Document:

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                                                                    EXHIBIT 10.3

                          PROPERTY MANAGEMENT AGREEMENT

         This Agreement (the "Agreement") is made as of June 20, 2001 by and
between CRIT-VA III, Inc., a Virginia corporation (the "Owner"), and Cornerstone
Realty Income Trust, Inc., a Virginia corporation (the "Manager").

                                    RECITALS:

         Owner is the owner of the apartment community listed on Schedule A
                                                                 ----------
hereto (the "Property"). Owner has selected Manager to manage the Property on
the terms and conditions set forth in this Agreement.

         NOW THEREFORE, for good and valuable consideration, receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

         1.  Designation of Property Manager. Owner hereby engages Manager as
             -------------------------------
the sole and exclusive manager to rent, manage and operate the Property, upon
the conditions and for the term and compensation herein set forth. All or a
portion of the services being performed by Manager may be contracted or
subcontracted to another property management company, provided that such company
agrees in writing to be bound by the terms of this Agreement.

         2.  Term of Agreement. This Agreement shall be valid for an initial
             -----------------
term of two (2) years. In the event Owner sells its interest in the Property,
this Agreement will terminate the date of such sale. This Agreement shall renew
automatically for successive terms of two (2) years, on the same terms and
conditions as set forth in this Agreement, unless a party elects not to renew
this Agreement by delivering written notice to the other party at least sixty
(60) calendar days before the end of any two-year term.

         3.  Acceptance of Engagement. Manager hereby accepts its engagement as
             ------------------------
the manager of the Property and agrees to perform all services necessary for the
care, protection, maintenance and operation of the Property. Without limiting
the scope of the foregoing:

             (a)  Manager shall collect all rents and other income from the
Property, provided that nothing herein contained shall constitute a guarantee by
Manager of the payment of rent by tenants.

             (b)  Manager shall purchase, at the expense of Owner, all
equipment, tools, appliances, materials, supplies and uniforms necessary for the
maintenance or operation of the Property.

             (c)  Manager shall contract on behalf of Owner for water, gas,
electricity and other services necessary for the operation and maintenance of
the Property.

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          (d) Manager shall advertise for the rental of units at the Property,
the cost of which shall be paid by Owner.

          (e) Manager shall use all reasonable efforts to keep the Property
rented by procuring tenants for the Property and negotiating and executing on
behalf of Owner all leases for units at the Property.

          (f) Manager shall hire, evaluate, supervise, discharge and pay all
employees or contractors necessary for the management and operation of the
Property. Owner agrees that all wages and compensation (and federal and state
unemployment insurance and other required charges) with respect to such
employees and contractors shall be paid from Owner's funds.

          (g) Manager shall prepare and file all returns and other documents
(other than promissory notes, mortgages, deeds of trust or other documents or
instruments which would encumber the Property) required under the Federal
Insurance Contributions Act and the Federal Unemployment Tax Act, or any similar
federal or state legislation. Manager also shall file returns and reports, and
pay from Owner's funds, all sums as may be required from time to time by the
state or locality in which the Property is located.

          (h) Manager shall maintain accurate and complete books of account with
entries for all receipts and expenditures, and such books of account shall be
the property of Owner and shall at all times be open to the inspection of Owner,
or any of its employees or duly authorized agents.

          (i) Manager shall deliver to Owner of all lenders' annual property
inspection letters regarding repairs necessary to avoid mortgage loan defaults.
Manager shall deliver a detailed monthly statement of all receipts and
disbursements on or before the 20th day of each month for the preceding month.
Such statement shall show the status of collections, shall be supported by
cancelled checks, vouchers, duplicate invoices and similar documentation
covering all items of income and expense, and shall be kept in Manager's office
and shall be available for inspection by Owner's representatives at all times.
Manager also shall deliver a monthly operating statement showing the income and
expense for the month, for the year-to-date and for the same month of the
preceding year. The cost of performing the accounting functions outlined in
paragraph (h) and this paragraph (i) shall be paid by Owner pursuant to the
terms of this Agreement.

