income of approximately  $41,000 from a Local  Partnership.  During the three
months  ended  March 31,  2002,  the  Partnership  recognized  equity in loss of
approximately  $155,000 from a Local Partnership.  During the three months ended
March 31, 2003 and 2002,  the  Partnership  received  approximately  $19,000 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 currently do not own any limited partnership units (the
"Units") in the  Partnership.  It is possible that AIMCO or its affiliates  will
acquire units of limited partnership interest in the Partnership in exchange for
cash or a combination  of cash and units in the operating  partnership of AIMCO.
Under the Partnership Agreement, unitholders holding a majority of the Units are
entitled  to take  action  with  respect to a variety of  matters,  which  would
include 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  Limited  Partnerships.  Accordingly,  the  Partnership  accounts  for its
investments  in the Local  Limited  Partnerships  using the equity  method.  The
Partnership  is allocated  profits and losses of the Local Limited  Partnerships
based  upon its  respective  ownership  percentage  (between  95% 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  Limited
Partnerships  are  restricted  by the  Local  Limited  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  Limited  Partnership.  The  Partnership  is allocated  profits and
losses and receives distributions from refinancings and sales in accordance with
the Local Limited Partnerships' partnership agreements. These agreements usually
limit the Partnership's  distributions to an amount  substantially less than its
ownership percentage in the Local Limited Partnership.

The individual  investments are carried at cost plus the Partnership's  share of
the Local  Limited  Partnership's  profits less the  Partnership's  share of the
Local Limited  Partnership's  losses,  distributions and impairment charges. The
Partnership  is not  legally  liable for the  obligations  of the Local  Limited
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 Limited  Partnerships  reaches zero.  Distributions from the Local Limited
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  Limited  Partnerships  only to the extent of  distributions  received and
amortization  of  acquisition  costs  from  those  Local  Limited  Partnerships.
Therefore,  the  Partnership  limits its  recognition of equity  earnings to the
amount it expects to ultimately realize.

ITEM 3.     CONTROLS AND PROCEDURES

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, within 90 days of
the filing date of this quarterly  report,  evaluated the  effectiveness  of the
Partnership's  disclosure  controls and  procedures  (as defined in Exchange Act
Rules 13a-14(c) and 15d-14(c) and have determined that such disclosure  controls
and  procedures  are  adequate.  There have been no  significant  changes in the
Partnership's  internal  controls or in other  factors that could  significantly
affect the  Partnership's  internal  controls since the date of evaluation.  The
Partnership does not believe any significant deficiencies or material weaknesses
exist in the Partnership's internal controls, accordingly, no corrective actions
have been taken.


<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 judge
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.
NAPICO has appealed the judgment. Since the amount of the judgment substantially
exceeds NAPICO's net worth, NAPICO cannot post a bond for the full amount of the
judgment in order to stay execution of the judgment  during the appeal  process.
NAPICO has asserted its right to indemnification  from the prior shareholders of
Casden   Properties   Inc.   pursuant  to   documents,   including   the  Master
Indemnification  Agreement  dated as of December 3, 2001,  related to the NAPICO
acquisition,  which  was  completed  in  March  2002.  On May 13,  2003,  NAPICO
commenced  an action  in New York  against  the  former  shareholders  of Casden
Properties Inc. for damages  relating to the litigation.  In connection with the
judgment,  the plaintiffs  issued a press release  indicating their intention to
file a motion to seek to have a court-appointed  receiver take possession of all
of NAPICO's assets,  liquidate or operate  NAPICO's assets,  recover assets that
allegedly   may  have  been  conveyed  by  NAPICO  for  improper  or  inadequate
consideration  prior to the receivership,  and enforce NAPICO's rights under the
Master Indemnification Agreement.  NAPICO will vigorously oppose the motion. The
Corporate  General  Partner cannot  predict the outcome of these  matters,  what
other actions that may be pursued by the plaintiffs to satisfy the judgment,  or
the impact, if any, on the Partnership.

Millenium   Management,   LLC  ("Millenium")  and  Everest  Properties  II,  LLC
("Everest") have filed with the SEC a preliminary Consent Solicitation Statement
requesting the consent of the limited partners of Real Estate Associates Limited
III  (the   "Partnership")  to  remove  the  current  general  partners  of  the
Partnership and to elect Millenium as the new general  partner.  The Partnership
has filed  with the SEC a  preliminary  Consent  Revocation  Statement  opposing
Millenium's and Everest's efforts to remove the general  partners.  An affiliate
of the  general  partner  has  purchased  Everest's  partnership  interests  and
Everest's consent solicitation has been terminated.

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 99     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 March 31, 2003:

         None.


<PAGE>


                                   SIGNATURES



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


                                    REAL ESTATE ASSOCIATES LIMITED III
                                    (a California limited partnership)


                                    By:   National Partnership Investments Corp.
                                          Corporate General Partner

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

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


                                    Date: May 14, 2003


<PAGE>



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


3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  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 quarterly report;


4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


      a)  Designed  such  disclosure  controls  and  procedures  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 quarterly report is
      being prepared;


      b) Evaluated the effectiveness of the registrant's disclosure controls and
      procedures  as of a date  within 90 days prior to the filing  date of this
      quarterly report (the "Evaluation Date"); and


      c)  Presented  in  this  quarterly   report  our  conclusions   about  the
      effectiveness  of the  disclosure  controls  and  procedures  based on our
      evaluation as of the Evaluation Date;


5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):


      a) All  significant  deficiencies  in the design or  operation of internal
      controls which could adversely affect the registrant's  ability to record,
      process,  summarize and report  financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and


      b) Any fraud,  whether or not material,  that involves management or other
      employees  who  have  a  significant  role  in the  registrant's  internal
      controls; and


6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date:  May 14, 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>



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


3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  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 quarterly report;


4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:


      a)  Designed  such  disclosure  controls  and  procedures  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 quarterly report is
      being prepared;


      b) Evaluated the effectiveness of the registrant's disclosure controls and
      procedures  as of a date  within 90 days prior to the filing  date of this
      quarterly report (the "Evaluation Date"); and


      c)  Presented  in  this  quarterly   report  our  conclusions   about  the
      effectiveness  of the  disclosure  controls  and  procedures  based on our
      evaluation as of the Evaluation Date;


5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   board  of  directors  (or  persons   performing   the  equivalent
functions):


      a) All  significant  deficiencies  in the design or  operation of internal
      controls which could adversely affect the registrant's  ability to record,
      process,  summarize and report  financial data and have identified for the
      registrant's auditors any material weaknesses in internal controls; and


      b) Any fraud,  whether or not material,  that involves management or other
      employees  who  have  a  significant  role  in the  registrant's  internal
      controls; and


6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


Date:  May 14, 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 99


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



In connection with the Quarterly Report on Form 10-QSB of Real Estate Associates
Limited III (the  "Partnership"),  for the quarterly period ended March 31, 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:  May 14, 2003


                                           /s/Brian H. Shuman
                                    Name:  Brian H. Shuman
                                    Date:  May 14, 2003


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