SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                    FORM 8-K
                                CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report: March 31, 1998

                     CORNERSTONE REALTY INCOME TRUST, INC.
             (Exact name of registrant as specified in its charter)




    VIRGINIA                         1-12875                     54-1589139
 (State of                          (Commission                (IRS Employer
 Incorporation)                      File Number)            Identification No.)


306 EAST MAIN STREET
RICHMOND, VIRGINIA                                                       23219
(Address of principal                                                 (Zip Code)
 executive office)

               Registrant's telephone number, including area code:
                                 (804) 643-1761

<PAGE>

                      CORNERSTONE REALTY INCOME TRUST, INC.
                                    FORM 8-K

                                      Index


Item 2       Acquisition or Disposition of Assets

Item 7       Financial Statements, Pro Forma Financial Information and Exhibits

     a.      Independent Auditors' Report 
             (Hampton Pointe Apartments)

             Historical  Statement  of  Income  and  Direct  Operating  Expenses
             (Hampton  Pointe  Apartments) 

             Note  to  Historical  Statement  of  Income  and  Direct  Operating
             Expenses (Hampton Pointe Apartments)

     b.      Independent  Auditors' Report  (Pinnacle Ridge (formerly  Edgewood
             Knoll) Apartments)

             Historical  Statement  of  Income  and  Direct  Operating  Expenses
             (Pinnacle Ridge (formerly Edgewood Knoll) Apartments)

             Note  to  Historical  Statement  of  Income  and  Direct  Operating
             Expenses (Pinnacle Ridge (formerly Edgewood Knoll) Apartments)

     c.      Pro Forma  Statement of Operations for  the Year Ended December 31,
             1997 (unaudited)

             Pro Forma  Statement of Operations  for the Quarter Ended March 31,
             1998 (unaudited) 





                                      -2-
<PAGE>

    d.      Exhibits

     10.1    Purchase Contract for Hampton Pointe Apartments

     10.2    Purchase  Contract for Pinnacle  Ridge  (formerly  Edgewood Knoll)
             Apartments

     23.1    Consent of Independent Auditors

     23.2    Consent of Independent Auditors













                                      -3-



<PAGE>
Item 2. Acquisition or Disposition of Assets

                           HAMPTON POINTE APARTMENTS
                          Charleston, South Carolina

     On March 31, 1998, Cornerstone Realty Income Trust, Inc. (together with its
subsidiary,   CRIT-NC,  LLC,  the  "Company")   purchased   the  Hampton  Pointe
Apartments,  a  304-unit  apartment  complex  having  an  address  of  1916  Sam
Rittenberg Boulevard, Charleston, South Carolina (the "Property").

     The seller, Hampton Pointe Properties, was affiliated with the Company. The
purchase  price was  $12,225,000.  At  closing,  the entire  purchase  price was
borrowed under the Company's unsecured line of credit. Title to the Property was
conveyed to the Company by limited warranty deed.

     LOCATION.  The  following  information  is based in part  upon  information
provided by the Charleston Chamber of Commerce.

     The  Charleston  Metropolitan  Statistical  Area  ("MSA") is  comprised  of
Charleston, Berkeley and Dorchester Counties.  The approximate population of the
MSA  is  570,000.   Charleston  County  has   approximately   330,000 residents,
approximately 85,000 of which are in the city limits.

     The  principal  economic  factors in the region are  distribution  and port
facilities,  tourism,  medical services and the military. 

     The Port of Charleston is the leading container cargo port in the southeast
and on the entire east coast ranks second only to the combined ports of New York
and New Jersey.  BMW and NUCOR are two recent examples of companies that rely on
the Port of Charleston.

     Tourism is a major  factor in the area,  with  approximately  five  million
visitors  annually.   Tourist  attractions  include  the  historic  district  of
Charleston,  beaches,  golf courses,  and restaurants.  It is estimated that the
total  economic  impact of the tourist  industry in the region is  approximately
$1.5  billion   annually,   accounting   for   approximately   34,000  jobs  and
approximately 14% of the total work force.

     Charleston is the home to the Medical  University of South Carolina,  which
accounts for approximately  7,500 jobs. A total of approximately  16,000 persons
are employed in the region's 10 hospitals and medical facilities.






                                      -4-

<PAGE>

     The United States Navy employs  approximately 7,800 people in the region in
installations such as Charleston Naval Weapons Station, Naval Hospital and Naval
Command,  Control and Ocean  Surveillance  Center in Service  Engineering,  East
Coast  Division.  In addition,  the Charleston Air Force Base employs over 5,400
people. From 1989 to 1996, naval employment in the region dropped from 21% to 3%
of total jobs. However,  the region experienced a concurrent increase in jobs in
other sectors.

     The overall unemployment rate in the region is currently approximately 5%.

     The  Property  is  listed in the West  Ashley  region  of  Charleston.  The
immediate  area consists of other  multi-family  housing,  commercial and retail
development  and  single-family  housing.  The  Property  is located  near major
shopping centers,  schools and churches and is accessible from Interstate 26 and
Mark Clark Expressway.  Charleston's  largest mall, the Citadel Mall, is located
less  than one mile from the  Property  and has four  major  anchor  stores  and
approximately one million square feet of space. The Property is an approximately
15-minute drive from the College of Charleston, downtown Charleston, the airport
and the beach.

     DESCRIPTION  OF THE  PROPERTY.  The Property  consists of 304  garden-style
apartments located in 19 two-story  buildings on approximately 20 acres of land.
The Property was constructed in 1986.

     The Company  believes that the Property has generally been well  maintained
and  is  generally  in  good  condition.   However,  the  Company  has  budgeted
approximately   $912,000  for  repairs  and  improvements   including  clubhouse
renovation, re-siding of all building exteriors and window replacement.

     The Property offers four different unit types. The unit mix and rents being
charged new tenants as of June 1998 are as follows:

                                                APPROXIMATE
                                                 INTERIOR        MONTHLY
 QUANTITY                 TYPE                SQUARE FOOTAGE     RENTAL
----------   -----------------------------   ----------------   --------

64           One bedroom, one bathroom               750          $510
64           One bedroom, one bathroom               900           560












                                      -5-
<PAGE>
                                                APPROXIMATE
                                                 INTERIOR        MONTHLY
 QUANTITY                 TYPE                SQUARE FOOTAGE     RENTAL
----------   -----------------------------   ----------------   --------

88           Two bedrooms, two bathrooms           1,175           650
88           Two bedrooms, two bathrooms           1,200           675


     The  apartments  provide a combined total of  approximately  314,000 square
feet of net rentable area.

     Leases at the  Property are for terms of one year or less.  Average  rental
rates for the past five years have generally remained constant or increased.  As
an example, a two-bedroom, two-bathroom apartment (1,175 square feet) rented for
$585 in 1993,  $585 in 1994,  $585 in 1995,  $600 in 1996, and $650 in 1997. The
average  effective annual rental per square foot at the Property for 1993, 1994,
1995, 1996 and 1997 was $6.39, $6.39, $6.39, $6.55, and $7.10, respectively.

     The buildings are wood frame  construction on concrete slabs. The buildings
have pitched roofs with asphalt shingles. Exteriors are cedar lap siding.


     The Property has two outdoor swimming pools, a Jacuzzi,  two lighted tennis
courts,  a sand  volleyball  court, a fitness  center,  a putting green,  picnic
areas, a car wash area with vacuum,  and a laundry  facility.  The Property also
has a large  clubhouse  with an  entertainment  area,  kitchenette  and  leasing
office. There is ample paved parking.


     Apartments units have wall-to-wall  carpeting in the living areas and vinyl
floors in the  kitchen  and  baths,  as well as cable  television  hook-ups  and
individually  controlled  heating  and air  conditioning  units.  Each  unit has
miniblinds, walk-in closets, full-sized washer/dryer connections, a wood-burning
fireplace   and  a  sun  room  or  patio.   Each  kitchen  is  equipped  with  a
refrigerator/freezer,  electric range and oven, dishwasher and garbage disposal.
The owner of the Property supplies cold water,  sewer service and trash removal.
The tenants pay for their  electricity  usage,  which includes air conditioning,
cooking and lights, and for gas usage, which includes heat and hot water.


     There are at least six  apartment  properties in the area that compete with
the  Property.  All offer similar  amenities  and generally  have rents that are
comparable to those of the 




                                      -6-

<PAGE>

Property.  Based  on a recent  telephone  survey,  the  Company  estimates  that
occupancy in nearby competing  projects  averaged  approximately  96% at May 31,
1998. One of the competing properties,  Westchase  Apartments,  is also owned by
the Company.

     According to information provided by the seller,  physical occupancy at the
Property  averaged  approximately  72% in 1993, 73% in 1994, 85% in 1995, 95% in
1996 and 98% in 1997.  On May 31,  1998,  the  Property  was 98%  occupied.  The
tenants are a mix of white-collar and blue-collar workers,  students and retired
persons.

     The 1997 real estate taxes  applicable to the Property  were  calculated as
assessed  value  times  6%  times  $0.3181,  plus a solid  waste  tax of $63 per
apartment  unit. The real estate taxes for 1997 were  calculated to be $158,576.
The assessed value was $8,699,800. The basis of the depreciable residential real
property portion of the Property (currently estimated at about $10,973,281) will
be  depreciated  over 27.5  years on a  straight  line  basis.  The basis of the
personal  property  portion will be depreciated in accordance  with the modified
accelerated cost recovery system of the Code.

     The  Company  believes  that  the  Property  is  and  will  continue  to be
adequately covered by property and liability insurance.

     MATERIAL  FACTORS  CONSIDERED  IN  ASSESSING  THE  PROPERTY.   The  factors
considered  by the  Company  to be  relevant  in  evaluating  the  Property  for
acquisition by the Company included the following:

     1.  The Company  believes  that the  Charleston,  South  Carolina area will
experience continued strong economic development and steady population increase,
owing to a strong,  diversified  economy  characterized  by at least  four major
employment  factors  (port  facilities,  tourism,  medical  facilities  and  the
military),  and that such dvelopment and increase will support stable  occupancy
rates and reasonable increases in rents at the Property.

     2.  Based upon an engineering  report and its own inspections,  the Company
believes that the Property is in good condition.

