Document:

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                                                                    EXHIBIT 10.3

                       FORM OF ADVISORY SERVICES AGREEMENT

         ADVISORY SERVICES AGREEMENT, dated as of __________, 2002, by and
between BERKSHIRE INCOME REALTY INC., a Maryland corporation (the "COMPANY"),
and BERKSHIRE REAL ESTATE ADVISORS, L.L.C., a Delaware limited liability company
(the "ADVISOR").

                                   WITNESSETH:

         WHEREAS, the Company has filed with the Securities and Exchange
Commission a registration statement on Form S-11 (the "REGISTRATION STATEMENT")
to register its shares of Series A preferred stock, par value $0.01 per share
(the "PREFERRED SHARES"), to be offered in connection with the proposed exchange
of its Preferred Shares for certain interests in mortgage funds, as more fully
described in the Registration Statement (the "EXCHANGE");

         WHEREAS, the Company intends to qualify as a "real estate investment
trust," as defined in the Internal Revenue Code of 1986, as amended (the
"CODE");

         WHEREAS, the Company desires to avail itself of the experience,
resources, advice, assistance and certain facilities of the Advisor and to have
the Advisor undertake the duties and responsibilities hereinafter set forth, on
behalf of and subject to the supervision of the Board of Directors of the
Company (the "BOARD OF DIRECTORS"), all as provided herein;

         WHEREAS, the Advisor is willing to undertake to render such services on
the terms and subject to the conditions hereinafter set forth;

         WHEREAS, this Agreement shall become effective upon the closing of the
Exchange; and

         WHEREAS, all capitalized terms used and not defined herein have the
meaning ascribed to them in the Registration Statement.

         NOW, THEREFORE, the parties hereto agree as follows:

         1. APPOINTMENT. The Company hereby appoints the Advisor to serve as its
investment and management advisor on the terms and subject to the conditions set
forth in this Agreement, and the Advisor hereby accepts such appointment.

         2. DUTIES OF THE ADVISOR. The Advisor undertakes to manage the
Company's portfolio and identify investment opportunities consistent with the
Company's investment policies and objectives, as the Board of Directors may
adopt from time to time. In performance of this undertaking, subject to the
supervision and direction of the Board of Directors, the Advisor shall, pursuant
to delegated authority:

         (a) obtain or provide such services as may be required to administer
the Company's daily operations;

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                                                                               2

         (b) identify investment opportunities for the Company which are
consistent with the Company's investment objectives and policies;

         (c) serve as the Company's investment and financial advisor and provide
reports with respect to the Company's portfolio of investments, including, but
not limited to, the making of investments in real properties and other real
estate investments consistent with the Company's investment policies;

         (d) on the Company's behalf, investigate, select, retain and conduct
relationships with such persons as the Advisor deems necessary to the proper
performance of its obligations hereunder, including, but not limited to,
consultants, investors, builders, developers, borrowers, lenders, mortgagors,
brokers, accountants, attorneys, appraisers and others, including the Company's
or the Advisor's affiliates;

         (e) provide advice and recommendations concerning the making of
investments consistent with the Company's investment policies;

         (f) structure and negotiate the terms of investments in properties and
obtain the Board of Directors' approval of investments, consistent with the
Company's investment policies and objectives as they may be adopted from time to
time by the Board of Directors; provided, that the Advisor is expressly
authorized to make investments in multi-family residential properties on the
Company's behalf that are consistent with the investment and other policies
adopted by the Board of Directors from time to time without obtaining the
approval of the Board of Directors;

         (g) obtain from the Advisor's affiliates or from third parties property
management services for the Company's investments in real property;

         (h) obtain for or provide to the Company such services as may be
required in acquiring, managing and disposing of investments, including, but not
limited to, the negotiation of purchase contracts and services related to the
acquisition of real properties by the Company, disbursing and collecting the
Company's funds, paying the Company's debts and fulfilling the Company's
obligations, and handling, prosecuting and settling any of the Company's claims,
and such other services as the Company may require;

         (i) do all things necessary to assure the Advisor's ability to fulfill
its obligations to the Company, including providing the office space,
furnishings and personnel necessary for the performance of the foregoing
services;

