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, 2004


[ ]   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, 2004


                              ASSETS

Investment in local partnership (Note 2)                               $   102
Cash and cash equivalents                                                1,135
            Total assets                                               $ 1,237

          LIABILITIES AND PARTNERS' (DEFICIENCY) EQUITY

Liabilities:
   Accounts payable and accrued expenses                               $    34

Contingencies (Note 4)

Partners' (deficiency) equity:
   General partners                                                    $  (144)
   Limited partners                                                      1,347
                                                                         1,203
            Total liabilities and partners' (deficiency) equity        $ 1,237


                See Accompanying Notes to Financial Statements



<PAGE>






                       REAL ESTATE ASSOCIATES LIMITED III

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

<TABLE>
<CAPTION>

                                                                     Three Months Ended
                                                                          March 31,
                                                                         2004    2003

<S>                                                                  <C>         <C>
Interest income                                                      $     3     $     7

Operating Expenses:
  Management fees - partners (Note 3)                                     32          32
  General and administrative (Note 3)                                      6           8
  Legal and accounting                                                    30          32
        Total operating expenses                                          68          72

Loss from partnership operations                                         (65)        (65)
Distributions from local partnerships recognized as income
  (Note 2)                                                                --          19
Equity in income of local partnerships and amortization
  of acquisition costs (Note 2)                                           --          41

Net loss                                                             $   (65)    $    (5)

Net loss allocated to general partners (1%)                          $    (1)    $    --
Net loss allocated to limited partners (99%)                             (64)         (5)

                                                                     $   (65)    $    (5)

Net loss per limited partnership interest (Note 1)                   $ (5.60)    $ (0.44)



                See Accompanying Notes to Financial Statements
</TABLE>



<PAGE>




                       REAL ESTATE ASSOCIATES LIMITED III

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


<TABLE>
<CAPTION>

                                        General          Limited
                                       Partners          Partners          Total

<S>                                                       <C>
Partnership interests                                     11,432

Partners' (deficiency) equity,
  December 31, 2003                     $ (143)          $ 1,411           $1,268

Net loss for the three months
  ended March 31, 2004                       (1)             (64)             (65)

Partners' (deficiency) equity,
  March 31, 2004                        $ (144)          $ 1,347           $1,203


                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,
                                                                      2004            2003
Cash flow from operating activities:
<S>                                                                 <C>             <C>
  Net loss                                                          $  (65)         $   (5)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
     Equity in income of local partnerships and
      amortization of acquisition costs                                 --             (41)
     Increase in fee due to partners                                    --               4
     Increase in due from affiliate                                     --             (26)
     Increase in accounts payable and accrued expenses                  28              16
         Net cash used in operating activities                         (37)            (52)

Cash flow provided by investing activities:
     Distributions from local partnership recognized
       as return of capital                                             --              41

Net decrease in cash and cash equivalents                              (37)            (11)
Cash and cash equivalents, beginning of period                       1,172           2,076

Cash and cash equivalents, end of period                           $ 1,135         $ 2,065


                See Accompanying Notes to Financial Statements
</TABLE>


                       REAL ESTATE ASSOCIATES LIMITED III

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)
                                 MARCH 31, 2004

Note 1 - Organization and Summary of Significant Accounting Policies

General

The  information  contained in the following  notes to the  unaudited  financial
statements  is  condensed  from that which  would  appear in the annual  audited
financial  statements;  accordingly,  the financial  statements  included herein
should be reviewed in  conjunction  with the  financial  statements  and related
notes  thereto  contained  in  the  Real  Estate  Associates  Limited  III  (the
"Partnership" or "Registrant")  annual report for the fiscal year ended December
31, 2003.  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,
2004 and the  results  of  operations  and  changes  in cash flows for the three
months ended March 31, 2004 and 2003, respectively.

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

Basis of Presentation

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

Method of Accounting for Investment in Local Partnerships

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

Net Loss Per Limited Partnership Interest

Net loss per limited  partnership  interest was computed by dividing the limited
partners'  share of net loss by the  number  of  limited  partnership  interests
outstanding  at the beginning of the period.  The number of limited  partnership
interests was 11,432 and 11,442 at December 31, 2003 and 2002, respectively.

Recent Accounting Pronouncements

In January 2003,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Interpretation  No. 46 ("FIN 46"),  Consolidation of Variable Interest Entities.
FIN 46 requires the  consolidation of entities in which an enterprise  absorbs a
majority of the entity's  expected  losses,  receives a majority of the entity's
expected  residual  returns,  or both, as a result of ownership,  contractual or
other  financial  interests  in the  entity.  Prior to the  issuance  of FIN 46,
entities were generally  consolidated by an enterprise when it had a controlling
financial  interest  through  ownership  of a majority  voting  interest  in the
entity.  FIN 46 applied  immediately to variable interest entities created after
January 31, 2003,  and with respect to public  entities with  variable  interest
held before  February 1, 2003,  FIN 46 will apply to  financial  statements  for
periods ending after December 15, 2004.