     3.  The Property is  conveniently  located and proximate to area  employers
and shopping.

     4.  The Company is familiar with the Charleston, South Carolina market.



                                      -7-



<PAGE>

         The Company is not aware of any material  adverse  factors  relating to
the  Property  not set forth in this  report  that  would  cause  the  financial
information contained in this report not to be necessarily  indicative of future
operating results.


              PINNACLE RIDGE (formerly Edgewood Knoll) APARTMENTS
                           Asheville, North Carolina

         On March 31, 1998, the Company purchased the Edgewood Knoll Apartments,
a  168-unit  apartment  complex  having  an  address  of  600  Merrimon  Avenue,
Asheville,  North Carolina (the "Property").  The Company purchased the Property
from a seller (R.B.R.  & S.T., a North Carolina limited  partnership)  which was
unaffiliated with the Company.  The purchase price was $5,750,000,  all of which
was borrowed on an interim basis under the Company's  unsecured  line of credit.
Title to the Property was conveyed to the Company by limited  warranty deed. The
Company has changed the name of the Property to "Pinnacle Ridge Apartments."

         LOCATION.  The following  information is based in part upon information
provided by the Asheville Chamber of Commerce.

         The Property is located in North Carolina, in the City of Asheville and
Buncombe County, which collectively have a population of approximately  250,000.
Asheville is located approximately 115 miles from Charlotte, North Carolina, and
65 miles from Greenville, South Carolina.

         The City of Asheville and Buncombe  County are  represented by a number
of  nationally  recognized  companies  and  organizations  in the  health  care,
education and  manufacturing  sectors.  Some of the major  employers in the area
include  Champion  International  (a manufacturer of paper and  paperboard),  GE
Lighting  Systems,  Westinghouse  Electric  and  ITT  Automotive.  In  addition,
Memorial Mission Hospital and St. Joseph Hospital are major area employers.

     The major  highways  serving the area are  Interstates  40, 26 and 240. The
Asheville Regional Airport is centrally located within the metropolitan area and
is  approximately  20 miles from the  Property.  Also,  Asheville is home to the
University of North Carolina at Asheville,  with an enrollment of  approximately
3,200 students.

         The  property is located on Merrimon  Avenue,  in the north  section of
Asheville, within the city limits. The area


                                      -8-

<PAGE>

surrounding the Property is well-developed,  with various retail centers as well
as single-family  residences.  The Property is located  approximately  two miles
from the city's  central  business  district,  and is  convenient  to employment
centers,  shops and  restaurants  located  there.  The Property is also near two
major shopping centers, Asheville Mall and Biltmore Square Mall.

         DESCRIPTION OF THE PROPERTY.  The Property consists of 168 garden-style
and townhouse-style apartments in 25 two-story buildings and one two-story house
located on approximately 17 acres of land. The Property was constructed in 1951.

     The Company  believes  that the Property is  generally  in good  condition.
However, approximately $336,000 has been budgeted by the Company for repairs and
improvements,  including construction of an outdoor swimming pool, conversion of
the two-story  Victorian house on site (which  currently  contains two apartment
units) into a clubhouse,  exterior painting and siding replacement,  landscaping
and interior upgrades.

         The Property  offers six unit types.  The unit mix and rents  currently
being charged new tenants as of June 1998 are as follows:


<TABLE>
<CAPTION>
                                                     APPROXIMATE INTERIOR     MONTHLY
 QUANTITY*                    TYPE                      SQUARE FOOTAGE        RENTAL
-----------   -----------------------------------   ----------------------   --------
<S>           <C>                                   <C>                      <C>
      8       One bedroom, one bathroom                        760             $500
      4       One bedroom, one bathroom (TH)                   760              515
     62       Two bedrooms, one bathroom                       816              540
     74       Two bedrooms, one bathroom (TH)                  912              550
     12       Three bedrooms, one bathroom (TH)              1,038              615
      6       Three bedrooms, two bathrooms                  1,200              630

</TABLE>

*        At the  time of  purchase  by the  Company,  the  Property  included  a
         two-story  house with two  apartment  units.  As indicated  above,  the
         Company  expects to convert the two-story  house into a clubhouse,  and
         these two apartment units will cease to exist.




                                      -9-



<PAGE>
         The apartments provide a combined total of approximately 147,000 square
feet of net rentable area

         Currently,  the Property does not have standard common-area  amenities,
although,  as noted above, the Company plans to construct a swimming pool at the
Property and to convert an existing two-story house into a clubhouse and amenity
center.

         Leases  at the  Property  generally  are for terms of one year or less.
Average  rental rates for the past five years have  generally  been  constant or
increasing.  As an example,  a  two-bedroom,  one-bathroom  apartment  unit (816
square feet) rented for $350 in 1993,  $375 in 1994, $375 in 1995, $375 in 1996,
and $480 in 1997.  The average  effective  annual  rental per square foot at the
Property for 1993, 1994, 1995, 1996, and 1997 was $4.84,  $5.18,  $5.18,  $5.18,
and $6.63, respectively.

         The buildings are wood frame construction over crawl spaces.  Exteriors
have brick veneer and a combination  of painted  hardboard  lap siding,  painted
cementitious-type siding and painted T-111 siding. There are sloped gabled roofs
covered with asphalt shingles.

         All apartment units have hardwood floors in the living areas,  and tile
floors in the  kitchen and baths.  Each  apartment  unit has a cable  television
hook-up and an individually  controlled  heating and air conditioning unit. Each
apartment unit also has miniblinds and full-sized washer/dryer connections. Each
kitchen  is  equipped  with a  refrigerator/freezer,  electric  range  and oven,
dishwasher and garbage disposal.  The owner of the Property supplies cold water,
sewer  service and trash  removal.  The  tenants pay for their gas usage,  which
includes  heat (in all  units)  and hot  water in  garden  units,  and for their
electricity  usage,  which includes  air-conditioning,  cooking,  lights and hot
water in townhouse units.

          There are at least three apartment properties in the area that compete
with the Property. All offer similar amenities and have rents that are generally
comparable to those of the Property.  Based on a recent  telephone  survey,  the
Company   estimates  that  occupancy  in  nearby  competing   projects  averaged
approximately 91% at May 31, 1998.

          According to information provided by the seller, physical occupancy at
the Property  averaged  approximately 90% in 1993, 90% in 1994, 75% in 1995, 70%
in 1996,  and 80% in 1997. On May 31, 1998,  the Property was 90% occupied.  The
current  residents at the Property are employed in a variety of white-collar and
blue-



                                      -10-


<PAGE>

collar jobs, and there are also student residents and retired persons.

     The 1997 real estate tax rate applicable to the Property was $1.51 per $100
of assessed  value,  and the real estate  taxes for 1997 were  calculated  to be
$44,208.  The  assessed  value  was  $2,927,700.  The  basis of the  depreciable
residential real property portion of the Property (currently  estimated at about
$4,187,566)  will be depreciated  over 27.5 years on a straight-line  basis. The
basis of the personal  property  portion will be depreciated in accordance  with
the modified  accelerated cost recovery system of the Code.  Amounts to be spent
by the Company on repairs and  improvements  will be treated for tax purposes as
permitted by the Code based on the nature of the expenditures.

     The  Company  believes  that  the  Property  is  and  will  continue  to be
adequately covered by property and liability insurance.

     MATERIAL  FACTORS  CONSIDERED  IN  ASSESSING  THE  PROPERTY.   The  factors
considered  by the  Company  to be  relevant  in  evaluating  the  Property  for
acquisition by the Company included the following:

             1. The Company  believes  that the  Asheville,  North Carolina area
will enjoy continued economic  development and steady population  increase,  and
that such  development  and increase  will support  stable  occupancy  rates and
reasonable increases in rents at the Property.

             2.    Based upon an engineering report and its own inspections, the
Company believes that the Property is generally in sound condition.

             3.    The Property is  conveniently  located and proximate to major
employers and shopping.

             4.    The Company is familiar with the  Asheville,  North  Carolina
rental market.

     The Company is not aware of any material  adverse  factors  relating to the
Property not set forth in this report that would cause the financial information
contained in this report not to be  necessarily  indicative of future  operating
results.




                                      -11-
<PAGE>




                                   ITEM 7.a.









                                      -12-




<PAGE>


                          INDEPENDENT AUDITORS' REPORT



The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia


     We have audited the  accompanying  statement of income and direct operating
expenses  exclusive of items not comparable to the proposed future operations of
the property Hampton Pointe Apartments located in Charleston, South Carolina for
the  twelve  month  period  ended  February  28,  1998.  This  statement  is the
responsibility   of  the   management   of  Hampton   Pointe   Apartments.   Our
responsibility is to express an opinion on this statement based on our audit.

     We conducted  our audit in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable   assurance   about   whether  the  statement  is  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement.  An audit also includes  assessing
the accounting principles used and significant estimates made by management,  as
well as evaluating the overall  presentation  of the statement.  We believe that
our audit provides a reasonable basis for our opinion.

     The  accompanying  statement was prepared for the purpose of complying with
the rules  and  regulations  of the  Securities  and  Exchange  Commission  (for
inclusion in a filing by  Cornerstone  Realty Income  Trust,  Inc.) and excludes
material  expenses,  described  in Note 2 to the  statement,  that  would not be
comparable  to  those  resulting  from the  proposed  future  operations  of the
property.

     In our opinion,  the statement  referred to above presents  fairly,  in all
material  respects,  the income and direct operating  expenses of Hampton Pointe
Apartments  (as defined  above) for the twelve month  period ended  February 28,
1998, in conformity with generally accepted accounting principles.

                                                  /s/  L.P. Martin & Co., P.C. 
                                                  -----------------------------
Richmond, Virginia
April 8, 1998


                                      -13-

<PAGE>



                           HAMPTON POINTE APARTMENTS

         STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
                  ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
                           OPERATIONS OF THE PROPERTY

                  TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1998


INCOME
         Rental and Other Income                                 $   1,980,245


DIRECT OPERATING EXPENSES
         Administrative and Other                                      150,195
         Insurance                                                      50,061
         Repairs and Maintenance                                       323,067
         Taxes, Property                                               169,434
         Utilities                                                     156,652


              TOTAL DIRECT OPERATING EXPENSES                          849,409
                                                              
              Operating income exclusive of items not         
              comparable to the proposed future operations    
              of the property                                   $    1,130,836
                                                                    ==========



See accompanying notes to the financial statement.