         (j) from time to time, or at any time reasonably requested by the Board
of Directors, make reports to the Board of Directors of the Advisor's
performance of the foregoing services; and

         (k) within 30 days after the end of each of the Company's fiscal
quarters, submit to the Board of Directors a statement of the Company's sources
of income during such fiscal quarter and make recommendations concerning
changes, if any, in the Company's investments to permit the Company to satisfy
the requirements of

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                                                                               3

Sections 856(c)(2), 856(c)(3) and 856(c)(4) of the Code (such statement of
income may be based upon information supplied by independent contractors of the
Company, to the extent applicable).

         3. CERTAIN GUIDELINES. The Advisor shall endeavor to ensure, with
respect to the Company's investments, that: (a) an appropriate policy of title
insurance is obtained with respect to any property, whether acquired directly by
the Company or encumbered by a lien in favor of the Company, which secures a
loan made by the Company or any property otherwise acquired by the Company, or
that an opinion of counsel as to such title is obtained; (b) any mortgage
securing any investment of the Company shall be a valid lien upon the mortgaged
property and upon foreclosure thereof would be subordinate only to such liens as
are expressly set forth therein; (c) any property acquired by the Company or
securing a mortgage loan investment of the Company is duly insured against loss
or damage by fire, with extended coverage, and against such other insurable
hazards and risks as are customary and appropriate in the circumstances; (d) a
majority of the Board of Directors (including a majority of the independent
directors, as such term is used in the Registration Statement) approves, in
advance, any investment (other than with respect to the initial properties (as
such term is used in the Registration Statement) or the Interests) by the
Company or the operating partnership (as such term is used in the Registration
Statement), on the one hand, with the Advisor or any of its affiliates, on the
other hand; (e) the Company does not make any loans to the Advisor or any of its
affiliates; (f) the Company's ratio of debt to total assets, at the time of the
incurrence of any indebtedness, does not exceed 75%; and (g) investments in any
one property acquired after the formation transactions described in the
Registration Statement do not exceed 25% of the value of the Company's total
assets at the time of its acquisition.

         4. REIT QUALIFICATION, ETC. Notwithstanding anything to the contrary in
this Agreement, the Advisor shall use its best efforts to refrain from taking
any action (including, without limitation, the furnishing or rendering of
services to tenants of a property or managing or operating a property) which, in
its judgment, made in good faith and with the exercise of reasonable care,
would: (a) adversely affect the status of the Company as a "real estate
investment trust" under the Code and all rules and regulations promulgated
thereunder or subject the Company to material income taxes or excise taxes or
any tax on a prohibited transaction, as defined for purposes of the Code; (b)
violate any law, rule, regulation or statement of policy of any governmental
body or agency having jurisdiction over the Company or over its securities, of
which the Advisor should reasonably be aware; or (c) otherwise not be permitted
by the charter or bylaws of the Company, except that if any such action
specified in clauses (a), (b) or (c) shall be ordered by the Board of Directors,
the Advisor shall promptly notify the Board of Directors of the Advisor's
judgment that such action would adversely affect the status of the Company as a
"real estate investment trust" under the Code, and the Advisor shall refrain
from taking such action, unless, but only to the extent that, the Advisor
receives specific written instructions from the Board of Directors expressly
ordering that the action be taken, notwithstanding such notification by it to
the Board of Directors. In such event the Advisor shall have no liability for
acting in accordance with the specific written instructions of the Board of
Directors so given.

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         5. INVESTMENT COMPANY STATUS. Notwithstanding anything to the contrary
in this Agreement, the Advisor shall use its best efforts to refrain from any
action which, in its judgment, made in good faith and in the exercise of
reasonable care, would cause the Company to be required to register as an
investment company under the Investment Company Act of 1940, as amended, except
where such action has been ordered by the Board of Directors, in which event the
Advisor shall promptly notify the Board of Directors of the Advisor's judgment
that such action might require such registration and shall refrain from taking
such action, unless, but only to the extent that, the Advisor receives specific
written instructions from the Board of Directors expressly ordering that the
actions be taken, notwithstanding such notification by it to the Board of
Directors. In such event, the Advisor shall have no liability for acting in
accordance with the specific written instructions of the Board of Directors so
given.