          (j) Manager shall deliver to Owner annual reports containing a
composite financial report of the monthly statements provided in accordance with
paragraph (i), plus a statement by Manager as to the operations of the Property
during the previous year and recommendations, if any, as to necessary policy
changes or improvements for the forthcoming year, accompanied by an estimated
budget for such items.

          (k) Manager shall deliver to Owner from time to time, and at least
semi-annually, a tentative budget of expenses.

          (l) Manager shall deliver to Owner from time to time, and at least
annually, the following schedules with respect to the Property: (1) forecast of
rental and occupancy changes; (2)

                                       -2-

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review of lease negotiations; (3) annual analysis of leases; and (4) schedule of
capital improvements and method of financing such improvements.

         (m) Manager shall deliver to Owner, on a regular basis, all forms
necessary to operate and lease the Property and manage the personnel, including
but not limited to form leases, contracts and management policies.

         (n) During the initial term of this Agreement, Manager shall supervise
the transition from the former owners of the Property and shall, to the extent
necessary, implement new management systems with respect to the operation of the
Property.

     4.  Deposits of Rent and Other Income. All sums received from rents, tenant
         ---------------------------------
security deposits or other deposits on units at the Property, deposits on keys
and other income from the Property, shall be deposited as collected by Manager
to the credit of Owner in such bank or banks as may be designated by Owner from
time to time. Such funds shall be disbursed only in accordance with the terms of
each particular lease and any applicable federal, state or local laws,
regulations or ordinances.

     5.  Insurance. Owner shall place all insurance policies with respect to the
         ---------
Property and its operation. Manager shall be included as an insured in the
policies covering general liability, public liability and workers' compensation
insurance. In the event Manager is authorized by Owner to place insurance
policies, the companies, the general agents, the amounts of coverage and the
risks insured shall be subject to the approval of Owner.

     6.  Indemnification. Owner hereby agrees to indemnify Manager against, and
         ---------------
to hold Manager harmless from, any loss, cost or expense (including reasonable
investigative expenses and legal fees), judgment, award, settlement, fine,
penalty and liability of any kind incurred by or asserted against Manager by
reason of, or in connection with, the engagement of Manager hereunder, the
performance by Manager of the services described herein or the occurrence or
existence of any event or circumstance which results or is alleged to have
resulted in any death or injury to any person, any destruction of, or damage to,
the Property, or any suit, action or proceeding (whether threatened, initiated
or completed) arising from any of the foregoing. Notwithstanding the preceding,
however, no such indemnification of Manager shall be made, and Manager shall
indemnify Owner against, and shall hold Owner harmless from, any loss that a
court of competent jurisdiction shall determine, by final adjudication, to have
resulted from willful misconduct, gross negligence or fraud by or on the part of
Manager.

     7.  Compensation of Manager for Managing the Property. Owner shall pay to
         -------------------------------------------------
Manager a "Property Management Fee" for management of the Property pursuant to
this Agreement in an amount equal to five percent (5%) of the monthly gross
revenues from the Property. The Property Management Fee shall be paid to Manager
on or before the 10th day of each month and shall be based upon the income from
the Property received by Owner (for such month) by such date. If additional
income from the Property is received by Owner after such date, the sum due to
Manager with respect to such additional income shall be paid to Manager when
Manager is paid its fees for the next succeeding month.

                                       -3-

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     8.  Reimbursement of Expenses. Owner shall reimburse Manager for Manager's
         -------------------------
expenses, including salaries and related overhead expenses, associated with
bookkeeping, accounting and financial reporting services pertaining to the
Property.

     9.  Reserves for Capital Items. Owner acknowledges that the budget of
         --------------------------
expenses prepared by Manager, pursuant to paragraph 3(k), shall contain a
category labeled "Reserve for Capital Items." Owner agrees to place rents and
other income in a bank account, or to permit Manager to transfer Owner's funds
to such account, in sufficient amounts to meet the needs reflected in such
budget. Such funds shall be placed in the account on a monthly basis as
reflected in the budget.