                                      -14-


<PAGE>



                           HAMPTON POINTE APARTMENTS

         NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
            EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
                           OPERATIONS OF THE PROPERTY

                  TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1998

NOTE 1 - ORGANIZATION

Hampton Pointe  Apartments is a 304 unit garden style apartment  complex located
on 20.25 acres in Charleston, South Carolina. The assets comprising the property
were  owned by  Hampton  Pointe  Properties,  A Limited  Partnership,  an entity
unaffiliated  with Cornerstone  Realty Income Trust,  Inc., during the financial
statement period.  Cornerstone  Realty Income Trust, Inc. purchased the property
on March 31, 1998.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES

Revenue  and  Expense  Recognition  -  The  accompanying   statement  of  rental
operations  has been  prepared  using  the  accrual  method  of  accounting.  In
accordance  with Rule 3-14 of  Regulation  S-X of the  Securities  and  Exchange
Commission,  the  statement  of income and direct  operating  expenses  excludes
interest and non rent related income and expenses not  considered  comparable to
those  resulting from the proposed future  operations of the property.  Excluded
expenses   are   mortgage   interest,   property   depreciation,   amortization,
professional fees and management fees.

Estimates - The preparation of financial statements in conformity with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Repairs  and  Maintenance  -  Repairs  and  maintenance  costs are  expensed  as
incurred,  while  significant  improvements,  renovations and  replacements  are
capitalized.

Advertising - Advertising costs are expensed in the period incurred.


                                      -15-

<PAGE>



                                   ITEM 7.b.











                                      -16-



<PAGE>


                          INDEPENDENT AUDITORS' REPORT



The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia

     We have audited the  accompanying  statement of income and direct operating
expenses  exclusive of items not comparable to the proposed future operations of
the property Edgewood Knoll Apartments located in Asheville,  North Carolina for
the  twelve  month  period  ended  February  28,  1998.  This  statement  is the
responsibility   of  the   management   of  Edgewood   Knoll   Apartments.   Our
responsibility is to express an opinion on this statement based on our audit.

     We conducted  our audit in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable   assurance   about   whether  the  statement  is  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement.  An audit also includes  assessing
the accounting principles used and significant estimates made by management,  as
well as evaluating the overall  presentation  of the statement.  We believe that
our audit provides a reasonable basis for our opinion.

     The  accompanying  statement was prepared for the purpose of complying with
the rules  and  regulations  of the  Securities  and  Exchange  Commission  (for
inclusion in a filing by  Cornerstone  Realty Income  Trust,  Inc.) and excludes
material  expenses,  described  in Note 2 to the  statement,  that  would not be
comparable  to  those  resulting  from the  proposed  future  operations  of the
property.

     In our opinion,  the statement  referred to above presents  fairly,  in all
material  respects,  the income and direct operating  expenses of Edgewood Knoll
Apartments  (as defined  above) for the twelve month  period ended  February 28,
1998, in conformity with generally accepted accounting principles.

                                              /s/  L.P. Martin & Co., P.C.
                                              ----------------------------
                                             
Richmond, Virginia
April 8, 1998


                                      -17-

<PAGE>


                           EDGEWOOD KNOLL APARTMENTS

         STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
                  ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
                           OPERATIONS OF THE PROPERTY

                  TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1998

INCOME
  Rental and Other Income                                       $    859,763
                                                                ------------


DIRECT OPERATING EXPENSES
  Administrative and Other                                            13,727
  Insurance                                                           17,434
  Repairs and Maintenance                                            217,092
  Taxes, Property                                                     44,208
  Utilities                                                           61,894
                                                                ------------
    
      TOTAL DIRECT OPERATING EXPENSES                                354,355
                                                                ------------
      Operating income exclusive of items not
      comparable to the proposed future operations
      of the property                                           $    505,408
                                                                ============


See accompanying notes to the financial statement.


                                      -18-

<PAGE>



                           EDGEWOOD KNOLL APARTMENTS

         NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
            EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
                           OPERATIONS OF THE PROPERTY

                  TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1998

NOTE 1 - ORGANIZATION

Edgewood  Knoll  Apartments is a 168 unit garden and townhouse  style  apartment
complex located on approximately 17.02 acres in Asheville,  North Carolina.  The
assets  comprising  the  property  were  owned  by R. B. R.  and S.  T., a North
Carolina Limited  Partnership,  an entity  unaffiliated with Cornerstone  Realty
Income Trust,  Inc., during the financial  statement period.  Cornerstone Realty
Income Trust, Inc. purchased the property on March 31, 1998.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES

Revenue  and  Expense  Recognition  -  The  accompanying   statement  of  rental
operations  has been  prepared  using  the  accrual  method  of  accounting.  In
accordance  with Rule 3-14 of  Regulation  S-X of the  Securities  and  Exchange
Commission,  the  statement  of income and direct  operating  expenses  excludes
interest and non rent related income and expenses not  considered  comparable to
those  resulting from the proposed future  operations of the property.  Excluded
expenses are mortgage interest and property depreciation.

Estimates - The preparation of financial statements in conformity with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Repairs  and  Maintenance  -  Repairs  and  maintenance  costs are  expensed  as
incurred,  while  significant  improvements,  renovations and  replacements  are
capitalized.

Advertising - Advertising costs are expensed in the period incurred.

NOTE 3 - RELATED PARTY TRANSACTIONS

During the financial  statement period,  the property had no employees.  General
maintenance  and repair work was performed by  individuals  who worked solely at
this property but who were employees of an affiliate of the owner.  The property
was billed for the payroll and associated  burden at the affiliate's  cost which
totaled $86,688.

The affiliate also employed a staff which performed grounds maintenance for this
and  other  projects.  The  affiliate  billed  each  project  for  a  systematic
allocation of their  employee  payroll and burden as well as specific  materials
and supplies purchased for the various properties. The amount billed to Edgewood
Knoll  Apartments for the grounds  services totaled $44,641 during the financial
statement period.

(Continued)

                                      -19-

<PAGE>



                           EDGEWOOD KNOLL APARTMENTS

         NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
            EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
                           OPERATIONS OF THE PROPERTY

                  TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1998

NOTE 3 - RELATED PARTY TRANSACTIONS  (Continued)

The affiliate  also billed the project  $6,240  during the  financial  statement
period for use of a maintenance truck. No formal lease exists.

Each of the  above  amounts  is  included  in  repairs  and  maintenance  on the
statement of income and direct operating expenses.

Administrative and other expense is below what would generally be expected for a
project of this size for the following reasons. All administrative  functions of
the property,  including  accounting and management  services and those services
which would generally be performed by a resident  manager and  assistants,  were
performed by the owner affiliate.  The affiliate's employees performed these and
other  duties for  several  projects.  Because  the  affiliate  and the  various
properties had common owners, no attempt was made to allocate employee costs and
other costs to  Edgewood  Knoll  Apartments  and the other  properties.  At this
point, any attempt to allocate cost to the property would be arbitrary.

                                      -20-


<PAGE>






                                   ITEM 7.c.






                                      -21-


<PAGE>

PRO  FORMA  STATEMENT  OF  OPERATIONS  FOR THE  YEAR  ENDED  DECEMBER  31,  1997
(UNAUDITED)

The Unaudited Pro Forma  Statement of Operations for the year ended December 31,
1997 is presented as if 11 of the 13 Property acquisitions during 1997 and the 3
Property acquisitions during 1998 had occurred on January 1, 1997. The Unaudited
Pro Forma  Statement of  Operations  assumes the Company  qualifying  as a REIT,
distributing at least 95% of its taxable  income,  and,  therefore,  incurred no
federal  income  tax  liability  for the  period  presented.  In the  opinion of
management,   all  adjustments   necessary  to  reflect  the  effects  of  these
transactions have been made.

The  Unaudited Pro Forma  Statement of  Operations is presented for  comparative
purposes only and is not  necessarily  indicative of what the actual  results of
the  Company  would  have  been  for the year  ended  December  31,  1997 if the
acquisitions had occurred at the beginning of the period presented,  nor does it
purport to be indicative of the results of  operations  in future  periods.  The
Unaudited Pro Forma Statement of Operations  should be read in conjunction with,
and is  qualified  in its  entirety  by,  the  Company's  respective  historical
financial statements and notes thereto.

<TABLE>
<CAPTION>

                                                          Historical                                                  Pro Forma     
                                                         Statement of           1997           Pro Forma             Before 1998    
                                                          Operations        Acquisitions      Adjustments            Acquisitions   
                                                        ------------------------------------------------------    ------------------
<S>                                                           <C>              <C>               <C>                   <C>          
Date of Acquisitions                                               -               -                                                
Revenues from rental properties                               $71,970,624      $8,176,747                 -            $80,147,371  
Rental expenses:
                Property and maintenance                       19,494,692       2,524,622                 -             22,019,314  
                Taxes and insurance                             6,075,991         608,815                 -              6,684,806  
                Property management                             1,769,272               -                 -              1,769,272  
                General and administrative                      1,351,667               -                 -              1,351,667  
                Amortization and other depreciation                56,075               -                 -                 56,075  
                Depreciation of rental property                15,163,593               -         1,514,811 (A)         16,678,404  
                Other                                           1,200,669               -                 -              1,200,669  
                Management contract termination                   402,907               -                 -                402,907  
                                                        ----------------------------------------------------      ------------------

                                                               45,514,866       3,133,437         1,514,811             50,163,114  

Income before interest income (expense)                        26,455,758       5,043,310        (1,514,811)            29,984,257  
Interest income                                                   331,114               -                 -                331,114  
Interest expense                                               (7,561,319)              -        (2,411,653)(B)         (9,972,972) 
                                                        ----------------------------------------------------      ------------------

Net Income                                                    $19,225,553      $5,043,310       ($3,926,464)           $20,342,399  

Net income per share                                                $0.59                                                        
                                                                    ======                                                       

Wgt. avg. number of shares outstanding                         32,617,823                         2,041,544 (C)         34,659,367  
                                                               ===========                                              ============