         6. BANK ACCOUNTS. The Advisor may establish and maintain one or more
bank accounts in its own name or in the name of the Company and may collect and
deposit into any such account or accounts, and disburse from any such account or
accounts, any money on behalf of the Company, under such terms and conditions as
the Board of Directors may approve. The Advisor shall, from time to time, render
to the Board of Directors and to the auditors of the Company a complete
accounting of such collections and disbursements.

         7. CONSULTATION AND ADVICE. In addition to the services described
above, the Advisor shall consult with the Board of Directors and shall, at the
request of the Board of Directors, furnish advice and recommendations with
respect to other aspects of the business and affairs of the Company.

         8. INFORMATION FURNISHED TO THE ADVISOR. The Board of Directors shall
at all times keep the Advisor fully informed concerning the investment,
disposition and financing policies of the Company and the intentions of the
Board of Directors concerning the future activities and investments of the
Company. The Company shall furnish the Advisor with a certified copy of all
financial statements, a signed copy of each report prepared by independent
certified public accountants and such other information with regard to the
Company's affairs as the Advisor may from time to time reasonably request.

         9. COMPENSATION. For rendering the services described herein, the
Company shall pay to the Advisor the following:

            (a) ASSET MANAGEMENT FEE. Subject to Section 9(c), for asset
management services rendered to the Company, an annual amount, payable quarterly
in arrears, equal to, in the case of properties (including the initial
properties, as such term is used in the Registration Statement) or mortgage loan
investments, 0.40% of the Purchase Price (as defined below) of such properties,
as adjusted from time to time to reflect the then current fair market value of
the property. Any such adjustment shall be proposed by the Advisor but will be
subject to the approval of the audit committee of the Board of Directors.
Notwithstanding the foregoing, there shall be no asset management fee payable
with respect to the Interests acquired by the Company pursuant to the Exchange.

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The term "PURCHASE PRICE," as used in this Agreement, shall mean the capitalized
basis of an asset under generally accepted accounting principles including, but
not limited to, rehabilitation or new construction costs, costs of acquisition,
or other items paid or received which would be considered an adjustment to
basis; except that acquisition fees and capital expenditures of a recurring
nature will be excluded from such definition.

            (b) ACQUISITION FEE. Subject to Section 9(c), the Advisor shall
receive an acquisition fee equal to 1.0% of the Purchase Price of any new
property, whether owned directly or indirectly by the Company. Notwithstanding
the foregoing, no acquisition fee shall be payable with respect to KRF Company,
L.L.C.'s interest in the initial properties (as such term is used in the
Registration Statement) or the Interests acquired by the Company pursuant to the
Exchange. In addition, the Company shall reimburse the Advisor and its
affiliates for the reasonable expenses of acquisition actually incurred by them.

            (c) SUBORDINATION. No asset management fee or acquisition fee under
Section 9(a) or 9(b) shall be payable to the Advisor during any time when any
amounts payable on the Preferred Shares then due have not been paid in full.

            (d) REIMBURSEMENT OF EXPENSES. The Company shall reimburse the
Advisor for (a) the out-of-pocket expenses of the Advisor of goods, materials
and services used for or by the Company and (b) the cost of administrative
services rendered to the Company by the Advisor which are necessary to the
prudent operation of the Company, such as legal, accounting, computer, transfer
agent and other services that could be performed directly for the Company by
independent parties.

         10. OTHER ACTIVITIES OF THE ADVISOR. Nothing contained herein shall
prevent the Advisor from engaging in other activities, including, without
limitation, the rendering of advice to other investors (including other REITs)
and the management of other programs advised, sponsored or organized by the
Advisor or its affiliates; nor shall this Agreement limit or restrict the right
of any director, officer, employee, member or shareholder of the Advisor or its
affiliates to engage in any other business or to render services of any kind to
any other partnership, limited liability company, corporation, firm, individual,
trust or association. Notwithstanding the foregoing, however, the Advisor shall
devote sufficient resources as may be required to discharge its obligations
hereunder. The Advisor may, with respect to any investment in which the Company
is a participant, subject to its contractual duties to the Company under this
Agreement, also render advice and service to each and every other participant
therein.