     10. Cash Flow. Owner acknowledges that the budget of expenses prepared by
         ---------
Manager, pursuant to paragraph 3(k), shall contain a category labeled "Cash
Flow." Owner agrees, in the event that the budgeted cash flow for the Property
is negative in any month covered by the budget, to place sufficient funds in a
bank account, or to permit Manager to transfer Owner's funds to such account, to
correct the budgeted operating deficit. Such funds shall be placed in such
account at least forty-five (45) calendar days before the budgeted deficit is to
occur.

     11. Power of Attorney. Owner hereby makes, constitutes and appoints Manager
         -----------------
as Owner's true and lawful attorney-in-fact, for Owner and in its name, place
and stead and for its use and benefit, to sign, acknowledge and file all
documents and agreements (other than promissory notes, mortgages, deeds of trust
or other documents or instruments which would encumber the Property) necessary
to perform or effect the duties and obligations of Manager under the terms of
this Agreement. The foregoing power of attorney is a special power of attorney
coupled with an interest, and may only be terminated by canceling this Agreement
as provided herein.

     12. Relationship of Parties. The parties agree and acknowledge that Manager
         -----------------------
is, and shall operate as, an independent contractor in performing duties and
services under this Agreement, and shall not be deemed an employee or agent of
Owner.

     13. Entire Agreement. This Agreement represents the entire understanding
         ----------------
between the parties hereto with regard to the transactions described herein and
may only be amended by a written instrument signed by the party against whom
enforcement is sought.

     14. Governing Law. This Agreement shall be construed in accordance with,
         -------------
and be governed by, the laws of the Commonwealth of Virginia, without regard to
any rules or principles thereof regarding choice or conflicts of laws.

                          (next page is signature page)

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WITNESS the following signatures:

OWNER:                              CRIT-VA III, Inc.
-----                               a Virginia corporation

                                    By:   /s/ Stanley J. Olander, Jr.
                                         ---------------------------------
                                         Stanley J. Olander, Jr.,
                                         Vice President

MANAGER:                            Cornerstone Realty Income Trust, Inc.
-------                             a Virginia corporation

                                    By:   /s/ Stanley J. Olander, Jr.
                                         ---------------------------------
                                         Stanley J. Olander, Jr.,
                                         Executive Vice President

                                       -5-

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                                   Schedule A

                                    Property

The Property consists of that real property, together with all improvements
thereon, which is located at the following address:

         Tradewinds Apartments
         255 Floyd Thompson Blvd.
         Hampton, Virginia  23666

                                       -6-<PAGE>

                                                                    EXHIBIT 10.4

                             CRIT SPECIAL III, INC.

                            ARTICLES OF INCORPORATION

                                    ARTICLE I
                                      Name

         1. Name. The name of the Corporation is CRIT Special III, Inc.
            ----

                                   ARTICLE II
                                     Purpose

         2. Purpose. Notwithstanding any provision hereof to the contrary, the
            -------
following shall govern: The business, operations and purposes of the Corporation
are limited solely to the following:

           (a) To serve as the sole member of, and to have the entire
membership interest in, CRIT-NC IV, LLC, a Delaware limited liability company
(the "LLC"), in accordance with the provisions hereof and the LLC's Operating
Agreement, which by its terms limits the business of the LLC to the ownership,
operation and management of those certain parcels of real property listed in
Article VIII hereof, together with all improvements located thereon
(collectively, the "Properties"), and limits the indebtedness of the LLC to a
first lien mortgage on the Properties arising from financing by First Union
National Bank (the "Mortgage"), any other indebtedness permitted under the
Mortgage, and normal trade accounts payable in the ordinary course of the LLC's
business; and

           (b) To exercise all powers that are enumerated in the Virginia Stock
Corporation Act and that are necessary or convenient for the business,
operations or purposes of the Corporation as set forth herein.