<CAPTION>

                                                                          Edgewood          Hampton                     
                                                      Stone Point          Knoll             Point                      
                                                       Pro Forma         Pro Forma         Pro Forma      Pro Forma        Total   
                                                      Adjustments       Adjustments       Adjustments    Adjustments     Pro Forma 
                                                     -----------------------------------------------------------------  ------------
<S>                                                       <C>             <C>             <C>               <C>          <C>        
Date of Acquisitions                                       1/15/98         3/31/98       3/31/98                                  - 
Revenues from rental properties                          $ 1,346,251      $859,763     $1,980,245                -      $84,333,630 
Rental expenses:
                Property and maintenance                     379,698       292,713        629,914                -       23,321,639 
                Taxes and insurance                           99,704        61,642        219,495                -        7,065,647 
                Property management                                -             -              -                -        1,769,272 
                General and administrative                         -             -              -                -        1,351,667 
                Amortization and other depreciation                -             -              -                -           56,075 
                Depreciation of rental property                    -             -              -          849,291 (A)   17,527,695 
                Other                                                                           -                -        1,200,669 
                Management contract termination                    -             -              -                -          402,907 
                                                     -----------------------------------------------------------------  ------------
                                                                                                                                    
                                                             479,402       354,355        849,409          849,291       52,695,571 
                                                                                                                                    
Income before interest income (expense)                      866,849       505,408      1,130,836         (849,291)      31,638,059 
Interest income                                                    -             -              -                -          331,114 
Interest expense                                                   -             -              -       (2,186,843)(B)  (12,159,815)
                                                     -----------------------------------------------------------------  ------------

Net Income                                                  $866,849      $505,408     $1,130,836      ($3,036,134)     $19,809,358 

Net income per share                                                                                                          $0.57 
                                                                                                                              ===== 

Wgt. avg. number of shares outstanding                                                                                   34,659,367 
                                                                                                                         ========== 
</TABLE>


(A) Represents the depreciation  expense of the properties acquired based on the
purchase price,  excluding amounts allocated to land, for the period of time not
owned by the Company.  The weighted average life of the property depreciated was
27.5 years.

(B)  Represents  the  interest  expense for the  properties  purchased  with the
Company's unsecured line of credit or other unsecured financing.  Total purchase
price of $63,851,388  for 1997  acquisitions  (8 properties)  and total purchase
price of $27,656,150  for 1998  acquisitions  (3  properties)  for the period in
which  properties were not owned for the year ended December 31, 1997.  Interest
was  computed  based on  interest  rates under the  Company's  line of credit in
effect at the time of the  respective  acquisition.

(C) Represents  additional  common shares used to purchase Ashley Run,  Carlyle,
Charleston  Place  and a portion  of  Dunwoody  based  upon  purchase  prices of
$18,000,000  $11,580,000,  $9,475,000 and  $10,560,312  (total purchase price of
Dunwoody was $15,200,000),  respectively and common shares issued in April, 1997
with net proceeds of $9.5875 per share to the Company.


                                      -22-

<PAGE>


PRO FORMA  CONSOLIDATED  STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31,
1997 (UNAUDITED)

The following schedule provides detail of 1997 acquisitions by property included
in the Pro  Forma  Consolidated  Statement  of  Operations  for the  year  ended
December 31, 1997.

<TABLE>
<CAPTION>
                                                                                                                                  
                                                          Westchase       Paces Arbor      Paces Forest       Ashley Run     
                                                          Pro Forma        Pro Forma         Pro Forma        Pro Forma      
                                                         Adjustments      Adjustments       Adjustments      Adjustments     
                                                         -----------      -----------       -----------      -----------     
<S>                                                      <C>                <C>              <C>              <C>       
Date of Acquisition                                        1/15/97           3/1/97           3/1/97           4/30/97       

Property operations

    Revenues from rental properties                      $166,656         $128,993          $154,702         $916,820  
    Rental expenses:                                                                                                   
               Property management                         54,436           35,902            37,110          246,537  
               Taxes and insurance                         16,024            8,094             9,108           69,240  
               General and administrative                    -                -                -                 -     
               Amortization                                  -                -                -                 -     
               Depreciation of rental property               -                -                -                 -     
               Other                                         -                -                -                 -  
                                                 ----------------------------------------------------------------------
                                                           70,460           43,996            46,218          315,777  

Income before interest income (expense)                    96,196           84,997           108,484          601,043  
Interest income                                              -                -                -                 -     
Interest expense                                             -                -                -                 -  
                                                 ----------------------------------------------------------------------

Net Income                                                $96,196          $84,997          $108,484         $601,043  
                                                 ======================================================================


<CAPTION>
                                                                            Charleston        Dunwoody          Clarion    
                                                           Carlyle Club        Place           Springs          Crossing   
                                                            Pro Forma        Pro Forma        Pro Forma        Pro Forma   
                                                           Adjustments      Adjustments      Adjustments      Adjustments  
                                                           -----------      -----------      -----------      -----------  
<S>                                                      <C>                <C>              <C>              <C>       
Date of Acquisition                                          4/30/97          5/13/97          7/25/97          9/30/97    

Property operations


    Revenues from rental properties                        $637,842         $536,210       $1,437,230       $1,141,473     
    Rental expenses:                                                                                                       
               Property management                          205,723          169,807          451,935          442,582     
               Taxes and insurance                           46,970           34,987          144,766           59,664     
               General and administrative                      -                -                -                -        
               Amortization                                    -                -                -                -        
               Depreciation of rental property                 -                -                -                -        
               Other                                           -                -                -                -     
                                                 --------------------------------------------------------------------------
                                                            252,693          204,794          596,701          502,246     

Income before interest income (expense)                     385,149          331,416          840,529          639,227     
Interest income                                                   -             -                -                -        
Interest expense                                                  -             -                -                -        
                                                 --------------------------------------------------------------------------

Net Income                                                 $385,149         $331,416         $840,529         $639,227     
                                                 ==========================================================================
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                                                       Remington 
                                                       St. Regis         Place          Stone Brooke          1997
                                                       Pro Forma       Pro Forma         Pro Forma        Acquisition
                                                      Adjustments     Adjustments       Adjustments       Adjustments
                                                      -----------     -----------       -----------       -----------
<S>                                                      <C>                <C>              <C>              <C>       
Date of Acquisition                                    10/31/97         10/31/97          10/31/97

Property operations


    Revenues from rental properties                  $1,100,453         $918,833         $1,037,535       $8,176,747
    Rental expenses:                                                                          -
               Property management                      294,153          262,938            323,499        2,524,622
               Taxes and insurance                       64,195           60,505             95,262          608,815
               General and administrative                  -                -                 -                    -
               Amortization                                -                -                 -                    -
               Depreciation of rental property             -                -                 -                    -
               Other                                       -                -                 -                    -
                                                 --------------------------------------------------------------------
                                                        358,348          323,443            418,761        3,133,437

Income before interest income (expense)                 742,105          595,390            618,774        5,043,310
Interest income                                            -                -                 -                    -
Interest expense                                           -                -                 -                    -
                                                 --------------------------------------------------------------------

Net Income                                             $742,105         $595,390           $618,774       $5,043,310
                                                 ====================================================================
</TABLE>

                                      -23-

<PAGE>

PRO FORMA  STATEMENT  OF  OPERATIONS  FOR THE THREE  MONTHS ENDED MARCH 31, 1998
(UNAUDITED)

The Unaudited Pro Forma Statement of Operations for the three month period ended
March 31, 1998 is presented as if the 3 Property  acquisitions  made during 1998
had occurred on January 1, 1998. The Unaudited Pro Forma Statement of Operations
assumes  the  Company  qualifying  as a REIT,  distributing  at least 95% of its
taxable income, and, therefore, incurred no federal income tax liability for the
period  presented.  In the opinion of management,  all adjustments  necessary to
reflect the effects of these transactions have been made.

The  Unaudited Pro Forma  Statement of  Operations is presented for  comparative
purposes only and is not  necessarily  indicative of what the actual  results of
the  Company  would  have  been  for the  period  ended  March  31,  1998 if the
acquisitions had occurred at the beginning of the period presented,  nor does it
purport to be indicative of the results of  operations  in future  periods.  The
Unaudited Pro Forma Statement of Operations  should be read in conjunction with,
and is  qualified  in its  entirety  by,  the  Company's  respective  historical
financial statements and notes thereto.

<TABLE>
<CAPTION>


                                                                                             Stone              Pinnacle 
                                                                      Historical             Point               Ridge   
                                                                     Statement of          Pro Forma           Pro Forma 
                                                                      Operations          Adjustments         Adjustments
                                                                 --------------------------------------------------------
<S>                                                                  <C>                    <C>                  <C>     
Date of Acquisitions                                                           -            1/15/98             3/31/98  

Rental and other income                                              $20,962,469            $ 56,094             $214,941
                                                                                                                         
Rental expenses:

           Property and maintenance                                    5,499,525              15,821               73,178
           Taxes and insurance                                         1,523,849               4,154               15,411
           Property management                                           512,319                 -                    -  
           General and administrative                                    356,339                 -                    -  
           Amortization and other depreciation                            16,138                 -                    -  
           Depreciation of rental property                             4,683,384                 -                    -  
           Other                                                         406,959                 -                    -  
                                                            -------------------------------------------------------------

                                                                      12,998,513              19,975               88,589

Income before interest income (expense)                                7,963,956              36,119              126,352
Interest income                                                           93,010                 -                   -   
Interest expense                                                      (2,820,918)                -                   -   
                                                                 --------------------------------------------------------

Net Income                                                            $5,236,048             $36,119             $126,352

Net income per share                                                       $0.15                                         
                                                                          ======                                         

Wgt. avg. number of shares outstanding                                35,701,334                                         
                                                                     ===========                                         
</TABLE>

<PAGE>

<TABLE>
<CAPTION>


                                                                    Hampton
                                                                     Pointe           1998
                                                                   Pro Forma        Pro Forma                     Total
                                                                  Adjustments       Adjustments                  Pro Forma
                                                           --------------------------------------------      --------------
<S>                                                              <C>               <C>                        <C>
Date of Acquisitions                                                3/31/98                                             -

Rental and other income                                          $495,061              -                      $21,728,565
                                                                                                                        -
Rental expenses:

           Property and maintenance                               157,479              -                        5,746,003
           Taxes and insurance                                     54,874              -                        1,598,288
           Property management                                       -                 -                          512,319
           General and administrative                                -                 -                          356,339
           Amortization and other depreciation                       -                 -                           16,138
           Depreciation of rental property                           -             147,656  (A)                 4,831,040
           Other                                                     -                 -                          406,959
                                                           ---------------------------------------      -----------------

                                                                  212,353          147,656                     13,467,086

Income before interest income (expense)                           282,708         (147,656)                     8,261,479
Interest income                                                     -                -                             93,010
Interest expense                                                    -             (409,092) (B)                (3,230,010)
                                                           --------------------------------------------      --------------

Net Income                                                       $282,708        ($556,748)                    $5,124,479

Net income per share                                                                                                $0.14
                                                                                                               ==========

Wgt. avg. number of shares outstanding                                                                         35,701,334
                                                                                                               ==========
</TABLE>

(A) Represents the depreciation  expense of the properties acquired based on the
purchase price, excluding amounts allocated  to land, for the period of time not
owned by the Company.  The weighted average life of the property depreciated was
27.5 years.