         11. ALLOCATION OF INVESTMENT OPPORTUNITIES. Neither the Advisor or any
of its affiliates shall be obligated to present to the Company investment
opportunities that come to their attention, even if any of those opportunities
may be suitable to the Company. In addition, the Advisor shall have sole
discretion in determining how to allocate investment opportunities as between
the Company, on the one hand, and the Advisor or its affiliates, on the other
hand, as the Advisor deems advisable.

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         12. TERM/TERMINATION OF AGREEMENT. Initially, this Agreement shall have
a term of two years commencing on the closing date of the Exchange. Following
the initial term, subsequent renewals will be subject to an evaluation of the
performance of the Advisor by the audit committee of the Board of Directors.
This Agreement may be terminated by the audit committee of the Board of
Directors or the Advisor, in all cases, by giving not less than 60 days advance
notice in writing to the other party.

         13. ACTION UPON TERMINATION. If the Advisor terminates this Agreement,
the Advisor shall not be entitled to compensation for services performed after
the effective date of such termination. The Advisor shall, forthwith upon such
termination:

            (a) promptly pay over to the Company all monies collected and held
for the account of the Company pursuant to this Agreement, after deducting any
accrued compensation and reimbursement for its expenses to which it is then
entitled under this Agreement;

            (b) promptly deliver to the Company a full accounting, including a
statement showing all amounts collected, disbursed and held by the Advisor, for
the period following the date of the last accounting furnished to the Company;
and

            (c) promptly deliver to the Company all property and documents of
the Company then in the custody of the Advisor.

         14. AMENDMENTS. The Agreement shall not be modified except by an
instrument in writing signed by both parties hereto, or their respective
successors or assigns, or otherwise as provided herein.

         15. ASSIGNMENT. This Agreement may be assigned upon the consent of both
parties hereto by: (i) the Advisor to a person which is an affiliate of the
Advisor; or (ii) either the Advisor or the Company to its successor-in-interest.
The Advisor may delegate some or all of its duties under this Agreement to an
affiliate. Notwithstanding the foregoing, so long as the Company intends to
qualify as a real estate investment trust under the Code, this Agreement may not
be assigned to any entity that serves as a property manager with respect to the
properties of the Company.

         16. GOVERNING LAW. The provisions of this Agreement shall be construed
and interpreted in accordance with the internal laws of the Commonwealth of
Massachusetts without giving effect to conflicts of laws, principles or rules.

         17. DIRECTORS AND STOCKHOLDERS NOT LIABLE. This Agreement is made on
behalf of the Company by an officer of the Company, not individually, but solely
as such officer, and the obligations under this Agreement are not binding upon,
nor shall resort be had to, the private property of any of the directors,
officers, shareholders, employees or agents of the Company personally, but shall
bind only the Company.

         18. INDEMNIFICATION BY THE COMPANY. The Company shall indemnify and
hold harmless the Advisor, to the full extent permitted by the Maryland General

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Corporation Law (in effect at the time indemnity is sought), from all liability,
claims, damages or loss arising in the performance of its duties hereunder, and
related expenses, including reasonable attorneys' fees, to the extent such
liability, claims, damages or losses and related expenses are not fully
reimbursed by insurance; provided, however, that the Advisor shall not be
entitled to indemnification, under this Section 18, if it acts in a manner which
constitutes gross negligence or willful misfeasance.

         19. NO PARTNERSHIP OR JOINT VENTURE. The Company and the Advisor are
not partners or joint venturers with each other and nothing herein shall be
construed so as to make them partners or joint venturers or impose any liability
as such on either of them or their affiliates.

         20. HEADINGS. The section headings hereof have been inserted for
reference only and shall not be construed to affect the meaning, construction or
effect of this Agreement.