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                                   ARTICLE III
                                  Prohibitions

         3. Certain Prohibited Activities. Notwithstanding any provision hereof
            -----------------------------
to the contrary, the following shall govern:

            (a) For so long as any obligation secured by the Mortgage remains
outstanding and not paid in full, the Corporation's indebtedness shall consist
only of indebtedness it is permitted to have under the Mortgage and normal trade
accounts payable in the ordinary course of business, and the Corporation shall
not cause or permit the LLC to have any indebtedness other than the following:
(i) the Mortgage, (ii) any other indebtedness the LLC is permitted to have under
the Mortgage, and (iii) normal trade accounts payable in the ordinary course of
the LLC's business.

            (b) The Corporation shall not consolidate or merge with or into any
other entity, or convey or transfer its properties and assets substantially as
an entirety to any entity, unless:

                (i) the entity that is formed upon such consolidation, that
survives such merger (if other than the Corporation), or that acquires by
conveyance or transfer the properties and assets of the Corporation
substantially as an entirety, shall: (A) be organized and existing under the
laws of the United States of America or any State or the District of Columbia,
(B) include in its organizational documents the same limitations set forth in
this Article III and in Article VII (Separateness Covenants), and (C) expressly
assume the due and timely performance of the Corporation's obligations; and

                (ii) immediately after giving effect to such transaction, no
default or event of default will have occurred under any agreement to which the
Corporation is a party.

            (c) The Corporation shall not cause or permit the LLC to consolidate
or merge with or into any other entity, or to convey or transfer its properties
and assets substantially as an entirety to any entity, unless:

                                       -2-

<PAGE>

                      (i) the entity that is formed upon such consolidation,
that survives such merger (if other than the LLC), or that acquires by
conveyance or transfer the properties and assets of the LLC substantially as an
entirety, shall: (A) be organized and existing under the laws of the United
States of America or any State or the District of Columbia, (B) include in its
organizational documents the same limitations set forth in this Article III and
in Article VII (Separateness Covenants), and (C) expressly assume the due and
punctual performance of the LLC's obligations; and

                      (ii) immediately after giving effect to such transaction,
no default or event of default will have occurred under any agreement to which
the LLC is a party.

                  (d) For so long as any obligation secured by the Mortgage
remains outstanding and not paid in full, the Corporation shall not, without the
unanimous consent of the Board of Directors (i) voluntarily commence a case with
respect to itself, as debtor, under the Federal Bankruptcy Code or any similar
federal or state statute; or (ii) cause or permit the LLC to voluntarily
commence a case with respect to the LLC, as debtor, under the Federal Bankruptcy
Code or any similar federal or state statute. For so long as any obligation
secured by the Mortgage remains outstanding and not paid in full, no material
amendment to these Articles of Incorporation or to the Corporation's Bylaws may
be made without the prior approval of the mortgagee holding the Mortgage, and
the Corporation shall not cause or permit any material amendment to be made to
the LLC's Certificate of Formation or Operating Agreement without the prior
approval of the mortgagee holding the Mortgage.

                                   ARTICLE IV
                                Authorized Shares

         4.1. Number and Designation. The number of shares the Corporation is
              ----------------------
authorized to issue is set forth below, together with the designation thereof
and the par value per share:

                  Number of Shares  Class Designation  Par Value Per Share
                  ----------------  -----------------  -------------------

                  5,000             Common             no par value

                                       -3-

<PAGE>

         4.2 Preemptive Rights. No holder of outstanding shares shall have any
             -----------------
preemptive right with respect to: (a) any shares of any class of the
Corporation, whether now or hereafter authorized; (b) any warrants, rights or
options to purchase any such shares; or (c) any obligations convertible into any
such shares or into warrants, rights or options to purchase any such shares.