(B) Represents the interest expense for the 3 Properties for the period in which
the  properties  were not owned for the three month period ended March 31, 1998,
interest was computed based on interest rates under the Company's line of credit
in effect at the time of the respective acquisition.


                                      -24-


<PAGE>


                                   SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.


                                           Cornerstone Realty Income Trust, Inc.

Date:  June 11, 1998                      By:  /s/ Stanley J. Olander, Jr.
                                                --------------------------------
                                                Stanley J. Olander, Jr.,
                                                Chief Financial Officer Of
                                                Cornerstone Realty Income
                                                Trust, Inc.










                                      -25-

<PAGE>

                                 EXHIBIT INDEX

                      Cornerstone Realty Income Trust, Inc.
                         Form 8-K dated March 31, 1998

Exhibit Number               Exhibit

     10.1                    Purchase Contract for Hampton Point Apartments

     10.2                    Purchase Contract for Pinnacle Ridge (formerly
                             Edgewood Knoll) Apartments

     23.1                    Consent of Independent Auditors

     23.2                    Consent of Independent Auditors





                                      -16-
[{"type": "8-K", "sequence": "1", "description": "FORM 8-K", "secsgml_size_bytes": 64308}]
{"company-data": {"conformed-name": "CORNERSTONE REALTY INCOME TRUST INC", "cik": "0000854875", "assigned-sic": "6798", "irs-number": "541589139", "state-of-incorporation": "VA", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "001-12875", "film-number": "98647112"}, "business-address": {"street1": "306 E MAIN ST", "city": "RICHMOND", "state": "VA", "zip": "23219", "phone": "8046431761"}, "mail-address": {"street1": "306 E MAIN ST", "city": "RICHMOND", "state": "VA", "zip": "23219"}}
SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                    FORM 8-K
                                CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report: March 31, 1998

                     CORNERSTONE REALTY INCOME TRUST, INC.
             (Exact name of registrant as specified in its charter)

    VIRGINIA                         1-12875                     54-1589139
 (State of                          (Commission                (IRS Employer
 Incorporation)                      File Number)            Identification No.)

306 EAST MAIN STREET
RICHMOND, VIRGINIA                                                       23219
(Address of principal                                                 (Zip Code)
 executive office)

               Registrant's telephone number, including area code:
                                 (804) 643-1761
CORNERSTONE REALTY INCOME TRUST, INC.
                                    FORM 8-K

                                      Index

Item 2       Acquisition or Disposition of Assets

Item 7       Financial Statements, Pro Forma Financial Information and Exhibits

     a.      Independent Auditors' Report 
             (Hampton Pointe Apartments)

             Historical  Statement  of  Income  and  Direct  Operating  Expenses
             (Hampton  Pointe  Apartments) 

             Note  to  Historical  Statement  of  Income  and  Direct  Operating
             Expenses (Hampton Pointe Apartments)

     b.      Independent  Auditors' Report  (Pinnacle Ridge (formerly  Edgewood
             Knoll) Apartments)

             Historical  Statement  of  Income  and  Direct  Operating  Expenses
             (Pinnacle Ridge (formerly Edgewood Knoll) Apartments)

             Note  to  Historical  Statement  of  Income  and  Direct  Operating
             Expenses (Pinnacle Ridge (formerly Edgewood Knoll) Apartments)

     c.      Pro Forma  Statement of Operations for  the Year Ended December 31,
             1997 (unaudited)

             Pro Forma  Statement of Operations  for the Quarter Ended March 31,
             1998 (unaudited) 

                                      -2-
d.      Exhibits

     10.1    Purchase Contract for Hampton Pointe Apartments

     10.2    Purchase  Contract for Pinnacle  Ridge  (formerly  Edgewood Knoll)
             Apartments

     23.1    Consent of Independent Auditors

     23.2    Consent of Independent Auditors

                                      -3-
Item 2. Acquisition or Disposition of Assets

                           HAMPTON POINTE APARTMENTS
                          Charleston, South Carolina

     On March 31, 1998, Cornerstone Realty Income Trust, Inc. (together with its
subsidiary,   CRIT-NC,  LLC,  the  "Company")   purchased   the  Hampton  Pointe
Apartments,  a  304-unit  apartment  complex  having  an  address  of  1916  Sam
Rittenberg Boulevard, Charleston, South Carolina (the "Property").

     The seller, Hampton Pointe Properties, was affiliated with the Company. The
purchase  price was  $12,225,000.  At  closing,  the entire  purchase  price was
borrowed under the Company's unsecured line of credit. Title to the Property was
conveyed to the Company by limited warranty deed.

     LOCATION.  The  following  information  is based in part  upon  information
provided by the Charleston Chamber of Commerce.

     The  Charleston  Metropolitan  Statistical  Area  ("MSA") is  comprised  of
Charleston, Berkeley and Dorchester Counties.  The approximate population of the
MSA  is  570,000.   Charleston  County  has   approximately   330,000 residents,
approximately 85,000 of which are in the city limits.

     The  principal  economic  factors in the region are  distribution  and port
facilities,  tourism,  medical services and the military. 

     The Port of Charleston is the leading container cargo port in the southeast
and on the entire east coast ranks second only to the combined ports of New York
and New Jersey.  BMW and NUCOR are two recent examples of companies that rely on
the Port of Charleston.

     Tourism is a major  factor in the area,  with  approximately  five  million
visitors  annually.   Tourist  attractions  include  the  historic  district  of
Charleston,  beaches,  golf courses,  and restaurants.  It is estimated that the
total  economic  impact of the tourist  industry in the region is  approximately
$1.5  billion   annually,   accounting   for   approximately   34,000  jobs  and
approximately 14% of the total work force.

     Charleston is the home to the Medical  University of South Carolina,  which
accounts for approximately  7,500 jobs. A total of approximately  16,000 persons
are employed in the region's 10 hospitals and medical facilities.

                                      -4-
The United States Navy employs  approximately 7,800 people in the region in
installations such as Charleston Naval Weapons Station, Naval Hospital and Naval
Command,  Control and Ocean  Surveillance  Center in Service  Engineering,  East
Coast  Division.  In addition,  the Charleston Air Force Base employs over 5,400
people. From 1989 to 1996, naval employment in the region dropped from 21% to 3%
of total jobs. However,  the region experienced a concurrent increase in jobs in
other sectors.

     The overall unemployment rate in the region is currently approximately 5%.

     The  Property  is  listed in the West  Ashley  region  of  Charleston.  The
immediate  area consists of other  multi-family  housing,  commercial and retail
development  and  single-family  housing.  The  Property  is located  near major
shopping centers,  schools and churches and is accessible from Interstate 26 and
Mark Clark Expressway.  Charleston's  largest mall, the Citadel Mall, is located
less  than one mile from the  Property  and has four  major  anchor  stores  and
approximately one million square feet of space. The Property is an approximately
15-minute drive from the College of Charleston, downtown Charleston, the airport
and the beach.

     DESCRIPTION  OF THE  PROPERTY.  The Property  consists of 304  garden-style
apartments located in 19 two-story  buildings on approximately 20 acres of land.
The Property was constructed in 1986.

     The Company  believes that the Property has generally been well  maintained
and  is  generally  in  good  condition.   However,  the  Company  has  budgeted
approximately   $912,000  for  repairs  and  improvements   including  clubhouse
renovation, re-siding of all building exteriors and window replacement.

     The Property offers four different unit types. The unit mix and rents being
charged new tenants as of June 1998 are as follows:

                                                APPROXIMATE
                                                 INTERIOR        MONTHLY
 QUANTITY                 TYPE                SQUARE FOOTAGE     RENTAL
----------   -----------------------------   ----------------   --------

64           One bedroom, one bathroom               750          $510
64           One bedroom, one bathroom               900           560

                                      -5-
APPROXIMATE
                                                 INTERIOR        MONTHLY
 QUANTITY                 TYPE                SQUARE FOOTAGE     RENTAL
----------   -----------------------------   ----------------   --------

88           Two bedrooms, two bathrooms           1,175           650
88           Two bedrooms, two bathrooms           1,200           675

     The  apartments  provide a combined total of  approximately  314,000 square
feet of net rentable area.

     Leases at the  Property are for terms of one year or less.  Average  rental
rates for the past five years have generally remained constant or increased.  As
an example, a two-bedroom, two-bathroom apartment (1,175 square feet) rented for
$585 in 1993,  $585 in 1994,  $585 in 1995,  $600 in 1996, and $650 in 1997. The
average  effective annual rental per square foot at the Property for 1993, 1994,
1995, 1996 and 1997 was $6.39, $6.39, $6.39, $6.55, and $7.10, respectively.

     The buildings are wood frame  construction on concrete slabs. The buildings
have pitched roofs with asphalt shingles. Exteriors are cedar lap siding.

     The Property has two outdoor swimming pools, a Jacuzzi,  two lighted tennis
courts,  a sand  volleyball  court, a fitness  center,  a putting green,  picnic
areas, a car wash area with vacuum,  and a laundry  facility.  The Property also
has a large  clubhouse  with an  entertainment  area,  kitchenette  and  leasing
office. There is ample paved parking.

     Apartments units have wall-to-wall  carpeting in the living areas and vinyl
floors in the  kitchen  and  baths,  as well as cable  television  hook-ups  and
individually  controlled  heating  and air  conditioning  units.  Each  unit has
miniblinds, walk-in closets, full-sized washer/dryer connections, a wood-burning
fireplace   and  a  sun  room  or  patio.   Each  kitchen  is  equipped  with  a
refrigerator/freezer,  electric range and oven, dishwasher and garbage disposal.
The owner of the Property supplies cold water,  sewer service and trash removal.
The tenants pay for their  electricity  usage,  which includes air conditioning,
cooking and lights, and for gas usage, which includes heat and hot water.