         21. NOTICES. All notices, demands and other communication to be given
or delivered under or by reason of the provisions of this Agreement must be in
writing and will be deemed to have been given, if hand delivered, on the date of
receipt; if delivered by courier, on the day delivered by such courier as such
day is established by evidence obtained by the sender from the courier; if
delivered by facsimile transmission, on the day and at the time of receipt with
confirmed answerback; or if delivered by U.S. mail, on the third business day
after mailing. Such notices, demands and other communications to be valid, must
be addressed:

            (a) If to the Company, to:

                Berkshire Income Realty, Inc.
                One Beacon Street
                Boston, Massachusetts 02108
                Attn:  Scott D. Spelfogel, Esq.

                with a copy to:

                Paul, Weiss, Rifkind, Wharton & Garrison
                1285 Avenue of the Americas
                New York, NY 10019-6064
                Attn:  James M. Dubin, Esq.

            (b) if to the Advisor, to:

                Berkshire Real Estate Advisors, L.L.C.
                One Beacon Street
                Boston, Massachusetts 02108
                Attn: Scott D. Spelfogel, Esq.

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                with a copy to:

                Paul, Weiss, Rifkind, Wharton & Garrison
                1285 Avenue of the Americas
                New York, NY 10019-6064
                Attn: James M. Dubin, Esq.

or to such other address or to the attention of such other person as recipient
party has specified by prior written notice to the sending party (or in the case
of counsel, to such other readily ascertainable business address as such counsel
may hereafter maintain).

                  [Remainder of page intentionally left blank.]

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         IN WITNESS WHEREOF, each of the undersigned has executed this Agreement
as of the date first above written.

                                  BERKSHIRE INCOME REALTY, INC.

                                  By:
                                     ------------------------------------------
                                     Name:
                                     Title

                                  BERKSHIRE REAL ESTATE ADVISORS, L.L.C.

                                  By:
                                     ------------------------------------------
                                     Name:
                                     Title:<PAGE>

                                                                    Exhibit 10.4

Hannibal Grove                          1

                                                            RESIDENTIAL PROPERTY

                          PROPERTY MANAGEMENT AGREEMENT

This Agreement is made as of the 1st day of January, 2002 between the
undersigned, KRF 3 Acquisition Company, L.L.C., a Delaware limited liability
company, (the "Owner") and the undersigned BRI OP LIMITED PARTNERSHIP, (the
"Agent").

         1. APPOINTMENT AND ACCEPTANCE. The Owner appoints the Agent as
exclusive agent for the management of the property described in Section 2 of
this Agreement, and the Agent accepts the appointment, subject to the terms and
conditions set forth in this Agreement.

         2. DESCRIPTION OF THE PROJECT. The property to be managed by the Agent
under this Agreement (the "Project") is a housing development consisting of the
land, buildings, and other improvements located in Columbia, Maryland and known
as Hannibal Grove Apartments, containing 316 dwelling units.

         3. BASIC INFORMATION. The Agent will thoroughly familiarize itself with
the character, location, construction, layout, plan and operation of the
Project, and especially the electrical, plumbing, air-conditioning and
ventilating systems, the elevators and all other mechanical equipment.

         4. MARKETING. The Agent will carry out the marketing activities
designed to attract tenants as described below.

         5. RENTALS. The Agent will offer for rent and will rent the dwelling
units and commercial space, if any, in the Project. Incident thereto, the
following provisions will apply:

         a.       The Agent will show the Project to prospective tenants;

         b.       The Agent will take and process applications for rentals. If
                  an application is rejected, the applicant will be told the
                  reason for rejection, and will be given the rejected
                  application, with reason for rejection noted. A current list
                  of prospective tenants will be maintained;

         c.       The Agent will prepare all dwelling leases and, unless
                  otherwise directed by the Owner, will execute the same in its
                  name, identifying itself thereon as agent for the Owner.
                  Dwelling leases will be in a form approved by the Owner;

         d.       The Owner will furnish the Agent with rent schedules, showing
                  contract rents for dwelling units, and other charges for
                  facilities and services. The Agent will periodically review
                  such rent schedules and make recommendations to the Owner with
                  respect to changes thereto;

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Hannibal Grove                          2

         e.       The Agent will collect, deposit, and disburse security
                  deposits, if required, in accordance with the terms of each
                  tenant's lease;

         f.       The Agent will negotiate and prepare commercial leases and
                  concession agreements, if the Project shall now or hereafter
                  contain any commercial space, and will execute the same in its
                  name, identified thereon as agent for the Owner, subject to
                  the Owner's prior approval of all terms and conditions; and

         g.       The Agent will perform periodic market surveys with respect to
                  the market area in which the Project is located.