         4.3 Voting and Distributions. The holders of the Common Shares shall
             ------------------------
have unlimited voting rights and shall be entitled to receive the net assets of
the Corporation upon the liquidation of the Corporation, its dissolution or the
winding up of its affairs.

                                    ARTICLE V
                       Initial Registered Office and Agent

         5.1 Initial Registered Office. The initial registered office of the
             -------------------------
Corporation is located in the City of Richmond, Virginia, at the following
address:

                                McGuireWoods LLP
                                One James Center
                                901 East Cary Street
                                Richmond, Virginia 23219

         5.2 Initial Registered Agent. The initial registered agent of the
             ------------------------
Corporation is Martin B. Richards, Esquire, whose business office is identical
with the initial registered office and who is a resident of Virginia and a
member of the Virginia State Bar.

                                   ARTICLE VI
                     Limit on Liability and Indemnification

         6.1 Limit on Liability. To the maximum extent that the Virginia Stock
             ------------------
Corporation Act, as it exists on the date hereof or may hereafter be amended,
permits elimination of, or limitations upon, the liability of a director or
officer of a corporation, the directors and officers of the Corporation shall
have, as applicable, no liability or limited liability to the Corporation or its
shareholders.

                                       -4-

<PAGE>

         6.2      Indemnification, Advancement of Expenses and Related Matters.
                  ------------------------------------------------------------

                  (a) The Corporation, in accordance with the mandatory
indemnification provisions of the Virginia Stock Corporation Act, shall
indemnify a director who entirely prevails in the defense of any proceeding to
which he was a party because he is or was a director of the Corporation against
reasonable expenses incurred by him in connection with the proceeding. An
officer of the Corporation shall be entitled to such mandatory indemnification
to the same extent as a director.

                  (b) In addition to any mandatory indemnification, the
Corporation shall provide the maximum indemnification permitted by law to any
director, officer, employee or agent of the Corporation in connection with any
proceeding (including any proceeding by or in the right of the Corporation) that
is brought against such person and that is based on the actions taken or not
taken by such person on behalf of the Corporation, or on the status of such
person as a director, officer, employee or agent of the Corporation, except to
the extent that such person has engaged in (i) willful misconduct, or (ii) a
knowing violation of the criminal law.

                  (c) The provisions of this Article shall not be deemed to
prevent, deny or limit (i) the indemnification or insurance permitted under
applicable law to the directors, officers, employees or agents of the
Corporation, or (ii) the authority of the Corporation under applicable law to
advance, reimburse or pay expenses for the benefit of any director, officer,
employee or agent.

                  (d) The determination of whether the Corporation is required
or permitted, in a particular case, to indemnify a director, officer, employee
or agent (or to provide such person with related advances, reimbursements or
other payments of expenses) shall be conducted in accordance with Section
13.1-701 of the Virginia Stock Corporation Act, or any successor provision.

         6.3      Mandatory Subordination. Notwithstanding any provision hereof
                  -----------------------
to the contrary, the following shall govern: Any indemnification shall be fully
subordinated to any obligations of

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<PAGE>

the Corporation in regard to the Properties and shall not constitute a claim
against the Corporation in the event that cash flow is insufficient to pay such
obligations.

         6.4 Amendments. No amendment, modification or repeal of this Article
             ----------
shall diminish the rights provided hereunder to any person arising from conduct
or events occurring before the adoption of such amendment, modification or
repeal.

                                   ARTICLE VII
                             Separateness Covenants

         7.1 Separateness Covenants. Notwithstanding any provision hereof to the
             ----------------------
contrary, the following shall govern: For so long as any obligation secured by
the Mortgage remains outstanding and not paid in full, in order to preserve and
ensure the Corporation's separate and distinct corporate identity, in addition
to the other provisions set forth in these Articles of Incorporation, the
Corporation shall conduct its affairs in accordance with the following
provisions:

                  (a) It shall establish and maintain an office through which
its business shall be conducted separate and apart from those of its parent and
any affiliate and it shall allocate fairly and reasonably any overhead for
shared office space.