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

Note 2 - Investments in Local Partnerships

As of March 31, 2004, the  Partnership  holds limited  partnership  interests in
nine  limited  partnerships  (the  "Local   Partnerships").   In  addition,  the
Partnership holds a general partner interest in Real Estate Associates  ("REA").
NAPICO is also a general partner in REA . The Local Partnerships own residential
low income rental  projects  consisting of 1,094 apartment  units.  The mortgage
loans of these  projects  are  payable to or  insured  by  various  governmental
agencies.

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

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

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

At  March  31,  2004,  the  investment  balance  in  eight  of  the  nine  Local
Partnerships had been reduced to zero.

The  following is a summary of the  investments  in Local  Partnerships  for the
three months ended March 31, 2004 (in thousands):

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

The  following  are  unaudited   condensed  combined  estimated   statements  of
operations  for the three  months  ended  March 31,  2004 and 2003 for the Local
Partnerships in which the Partnership has investments (in thousands):

                                     Three Months Ended
                                         March 31,
                                    2004            2003

Rental and other income            $ 1,532        $ 1,521
Expenses:
  Operating expenses                 1,049            998
  Financial expenses                   356            389
  Depreciation                         223            304
                                     1,628          1,691
Net loss                            $ (96)         $ (170)

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the results of Hidden  Pines and  Sunshine  Canyon have been  excluded  from the
combined estimated statements of operations for the three months ended March 31,
2003 due to the sale of the  Partnership's  interests in the Local  Partnerships
during 2003.

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

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

Note 3 - Transactions with Affiliated Parties

Under the terms of the Restated  Certificate  and Agreement of Limited  Partner,
the Partnership is obligated to NAPICO for an annual management fee equal to 0.4
percent of the  invested  assets.  Invested  assets are  defined as the costs of
acquiring project interests,  including the proportionate amount of the mortgage
loans  related to the  Partnership's  interests  in the capital  accounts of the
respective Local Partnerships. The management fee incurred for both of the three
months ended March 31, 2004 and 2003 was approximately $32,000.

The Partnership  reimburses NAPICO for certain expenses.  The reimbursement paid
to NAPICO was  approximately  $4,000 for both of the three month  periods  ended
March 31, 2004 and 2003, 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.

Pursuant to a formal order of investigation received by AIMCO on March 29, 2004,
the  Central  Regional  Office of the  United  States  Securities  and  Exchange
Commission is conducting an  investigation  relating to certain  matters.  AIMCO
believes the areas of investigation  include AIMCO's  miscalculated  monthly net
rental  income  figures in third  quarter 2003,  forecasted  guidance,  accounts
payable,  rent concessions,  vendor rebates,  and capitalization of expenses and
payroll.  AIMCO is cooperating  fully.  AIMCO does not believe that the ultimate
outcome  will  have a  material  adverse  effect on its  consolidated  financial
condition or results of operations  taken as a whole.  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
taken as a whole.


<PAGE>




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

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

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

Liquidity and Capital Resources

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

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

As of  March  31,  2004,  the  Partnership  had cash  and  cash  equivalents  of
approximately  $1,135,000.  Substantially  all  of  this  amount  is on  deposit
primarily with high credit quality  financial  institutions,  earning  interest.
Interest income earned during the three months ended March 31, 2004 and 2003 was
approximately  $3,000 and $7,000,  respectively.  The amount of interest  income
varies  with market  rates  available  on deposits  and with the amount of funds
available  for  investment.  Cash  equivalents  can be converted to cash to meet
obligations  of the  Partnership  as they  arise.  The  Partnership  intends  to
continue investing available funds in this manner.

Results of Operations

At March 31, 2004, the Partnership  has investments in nine Local  Partnerships.
The  Partnership,  as a limited  partner,  does not  exercise  control  over the
activities and  operations,  including  refinancing or selling  decisions of the
Local Partnerships.  Accordingly, the Partnership accounts for its investment in
the Local Partnerships using the equity method. Thus the individual  investments
are  carried  at cost plus the  Partnership's  share of the Local  Partnership's
profits  less  the  Partnership's  share  of  the  Local  Partnership's  losses,
distributions  and impairment  charges.  However,  since the  Partnership is not
legally  liable  for  the  obligations  of  the  Local  Partnerships,  or is not
otherwise committed to provide additional support to them, it does not recognize
losses  once its  investment  in each of the Local  Partnerships  reaches  zero.
Distributions  from the Local  Partnerships  are accounted for as a reduction of
the  investment  balance  until  the  investment  balance  is  reduced  to zero.
Subsequent  distributions  received are recognized as income in the accompanying
statements  of  operations.  For those  investments  where the  Partnership  has
determined that the carrying value of its investments approximates the estimated
fair value of those investments, the Partnership's policy is to recognize equity
in  income  of the  Local  Partnerships  only  to the  extent  of  distributions
received,  and amortization of acquisition costs from those Local  Partnerships.
During the three months ended March 31, 2003, the Partnership  recognized equity
in income of approximately $41,000 from a Local Partnership. The Partnership did
not recognize any equity in income or loss from a Local  Partnership  during the
three months ended March 31, 2004. During the three months ended March 31, 2003,
the  Partnership  received  approximately  $19,000 in  distributions  from Local
Partnerships  that were  recognized  as income in the  statements  of operations
since the Partnership's investment in the Local Partnerships had been reduced to
zero. The Partnership did not receive any distributions  from Local Partnerships
during the three months ended March 31, 2004.