         6. COLLECTION OF RENTS AND OTHER RECEIPTS. The Agent will collect, when
due, all rents, charges and other amounts receivable for the Owner's account in
connection with the management and operation of the Project. Such receipts will
be deposited in an account, separate from all other accounts and funds, with a
bank whose deposits are insured by the Federal Deposit Insurance Corporation.
This account will be carried in the Owner's name and designated of record as KRF
3 Acquisition Company, L.L.C. d/b/a "Hannibal Grove Apartments" (the "Project
Rental Account"). Subject to compliance with Section 11 hereof, the Agent is,
however, hereby authorized to make deposits to and withdrawals from the Project
Rental Account as agent for the Owner.

         7. ENFORCEMENT OF LEASES. The Agent will secure full compliance by each
tenant with the terms of such tenant's lease. Voluntary compliance will be
emphasized, but the Agent may lawfully terminate any tenancy when, in the
Agent's judgment, sufficient cause (including but not limited to non-payment of
rent) for such termination occurs under the terms of the tenant's lease. For
this purpose, the Agent is authorized to consult with legal counsel, to be
designated by the Owner, to bring actions for eviction against such tenants;
provided, however, the Agent shall keep the Owner informed of such actions and
shall follow such instructions as the Owner may prescribe for the conduct of any
such action. Subject to the Owner's approval, attorney fees and other necessary
costs incurred in connection with such actions will be paid out of the Project
Rental Account as Project expenses.

         8. MAINTENANCE AND REPAIR. The Agent will maintain the Project in good
repair and in compliance with local codes, and in a condition at all times
acceptable to the Owner, including, but not limited to, cleaning, painting,
decorating, plumbing, carpentry, grounds care, and such other maintenance,
repair, remodeling and refurbishing work as may be necessary, subject to any
limitations imposed by the Owner in addition to those contained herein. The
Agent will also assist the Owner in identifying and implementing capital
improvements to the Project.

The Agent will perform such periodic physical inspections as shall be
appropriate in connection therewith. Incident thereto, the following additional
provisions will apply:

         a.       Special attention will be given to preventive maintenance,
                  and, to the extent feasible, the services of regular
                  maintenance employees will be used;

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Hannibal Grove                          3

         b.       Subject to the Owner's prior approval, the Agent will
                  negotiate, review and sign, on behalf of the Owner, contracts
                  with qualified independent contractors for the maintenance and
                  repair of heating and air-conditioning systems and elevators,
                  and for extraordinary repairs to such items and other assets
                  of the Project, which are beyond the capability of regular
                  maintenance employees;

         c.       The Agent will systematically and promptly receive and
                  investigate all service requests from tenants, take such
                  action thereon as may be justified, and will keep records of
                  the same. Emergency requests will be received and serviced on
                  a twenty-four (24) hour basis. Complaints of a serious nature
                  will be reported to the Owner after investigation;

         d.       The Agent is authorized to purchase all materials, equipment,
                  tools, appliances, supplies and services necessary to the
                  proper maintenance and repair of the Project; and

         e.       Notwithstanding any of the foregoing provisions, the prior
                  approval of the Owner will be required for any expenditure
                  which exceeds Five Thousand Dollars ($5,000) in any one
                  instance for labor, materials or otherwise, in connection with
                  the maintenance and repair of the Project, except for
                  recurring expenses within the limits of the operating budget
                  and emergency repairs involving manifest danger to persons or
                  property or required to avoid suspension of any necessary
                  service to the Project. In the latter event, the Agent will
                  inform the Owner of the facts as promptly as possible.