     There are at least six  apartment  properties in the area that compete with
the  Property.  All offer similar  amenities  and generally  have rents that are
comparable to those of the 

                                      -6-
Property.  Based  on a recent  telephone  survey,  the  Company  estimates  that
occupancy in nearby competing  projects  averaged  approximately  96% at May 31,
1998. One of the competing properties,  Westchase  Apartments,  is also owned by
the Company.

     According to information provided by the seller,  physical occupancy at the
Property  averaged  approximately  72% in 1993, 73% in 1994, 85% in 1995, 95% in
1996 and 98% in 1997.  On May 31,  1998,  the  Property  was 98%  occupied.  The
tenants are a mix of white-collar and blue-collar workers,  students and retired
persons.

     The 1997 real estate taxes  applicable to the Property  were  calculated as
assessed  value  times  6%  times  $0.3181,  plus a solid  waste  tax of $63 per
apartment  unit. The real estate taxes for 1997 were  calculated to be $158,576.
The assessed value was $8,699,800. The basis of the depreciable residential real
property portion of the Property (currently estimated at about $10,973,281) will
be  depreciated  over 27.5  years on a  straight  line  basis.  The basis of the
personal  property  portion will be depreciated in accordance  with the modified
accelerated cost recovery system of the Code.

     The  Company  believes  that  the  Property  is  and  will  continue  to be
adequately covered by property and liability insurance.

     MATERIAL  FACTORS  CONSIDERED  IN  ASSESSING  THE  PROPERTY.   The  factors
considered  by the  Company  to be  relevant  in  evaluating  the  Property  for
acquisition by the Company included the following:

     1.  The Company  believes  that the  Charleston,  South  Carolina area will
experience continued strong economic development and steady population increase,
owing to a strong,  diversified  economy  characterized  by at least  four major
employment  factors  (port  facilities,  tourism,  medical  facilities  and  the
military),  and that such dvelopment and increase will support stable  occupancy
rates and reasonable increases in rents at the Property.

     2.  Based upon an engineering  report and its own inspections,  the Company
believes that the Property is in good condition.

     3.  The Property is  conveniently  located and proximate to area  employers
and shopping.

     4.  The Company is familiar with the Charleston, South Carolina market.

                                      -7-
The Company is not aware of any material  adverse  factors  relating to
the  Property  not set forth in this  report  that  would  cause  the  financial
information contained in this report not to be necessarily  indicative of future
operating results.

              PINNACLE RIDGE (formerly Edgewood Knoll) APARTMENTS
                           Asheville, North Carolina

         On March 31, 1998, the Company purchased the Edgewood Knoll Apartments,
a  168-unit  apartment  complex  having  an  address  of  600  Merrimon  Avenue,
Asheville,  North Carolina (the "Property").  The Company purchased the Property
from a seller (R.B.R.  & S.T., a North Carolina limited  partnership)  which was
unaffiliated with the Company.  The purchase price was $5,750,000,  all of which
was borrowed on an interim basis under the Company's  unsecured  line of credit.
Title to the Property was conveyed to the Company by limited  warranty deed. The
Company has changed the name of the Property to "Pinnacle Ridge Apartments."

         LOCATION.  The following  information is based in part upon information
provided by the Asheville Chamber of Commerce.

         The Property is located in North Carolina, in the City of Asheville and
Buncombe County, which collectively have a population of approximately  250,000.
Asheville is located approximately 115 miles from Charlotte, North Carolina, and
65 miles from Greenville, South Carolina.

         The City of Asheville and Buncombe  County are  represented by a number
of  nationally  recognized  companies  and  organizations  in the  health  care,
education and  manufacturing  sectors.  Some of the major  employers in the area
include  Champion  International  (a manufacturer of paper and  paperboard),  GE
Lighting  Systems,  Westinghouse  Electric  and  ITT  Automotive.  In  addition,
Memorial Mission Hospital and St. Joseph Hospital are major area employers.

     The major  highways  serving the area are  Interstates  40, 26 and 240. The
Asheville Regional Airport is centrally located within the metropolitan area and
is  approximately  20 miles from the  Property.  Also,  Asheville is home to the
University of North Carolina at Asheville,  with an enrollment of  approximately
3,200 students.

         The  property is located on Merrimon  Avenue,  in the north  section of
Asheville, within the city limits. The area

                                      -8-
surrounding the Property is well-developed,  with various retail centers as well
as single-family  residences.  The Property is located  approximately  two miles
from the city's  central  business  district,  and is  convenient  to employment
centers,  shops and  restaurants  located  there.  The Property is also near two
major shopping centers, Asheville Mall and Biltmore Square Mall.

         DESCRIPTION OF THE PROPERTY.  The Property consists of 168 garden-style
and townhouse-style apartments in 25 two-story buildings and one two-story house
located on approximately 17 acres of land. The Property was constructed in 1951.

     The Company  believes  that the Property is  generally  in good  condition.
However, approximately $336,000 has been budgeted by the Company for repairs and
improvements,  including construction of an outdoor swimming pool, conversion of
the two-story  Victorian house on site (which  currently  contains two apartment
units) into a clubhouse,  exterior painting and siding replacement,  landscaping
and interior upgrades.

         The Property  offers six unit types.  The unit mix and rents  currently
being charged new tenants as of June 1998 are as follows:
APPROXIMATE INTERIOR     MONTHLY
 QUANTITY*                    TYPE                      SQUARE FOOTAGE        RENTAL
-----------   -----------------------------------   ----------------------   --------
8       One bedroom, one bathroom                        760             $500
      4       One bedroom, one bathroom (TH)                   760              515
     62       Two bedrooms, one bathroom                       816              540
     74       Two bedrooms, one bathroom (TH)                  912              550
     12       Three bedrooms, one bathroom (TH)              1,038              615
      6       Three bedrooms, two bathrooms                  1,200              630
*        At the  time of  purchase  by the  Company,  the  Property  included  a
         two-story  house with two  apartment  units.  As indicated  above,  the
         Company  expects to convert the two-story  house into a clubhouse,  and
         these two apartment units will cease to exist.

                                      -9-
The apartments provide a combined total of approximately 147,000 square
feet of net rentable area

         Currently,  the Property does not have standard common-area  amenities,
although,  as noted above, the Company plans to construct a swimming pool at the
Property and to convert an existing two-story house into a clubhouse and amenity
center.

         Leases  at the  Property  generally  are for terms of one year or less.
Average  rental rates for the past five years have  generally  been  constant or
increasing.  As an example,  a  two-bedroom,  one-bathroom  apartment  unit (816
square feet) rented for $350 in 1993,  $375 in 1994, $375 in 1995, $375 in 1996,
and $480 in 1997.  The average  effective  annual  rental per square foot at the
Property for 1993, 1994, 1995, 1996, and 1997 was $4.84,  $5.18,  $5.18,  $5.18,
and $6.63, respectively.

         The buildings are wood frame construction over crawl spaces.  Exteriors
have brick veneer and a combination  of painted  hardboard  lap siding,  painted
cementitious-type siding and painted T-111 siding. There are sloped gabled roofs
covered with asphalt shingles.

         All apartment units have hardwood floors in the living areas,  and tile
floors in the  kitchen and baths.  Each  apartment  unit has a cable  television
hook-up and an individually  controlled  heating and air conditioning unit. Each
apartment unit also has miniblinds and full-sized washer/dryer connections. Each
kitchen  is  equipped  with a  refrigerator/freezer,  electric  range  and oven,
dishwasher and garbage disposal.  The owner of the Property supplies cold water,
sewer  service and trash  removal.  The  tenants pay for their gas usage,  which
includes  heat (in all  units)  and hot  water in  garden  units,  and for their
electricity  usage,  which includes  air-conditioning,  cooking,  lights and hot
water in townhouse units.

          There are at least three apartment properties in the area that compete
with the Property. All offer similar amenities and have rents that are generally
comparable to those of the Property.  Based on a recent  telephone  survey,  the
Company   estimates  that  occupancy  in  nearby  competing   projects  averaged
approximately 91% at May 31, 1998.

          According to information provided by the seller, physical occupancy at
the Property  averaged  approximately 90% in 1993, 90% in 1994, 75% in 1995, 70%
in 1996,  and 80% in 1997. On May 31, 1998,  the Property was 90% occupied.  The
current  residents at the Property are employed in a variety of white-collar and
blue-

                                      -10-
collar jobs, and there are also student residents and retired persons.

     The 1997 real estate tax rate applicable to the Property was $1.51 per $100
of assessed  value,  and the real estate  taxes for 1997 were  calculated  to be
$44,208.  The  assessed  value  was  $2,927,700.  The  basis of the  depreciable
residential real property portion of the Property (currently  estimated at about
$4,187,566)  will be depreciated  over 27.5 years on a straight-line  basis. The
basis of the personal  property  portion will be depreciated in accordance  with
the modified  accelerated cost recovery system of the Code.  Amounts to be spent
by the Company on repairs and  improvements  will be treated for tax purposes as
permitted by the Code based on the nature of the expenditures.

     The  Company  believes  that  the  Property  is  and  will  continue  to be
adequately covered by property and liability insurance.

     MATERIAL  FACTORS  CONSIDERED  IN  ASSESSING  THE  PROPERTY.   The  factors
considered  by the  Company  to be  relevant  in  evaluating  the  Property  for
acquisition by the Company included the following:

             1. The Company  believes  that the  Asheville,  North Carolina area
will enjoy continued economic  development and steady population  increase,  and
that such  development  and increase  will support  stable  occupancy  rates and
reasonable increases in rents at the Property.

             2.    Based upon an engineering report and its own inspections, the
Company believes that the Property is generally in sound condition.

             3.    The Property is  conveniently  located and proximate to major
employers and shopping.

             4.    The Company is familiar with the  Asheville,  North  Carolina
rental market.

     The Company is not aware of any material  adverse  factors  relating to the
Property not set forth in this report that would cause the financial information
contained in this report not to be  necessarily  indicative of future  operating
results.

                                      -11-
ITEM 7.a.