At  March  31,  2004,  the  investment  balance  in  eight  of  the  nine  Local
Partnerships had been reduced to zero.

Partnership  revenues consist of interest income earned on temporary  investment
of funds not required for investment in Local Partnerships.  Interest income for
the  three  months  ended  March  31,  2004   decreased  as  a  result  of  cash
distributions to partners during the year ended December 31, 2003 which resulted
in lower cash balances.

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 of the three
months ended March 31, 2004 and 2003.

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  $30,000
and $32,000 for the three  months  ended March 31, 2004 and 2003,  respectively.
General and administrative expenses were approximately $6,000 and $8,000 for the
three months ended March 31, 2004 and 2003, respectively.

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

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


<PAGE>



Other

AIMCO and its affiliates owned 492 limited  partnership  units (the "Units") (or
984 limited partnership interests) in the Partnership  representing 8.61% of the
outstanding  Units  as of  March  31,  2004.  A Unit  consists  of  two  limited
partnership  interests. A number of these Units were acquired pursuant to tender
offers  made by  AIMCO  or its  affiliates.  It is  possible  that  AIMCO or its
affiliates will acquire  additional  Units in exchange for cash or a combination
of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO,
either through private  purchases or tender offers.  Pursuant to the Partnership
Agreement,  unitholders  holding a majority  of the Units are  entitled  to take
action with  respect to a variety of matters that  include,  but are not limited
to,  voting on certain  amendments  to the  Partnership  Agreement and voting to
remove the Corporate  General  Partner.  Although the Corporate  General Partner
owes fiduciary duties to the limited partners of the Partnership,  the Corporate
General Partner also owes fiduciary duties to AIMCO as its sole stockholder.  As
a result,  the duties of the Corporate  General  Partner,  as corporate  general
partner, to the Partnership and its limited partners may come into conflict with
the duties of the Corporate General Partner to AIMCO, as its sole stockholder.

Critical Accounting Policies and Estimates

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

Method of Accounting for Investments in Local Partnerships

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

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

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

Recent Accounting Pronouncements

In January 2003,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
Interpretation  No. 46 ("FIN 46"),  Consolidation of Variable Interest Entities.
FIN 46 requires the  consolidation of entities in which an enterprise  absorbs a
majority of the entity's  expected  losses,  receives a majority of the entity's
expected  residual  returns,  or both, as a result of ownership,  contractual or
other  financial  interests  in the  entity.  Prior to the  issuance  of FIN 46,
entities were generally  consolidated by an enterprise when it had a controlling
financial  interest  through  ownership  of a majority  voting  interest  in the
entity.  FIN 46 applied  immediately to variable interest entities created after
January 31, 2003,  and with respect to public  entities with  variable  interest
held before  February 1, 2003,  FIN 46 will apply to  financial  statements  for
periods ending after December 15, 2004.

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

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 6.     EXHIBITS AND REPORTS ON FORM 8-K

   (a)   Exhibits:

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

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

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

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

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

   (b) Reports on Form 8-K:

         Current Report on Form 8-K dated December 30, 2003 and filed on January
         2, 2004  disclosing the Stipulation  Settlement  between NAPICO and the
         plaintiffs.


<PAGE>


                                   SIGNATURES



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


                                    REAL ESTATE ASSOCIATES LIMITED III
                                    (a California limited partnership)


                                    By:   National   Partnership   Investments
                                          Corp.
                                          Corporate General Partner


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

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


                                    Date: May 14, 2004


<PAGE>



Exhibit 31.1


                                  CERTIFICATION


I, David R. Robertson, certify that:


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

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

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

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

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

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

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

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

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


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


Date:  May 14, 2004

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


<PAGE>



Exhibit 31.2


                                  CERTIFICATION


I, Brian H. Shuman, certify that:


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

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

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

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

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

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

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

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

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


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


Date:  May 14, 2004

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


<PAGE>


Exhibit 32.1


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



In connection with the Quarterly Report on Form 10-QSB of Real Estate Associates
Limited III (the  "Partnership"),  for the quarterly period ended March 31, 2004
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, 2004


                                           /s/Brian H. Shuman
                                    Name:  Brian H. Shuman
                                    Date:  May 14, 2004


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.