         9. UTILITIES AND SERVICES. In accordance with the operating budget, the
Agent will make arrangements for water, electricity, gas, sewage and trash
disposal, vermin extermination, decorating, laundry facilities, and telephone
service. Subject to the Owner's prior approval, the Agent will make such
contracts as may be necessary to secure such utilities and services.

         10. NONCUSTOMARY SERVICES. Notwithstanding any contrary provision in
this Agreement, the Owner shall cause any services, in connection with the
rental of the Project, that are not customarily furnished to tenants of
comparable buildings in the region (including, but not limited to, the provision
of maid service and the furnishing of parking facilities, other than on a
complimentary, unreserved basis), to be performed by an entity qualifying as an
independent contractor.

         11. EMPLOYEES. Except as otherwise agreed, all on-site personnel will
be employees of the Owner, for purposes of their compensation, and not the
Agent, but will be hired, paid,

<PAGE>

Hannibal Grove                          4

supervised, and discharged through the Agent, in the Agent's sole discretion,
subject to the following conditions:

         a.       The resident manager will have duties of the type usually
                  associated with this position;

         b.       Compensation (including fringe benefits) of bookkeeping,
                  clerical, and other managerial personnel will be within the
                  Agent's sole discretion, provided minimum wage standards are
                  met;

         c.       The Owner will reimburse the Agent for the compensation
                  (including fringe benefits) payable to the on-site management
                  and maintenance employees, and for all local, state and
                  federal taxes and assessments (including, but not limited to,
                  Social Security taxes, unemployment insurance, and Workman's
                  Compensation insurance) incident to the employment of such
                  personnel. Such reimbursements will be paid out of the Project
                  Rental Account and will be treated as Project expenses; and

         d.       Compensation (including fringe benefits) payable to the
                  on-site staff, and all bookkeeping, clerical and other
                  managerial personnel, plus all local, state and federal taxes
                  and assessments incident to the employment of such personnel
                  will be borne solely by the Project, and will not be paid out
                  of the Agent's management fee. The rental value of any
                  dwelling unit furnished rent-free to on-site personnel will be
                  treated as a cost of the Project.

         12. DISBURSEMENTS FROM PROJECT RENTAL ACCOUNT.

         a.       From the funds collected and deposited by the Agent in the
                  Project Rental Account, either the Owner or the Agent, as
                  shall be determined from time to time by the Owner, will make
                  the following disbursements, when payable:

                  (1)      Reimbursement to the Agent for compensation payable
                           to the employees specified in Section 11 above, and
                           for the taxes and assessments payable to local, state
                           and federal governmental agencies;

                  (2)      All sums otherwise due and payable by the Owner as
                           expenses of the Project, including compensation
                           payable to the Agent for its services hereunder and
                           expenses of the Project incurred by the Agent under
                           the terms of this Agreement;

                  (3)      Any payment required to be made monthly by the Owner
                           to any mortgagee of the Project, including the
                           amounts due under the mortgage for principal
                           amortization, interest, ground rents, taxes and
                           assessments, and fire and other hazard insurance
                           premiums;

<PAGE>

Hannibal Grove                          5

         b.       Except for the disbursements mentioned above, funds will be
                  disbursed or transferred from the Project Rental Account only
                  as the Owner may from time to time direct; and

         c.       In the event the balance in the Project Rental Account is at
                  any time insufficient to pay disbursements due and payable
                  under Section 12(a) above, the Agent will inform the Owner of
                  that fact and Owner shall immediately deposit sufficient
                  funds. In no event will the Agent be required to use its own
                  funds to pay such disbursements.

         13. RECORDS AND REPORTS. The Agent will have the following
responsibilities with respect to records and reports:

         a.       The Agent will establish and maintain a comprehensive system
                  of records, books and accounts in a manner satisfactory to the
                  Owner;

         b.       With respect to each fiscal year ending during the term of
                  this Agreement, the Agent will furnish an annual financial
                  report. The Agent will also prepare and review budgets and
                  cash flow projections for the Project in such manner and at
                  such times as may be agreed with the Owner;

         c.       The Agent will furnish such information (including occupancy
                  reports) as may be reasonably requested by the Owner from time
                  to time with respect to the financial, physical, or operating
                  condition of the Project; and

         d.       By the twenty-fifth (25th) day of each month, the Agent will
                  furnish the Owner with a statement of receipts and
                  disbursements during the previous month, a schedule of
                  accounts receivable and payable, as of the end of the previous
                  month and reconciled bank statements for the Project Rental
                  Account, as of the end of the previous month.