                                      -12-
INDEPENDENT AUDITORS' REPORT

The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia

     We have audited the  accompanying  statement of income and direct operating
expenses  exclusive of items not comparable to the proposed future operations of
the property Hampton Pointe Apartments located in Charleston, South Carolina for
the  twelve  month  period  ended  February  28,  1998.  This  statement  is the
responsibility   of  the   management   of  Hampton   Pointe   Apartments.   Our
responsibility is to express an opinion on this statement based on our audit.

     We conducted  our audit in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable   assurance   about   whether  the  statement  is  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement.  An audit also includes  assessing
the accounting principles used and significant estimates made by management,  as
well as evaluating the overall  presentation  of the statement.  We believe that
our audit provides a reasonable basis for our opinion.

     The  accompanying  statement was prepared for the purpose of complying with
the rules  and  regulations  of the  Securities  and  Exchange  Commission  (for
inclusion in a filing by  Cornerstone  Realty Income  Trust,  Inc.) and excludes
material  expenses,  described  in Note 2 to the  statement,  that  would not be
comparable  to  those  resulting  from the  proposed  future  operations  of the
property.

     In our opinion,  the statement  referred to above presents  fairly,  in all
material  respects,  the income and direct operating  expenses of Hampton Pointe
Apartments  (as defined  above) for the twelve month  period ended  February 28,
1998, in conformity with generally accepted accounting principles.

                                                  /s/  L.P. Martin & Co., P.C. 
                                                  -----------------------------
Richmond, Virginia
April 8, 1998

                                      -13-
HAMPTON POINTE APARTMENTS

         STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
                  ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
                           OPERATIONS OF THE PROPERTY

                  TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1998

INCOME
         Rental and Other Income                                 $   1,980,245

DIRECT OPERATING EXPENSES
         Administrative and Other                                      150,195
         Insurance                                                      50,061
         Repairs and Maintenance                                       323,067
         Taxes, Property                                               169,434
         Utilities                                                     156,652

              TOTAL DIRECT OPERATING EXPENSES                          849,409
                                                              
              Operating income exclusive of items not         
              comparable to the proposed future operations    
              of the property                                   $    1,130,836
                                                                    ==========

See accompanying notes to the financial statement.

                                      -14-
HAMPTON POINTE APARTMENTS

         NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
            EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
                           OPERATIONS OF THE PROPERTY

                  TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1998

NOTE 1 - ORGANIZATION

Hampton Pointe  Apartments is a 304 unit garden style apartment  complex located
on 20.25 acres in Charleston, South Carolina. The assets comprising the property
were  owned by  Hampton  Pointe  Properties,  A Limited  Partnership,  an entity
unaffiliated  with Cornerstone  Realty Income Trust,  Inc., during the financial
statement period.  Cornerstone  Realty Income Trust, Inc. purchased the property
on March 31, 1998.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES

Revenue  and  Expense  Recognition  -  The  accompanying   statement  of  rental
operations  has been  prepared  using  the  accrual  method  of  accounting.  In
accordance  with Rule 3-14 of  Regulation  S-X of the  Securities  and  Exchange
Commission,  the  statement  of income and direct  operating  expenses  excludes
interest and non rent related income and expenses not  considered  comparable to
those  resulting from the proposed future  operations of the property.  Excluded
expenses   are   mortgage   interest,   property   depreciation,   amortization,
professional fees and management fees.

Estimates - The preparation of financial statements in conformity with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Repairs  and  Maintenance  -  Repairs  and  maintenance  costs are  expensed  as
incurred,  while  significant  improvements,  renovations and  replacements  are
capitalized.

Advertising - Advertising costs are expensed in the period incurred.

                                      -15-
ITEM 7.b.

                                      -16-
INDEPENDENT AUDITORS' REPORT

The Board of Directors
Cornerstone Realty Income Trust, Inc.
Richmond, Virginia

     We have audited the  accompanying  statement of income and direct operating
expenses  exclusive of items not comparable to the proposed future operations of
the property Edgewood Knoll Apartments located in Asheville,  North Carolina for
the  twelve  month  period  ended  February  28,  1998.  This  statement  is the
responsibility   of  the   management   of  Edgewood   Knoll   Apartments.   Our
responsibility is to express an opinion on this statement based on our audit.

     We conducted  our audit in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable   assurance   about   whether  the  statement  is  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the statement.  An audit also includes  assessing
the accounting principles used and significant estimates made by management,  as
well as evaluating the overall  presentation  of the statement.  We believe that
our audit provides a reasonable basis for our opinion.

     The  accompanying  statement was prepared for the purpose of complying with
the rules  and  regulations  of the  Securities  and  Exchange  Commission  (for
inclusion in a filing by  Cornerstone  Realty Income  Trust,  Inc.) and excludes
material  expenses,  described  in Note 2 to the  statement,  that  would not be
comparable  to  those  resulting  from the  proposed  future  operations  of the
property.

     In our opinion,  the statement  referred to above presents  fairly,  in all
material  respects,  the income and direct operating  expenses of Edgewood Knoll
Apartments  (as defined  above) for the twelve month  period ended  February 28,
1998, in conformity with generally accepted accounting principles.

                                              /s/  L.P. Martin & Co., P.C.
                                              ----------------------------
                                             
Richmond, Virginia
April 8, 1998

                                      -17-
EDGEWOOD KNOLL APARTMENTS

         STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES EXCLUSIVE OF
                  ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
                           OPERATIONS OF THE PROPERTY

                  TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1998

INCOME
  Rental and Other Income                                       $    859,763
                                                                ------------

DIRECT OPERATING EXPENSES
  Administrative and Other                                            13,727
  Insurance                                                           17,434
  Repairs and Maintenance                                            217,092
  Taxes, Property                                                     44,208
  Utilities                                                           61,894
                                                                ------------
    
      TOTAL DIRECT OPERATING EXPENSES                                354,355
                                                                ------------
      Operating income exclusive of items not
      comparable to the proposed future operations
      of the property                                           $    505,408
                                                                ============

See accompanying notes to the financial statement.

                                      -18-
EDGEWOOD KNOLL APARTMENTS

         NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
            EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
                           OPERATIONS OF THE PROPERTY

                  TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1998

NOTE 1 - ORGANIZATION

Edgewood  Knoll  Apartments is a 168 unit garden and townhouse  style  apartment
complex located on approximately 17.02 acres in Asheville,  North Carolina.  The
assets  comprising  the  property  were  owned  by R. B. R.  and S.  T., a North
Carolina Limited  Partnership,  an entity  unaffiliated with Cornerstone  Realty
Income Trust,  Inc., during the financial  statement period.  Cornerstone Realty
Income Trust, Inc. purchased the property on March 31, 1998.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES

Revenue  and  Expense  Recognition  -  The  accompanying   statement  of  rental
operations  has been  prepared  using  the  accrual  method  of  accounting.  In
accordance  with Rule 3-14 of  Regulation  S-X of the  Securities  and  Exchange
Commission,  the  statement  of income and direct  operating  expenses  excludes
interest and non rent related income and expenses not  considered  comparable to
those  resulting from the proposed future  operations of the property.  Excluded
expenses are mortgage interest and property depreciation.

Estimates - The preparation of financial statements in conformity with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Repairs  and  Maintenance  -  Repairs  and  maintenance  costs are  expensed  as
incurred,  while  significant  improvements,  renovations and  replacements  are
capitalized.

Advertising - Advertising costs are expensed in the period incurred.

NOTE 3 - RELATED PARTY TRANSACTIONS

During the financial  statement period,  the property had no employees.  General
maintenance  and repair work was performed by  individuals  who worked solely at
this property but who were employees of an affiliate of the owner.  The property
was billed for the payroll and associated  burden at the affiliate's  cost which
totaled $86,688.

The affiliate also employed a staff which performed grounds maintenance for this
and  other  projects.  The  affiliate  billed  each  project  for  a  systematic
allocation of their  employee  payroll and burden as well as specific  materials
and supplies purchased for the various properties. The amount billed to Edgewood
Knoll  Apartments for the grounds  services totaled $44,641 during the financial
statement period.

(Continued)

                                      -19-
EDGEWOOD KNOLL APARTMENTS

         NOTES TO THE STATEMENT OF INCOME AND DIRECT OPERATING EXPENSES
            EXCLUSIVE OF ITEMS NOT COMPARABLE TO THE PROPOSED FUTURE
                           OPERATIONS OF THE PROPERTY

                  TWELVE MONTH PERIOD ENDED FEBRUARY 28, 1998

NOTE 3 - RELATED PARTY TRANSACTIONS  (Continued)

The affiliate  also billed the project  $6,240  during the  financial  statement
period for use of a maintenance truck. No formal lease exists.

Each of the  above  amounts  is  included  in  repairs  and  maintenance  on the
statement of income and direct operating expenses.

Administrative and other expense is below what would generally be expected for a
project of this size for the following reasons. All administrative  functions of
the property,  including  accounting and management  services and those services
which would generally be performed by a resident  manager and  assistants,  were
performed by the owner affiliate.  The affiliate's employees performed these and
other  duties for  several  projects.  Because  the  affiliate  and the  various
properties had common owners, no attempt was made to allocate employee costs and
other costs to  Edgewood  Knoll  Apartments  and the other  properties.  At this
point, any attempt to allocate cost to the property would be arbitrary.

                                      -20-
ITEM 7.c.

                                      -21-
PRO  FORMA  STATEMENT  OF  OPERATIONS  FOR THE  YEAR  ENDED  DECEMBER  31,  1997
(UNAUDITED)

The Unaudited Pro Forma  Statement of Operations for the year ended December 31,
1997 is presented as if 11 of the 13 Property acquisitions during 1997 and the 3
Property acquisitions during 1998 had occurred on January 1, 1997. The Unaudited
Pro Forma  Statement of  Operations  assumes the Company  qualifying  as a REIT,
distributing at least 95% of its taxable  income,  and,  therefore,  incurred no
federal  income  tax  liability  for the  period  presented.  In the  opinion of
management,   all  adjustments   necessary  to  reflect  the  effects  of  these
transactions have been made.