                  (b) It shall maintain separate corporate records and books of
account from those of its parent and any affiliate.

                  (c) Its Board of Directors shall hold appropriate meetings, or
act by unanimous consent, to authorize all appropriate corporate actions and
shall observe all corporate formalities in authorizing such actions.

                  (d) It shall not commingle assets with those of its parent or
any affiliate.

                  (e) It shall conduct its own business in its own name.

                                       -6-

<PAGE>

                  (f) It shall maintain financial statements separate from its
parent and any affiliate.

                  (g) It shall pay any liabilities out of its own funds,
including salaries of any employees, rather than funds of its parent or any
affiliate.

                  (h) It shall maintain an arm's length relationship with its
parent and any affiliate.

                  (i) It shall not guarantee or become obligated for the debts
of any other person or entity (including, without limitation, its parent or any
affiliate) and shall not hold out its credit as being available to satisfy the
obligations of others.

                  (j) It shall use stationery, invoices and checks separate from
its parent and any affiliate.

                  (k) It shall not pledge its assets for the benefit of any
other person or entity (including, without limitation, its parent or any
affiliate).

                  (l) It shall hold itself out as an entity separate from its
parent and any affiliate.

                  (m) It shall not make any loans or advances to any third party
(including, without limitation, any affiliate).

                  (n) It shall comply with its obligations under the agreements
and instruments evidencing the Mortgage.

         7.2      Definitions.  For purpose of this Article VII, the following
                  -----------
terms shall have the indicated meanings:

                                       -7-

<PAGE>

                  (a) "affiliate" means, with respect to a specified person or
entity:

                      (i)   any person or entity directly or indirectly owning,
controlling or holding, with power to vote, ten percent (10%) or more of the
outstanding voting securities or interests of the specified entity;

                      (ii)  any person or entity ten percent (10%) or more of
whose outstanding voting securities are directly or indirectly owned, controlled
or held, with power to vote, by the specified person or entity;

                      (iii) any person or entity directly or indirectly
controlling, controlled by or under common control with the specified person or
entity;

                      (iv)  any officer, director or partner of the specified
person or entity;

                      (v)   if the specified person or entity is an officer,
director or partner, any company for which the specified person or entity acts
in any such capacity; and

                      (vi)  any close relative or spouse of the specified
person.

                  (b) "control" means the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
person or entity, whether through ownership of voting securities, by contract or
otherwise.

                  (c) "parent" means, with respect to a corporation, any other
corporation owning or controlling, directly or indirectly, fifty percent (50%)
or more of the voting shares of such corporation.

                  (d) "person or entity" includes any individual, corporation,
partnership, limited liability company, joint venture, association, joint stock
company, trust (including any

                                       -8-

<PAGE>

beneficiary thereof), unincorporated organization, government or any agency or
political subdivision thereof.

         7.3 Actions with Respect to LLC. For so long as any obligation secured
             ---------------------------
by the Mortgage remains outstanding and not paid in full, the Corporation shall
cause the LLC's Operating Agreement to include separateness covenants with
regard to the LLC that are the same in all material respects as the separateness
covenants contained herein with regard to the Corporation.

                                  ARTICLE VIII
                               List of Properties

         8.1 The Properties consist of those real properties, together with all
improvements thereon, that are located at the following addresses (and that are
more fully described in agreements and instruments evidencing the Mortgage):

         Deerfield Apartments
         910 Constitution Drive
         Durham, North Carolina 27705

         Meadow Creek Apartments
         12821 Meadow Creek Lane
         Pineville, North Carolina 28134

         Pinnacle Ridge Apartments
         600 Merrimon Drive
         Asheville, North Carolina 28804

Dated:   June 8, 2001

                                                     By: /s/ William D. James
                                                         -----------------------
                                                         William D. James,
                                                         Incorporator

                                       -9-

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