         14. ON-SITE MANAGEMENT FACILITIES. Subject to the further agreement of
the Owner and the Agent as to more specific terms, the Agent will maintain a
management office within the Project, for the convenience of the Owner, for the
sole purpose of the Agent's performing its duties under this Agreement, and the
Owner will make no rental charge for such office.

         15. INSURANCE. The Owner will inform the Agent of insurance to be
carried with respect to the Project and its operations, and the Agent, when
authorized by the Owner, will cause such insurance to be placed and kept in
effect at all times. The Agent will pay premiums out of the Project Rental
Account, as an expense of the Project. All insurance will

<PAGE>

Hannibal Grove                          6

be placed with such companies, on such conditions, in such amounts, and with
such beneficial interests appearing thereon as shall be acceptable to the Owner
and shall be otherwise in conformity with any mortgage relating to the Project,
provided that the same will include public liability coverage, with the Agent
designated as one of the insured, in amounts acceptable to the Owner, Agent and
any mortgagee of the Project. The Agent will investigate and furnish the Owner
with full reports as to all accidents, claims, and potential claims for damage
relating to the Project and will cooperate with the Owner's insurers in
connection therewith.

         16. AGENT'S COMPENSATION. The Agent will be compensated for its service
under this Agreement by monthly fees to be paid out of the Project Rental
Account to be treated as Project expenses. Such fees will be payable monthly.
Each such monthly fee will be in an amount equal to five percent (5%) of the
gross receipts (including rentals and other operating income of the Project)
actually received during the preceding month.

         17. INDEMNIFICATION BY THE OWNER. The Owner shall indemnify and hold
harmless the Agent from all liability, claims, damages or loss arising out of
the performance of its duties hereunder, and related expenses, including
reasonable attorneys' fees, to the extent such liability, claims, damages or
losses and related expenses are not fully reimbursed by insurance; provided,
however, that the Agent shall be entitled to indemnification, under this Section
17, only if the Agent, in connection with any liability, damages, claim or loss
for which it seeks indemnity, acted in a manner which would not constitute gross
negligence or willful misfeasance.

         18. INDEMNIFICATION BY THE AGENT. The Agent shall indemnify and hold
harmless the Owner from contract or other liability, claims, damages, losses and
related expenses, including attorneys' fees, to the extent that such liability,
claims, damages, losses and related expenses are not fully reimbursed by
insurance and are incurred by the Owner by reason of the Agent's deliberate
dishonesty or gross negligence.

         19. RIGHT TO ASSIGN. The Agent may assign some or all of its rights or
obligations under this Agreement, provided that the Agent remains principally
responsible hereunder, and the Owner is given notice of such assignment. The
Owner may assign its rights and obligations under this Agreement to any
successor in title to the Property, and upon any such assignment, the Owner
shall be relived of all liability accruing after the effective date of such
assignment.

         20. TERM OF AGREEMENT. This agreement shall be in effect for a period
commencing on the date hereof. This agreement may be terminated, without
penalty, by written notice of either party to the other as of the end of any
calendar month, provided at least thirty (30) days advance notice thereof is
given.

<PAGE>

Hannibal Grove                          7

         IN WITNESS WHEREOF, the parties hereto (by their duly authorized
representatives) have executed this Agreement as of the date first above
written.

OWNER:                                      AGENT:

KRF 3 ACQUISITION COMPANY, L.L.C.           BRI OP LIMITED PARTNERSHIP
                                            By:  Berkshire Apartments, L.L.C.,
                                                 its general partner
By: /s/ David C. Quade
   -----------------------------
Its: Executive Vice President
                                            By: /s/ Kenneth J. Richard
                                               --------------------------------
                                            Its: Senior Vice President

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