The  Unaudited Pro Forma  Statement of  Operations is presented for  comparative
purposes only and is not  necessarily  indicative of what the actual  results of
the  Company  would  have  been  for the year  ended  December  31,  1997 if the
acquisitions had occurred at the beginning of the period presented,  nor does it
purport to be indicative of the results of  operations  in future  periods.  The
Unaudited Pro Forma Statement of Operations  should be read in conjunction with,
and is  qualified  in its  entirety  by,  the  Company's  respective  historical
financial statements and notes thereto.
Historical                                                  Pro Forma     
                                                         Statement of           1997           Pro Forma             Before 1998    
                                                          Operations        Acquisitions      Adjustments            Acquisitions   
                                                        ------------------------------------------------------    ------------------
Date of Acquisitions                                               -               -                                                
Revenues from rental properties                               $71,970,624      $8,176,747                 -            $80,147,371  
Rental expenses:
                Property and maintenance                       19,494,692       2,524,622                 -             22,019,314  
                Taxes and insurance                             6,075,991         608,815                 -              6,684,806  
                Property management                             1,769,272               -                 -              1,769,272  
                General and administrative                      1,351,667               -                 -              1,351,667  
                Amortization and other depreciation                56,075               -                 -                 56,075  
                Depreciation of rental property                15,163,593               -         1,514,811 (A)         16,678,404  
                Other                                           1,200,669               -                 -              1,200,669  
                Management contract termination                   402,907               -                 -                402,907  
                                                        ----------------------------------------------------      ------------------

                                                               45,514,866       3,133,437         1,514,811             50,163,114  

Income before interest income (expense)                        26,455,758       5,043,310        (1,514,811)            29,984,257  
Interest income                                                   331,114               -                 -                331,114  
Interest expense                                               (7,561,319)              -        (2,411,653)(B)         (9,972,972) 
                                                        ----------------------------------------------------      ------------------

Net Income                                                    $19,225,553      $5,043,310       ($3,926,464)           $20,342,399  

Net income per share                                                $0.59                                                        
                                                                    ======                                                       

Wgt. avg. number of shares outstanding                         32,617,823                         2,041,544 (C)         34,659,367  
                                                               ===========                                              ============
Edgewood          Hampton                     
                                                      Stone Point          Knoll             Point                      
                                                       Pro Forma         Pro Forma         Pro Forma      Pro Forma        Total   
                                                      Adjustments       Adjustments       Adjustments    Adjustments     Pro Forma 
                                                     -----------------------------------------------------------------  ------------
Date of Acquisitions                                       1/15/98         3/31/98       3/31/98                                  - 
Revenues from rental properties                          $ 1,346,251      $859,763     $1,980,245                -      $84,333,630 
Rental expenses:
                Property and maintenance                     379,698       292,713        629,914                -       23,321,639 
                Taxes and insurance                           99,704        61,642        219,495                -        7,065,647 
                Property management                                -             -              -                -        1,769,272 
                General and administrative                         -             -              -                -        1,351,667 
                Amortization and other depreciation                -             -              -                -           56,075 
                Depreciation of rental property                    -             -              -          849,291 (A)   17,527,695 
                Other                                                                           -                -        1,200,669 
                Management contract termination                    -             -              -                -          402,907 
                                                     -----------------------------------------------------------------  ------------
                                                                                                                                    
                                                             479,402       354,355        849,409          849,291       52,695,571 
                                                                                                                                    
Income before interest income (expense)                      866,849       505,408      1,130,836         (849,291)      31,638,059 
Interest income                                                    -             -              -                -          331,114 
Interest expense                                                   -             -              -       (2,186,843)(B)  (12,159,815)
                                                     -----------------------------------------------------------------  ------------

Net Income                                                  $866,849      $505,408     $1,130,836      ($3,036,134)     $19,809,358 

Net income per share                                                                                                          $0.57 
                                                                                                                              ===== 

Wgt. avg. number of shares outstanding                                                                                   34,659,367 
                                                                                                                         ==========
(A) Represents the depreciation  expense of the properties acquired based on the
purchase price,  excluding amounts allocated to land, for the period of time not
owned by the Company.  The weighted average life of the property depreciated was
27.5 years.

(B)  Represents  the  interest  expense for the  properties  purchased  with the
Company's unsecured line of credit or other unsecured financing.  Total purchase
price of $63,851,388  for 1997  acquisitions  (8 properties)  and total purchase
price of $27,656,150  for 1998  acquisitions  (3  properties)  for the period in
which  properties were not owned for the year ended December 31, 1997.  Interest
was  computed  based on  interest  rates under the  Company's  line of credit in
effect at the time of the  respective  acquisition.

(C) Represents  additional  common shares used to purchase Ashley Run,  Carlyle,
Charleston  Place  and a portion  of  Dunwoody  based  upon  purchase  prices of
$18,000,000  $11,580,000,  $9,475,000 and  $10,560,312  (total purchase price of
Dunwoody was $15,200,000),  respectively and common shares issued in April, 1997
with net proceeds of $9.5875 per share to the Company.

                                      -22-
PRO FORMA  CONSOLIDATED  STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31,
1997 (UNAUDITED)

The following schedule provides detail of 1997 acquisitions by property included
in the Pro  Forma  Consolidated  Statement  of  Operations  for the  year  ended
December 31, 1997.
Westchase       Paces Arbor      Paces Forest       Ashley Run     
                                                          Pro Forma        Pro Forma         Pro Forma        Pro Forma      
                                                         Adjustments      Adjustments       Adjustments      Adjustments     
                                                         -----------      -----------       -----------      -----------
Date of Acquisition                                        1/15/97           3/1/97           3/1/97           4/30/97       

Property operations

    Revenues from rental properties                      $166,656         $128,993          $154,702         $916,820  
    Rental expenses:                                                                                                   
               Property management                         54,436           35,902            37,110          246,537  
               Taxes and insurance                         16,024            8,094             9,108           69,240  
               General and administrative                    -                -                -                 -     
               Amortization                                  -                -                -                 -     
               Depreciation of rental property               -                -                -                 -     
               Other                                         -                -                -                 -  
                                                 ----------------------------------------------------------------------
                                                           70,460           43,996            46,218          315,777  

Income before interest income (expense)                    96,196           84,997           108,484          601,043  
Interest income                                              -                -                -                 -     
Interest expense                                             -                -                -                 -  
                                                 ----------------------------------------------------------------------

Net Income                                                $96,196          $84,997          $108,484         $601,043  
                                                 ======================================================================
Charleston        Dunwoody          Clarion    
                                                           Carlyle Club        Place           Springs          Crossing   
                                                            Pro Forma        Pro Forma        Pro Forma        Pro Forma   
                                                           Adjustments      Adjustments      Adjustments      Adjustments  
                                                           -----------      -----------      -----------      -----------
Date of Acquisition                                          4/30/97          5/13/97          7/25/97          9/30/97    

Property operations

    Revenues from rental properties                        $637,842         $536,210       $1,437,230       $1,141,473     
    Rental expenses:                                                                                                       
               Property management                          205,723          169,807          451,935          442,582     
               Taxes and insurance                           46,970           34,987          144,766           59,664     
               General and administrative                      -                -                -                -        
               Amortization                                    -                -                -                -        
               Depreciation of rental property                 -                -                -                -        
               Other                                           -                -                -                -     
                                                 --------------------------------------------------------------------------
                                                            252,693          204,794          596,701          502,246     

Income before interest income (expense)                     385,149          331,416          840,529          639,227     
Interest income                                                   -             -                -                -        
Interest expense                                                  -             -                -                -        
                                                 --------------------------------------------------------------------------

Net Income                                                 $385,149         $331,416         $840,529         $639,227     
                                                 ==========================================================================
Remington 
                                                       St. Regis         Place          Stone Brooke          1997
                                                       Pro Forma       Pro Forma         Pro Forma        Acquisition
                                                      Adjustments     Adjustments       Adjustments       Adjustments
                                                      -----------     -----------       -----------       -----------
Date of Acquisition                                    10/31/97         10/31/97          10/31/97

Property operations

    Revenues from rental properties                  $1,100,453         $918,833         $1,037,535       $8,176,747
    Rental expenses:                                                                          -
               Property management                      294,153          262,938            323,499        2,524,622
               Taxes and insurance                       64,195           60,505             95,262          608,815
               General and administrative                  -                -                 -                    -
               Amortization                                -                -                 -                    -
               Depreciation of rental property             -                -                 -                    -
               Other                                       -                -                 -                    -
                                                 --------------------------------------------------------------------
                                                        358,348          323,443            418,761        3,133,437

Income before interest income (expense)                 742,105          595,390            618,774        5,043,310
Interest income                                            -                -                 -                    -
Interest expense                                           -                -                 -                    -
                                                 --------------------------------------------------------------------

Net Income                                             $742,105         $595,390           $618,774       $5,043,310
                                                 ====================================================================
-23-
PRO FORMA  STATEMENT  OF  OPERATIONS  FOR THE THREE  MONTHS ENDED MARCH 31, 1998
(UNAUDITED)

The Unaudited Pro Forma Statement of Operations for the three month period ended
March 31, 1998 is presented as if the 3 Property  acquisitions  made during 1998
had occurred on January 1, 1998. The Unaudited Pro Forma Statement of Operations
assumes  the  Company  qualifying  as a REIT,  distributing  at least 95% of its
taxable income, and, therefore, incurred no federal income tax liability for the
period  presented.  In the opinion of management,  all adjustments  necessary to
reflect the effects of these transactions have been made.

The  Unaudited Pro Forma  Statement of  Operations is presented for  comparative
purposes only and is not  necessarily  indicative of what the actual  results of
the  Company  would  have  been  for the  period  ended  March  31,  1998 if the
acquisitions had occurred at the beginning of the period presented,  nor does it
purport to be indicative of the results of  operations  in future  periods.  The
Unaudited Pro Forma Statement of Operations  should be read in conjunction with,
and is  qualified  in its  entirety  by,  the  Company's  respective  historical
financial statements and notes thereto.
Stone              Pinnacle 
                                                                      Historical             Point               Ridge   
                                                                     Statement of          Pro Forma           Pro Forma 
                                                                      Operations          Adjustments         Adjustments
                                                                 --------------------------------------------------------
Date of Acquisitions                                                           -            1/15/98             3/31/98  

Rental and other income                                              $20,962,469            $ 56,094             $214,941
                                                                                                                         
Rental expenses:

           Property and maintenance                                    5,499,525              15,821               73,178
           Taxes and insurance                                         1,523,849               4,154               15,411
           Property management                                           512,319                 -                    -  
           General and administrative                                    356,339                 -                    -  
           Amortization and other depreciation                            16,138                 -                    -  
           Depreciation of rental property                             4,683,384                 -                    -  
           Other                                                         406,959                 -                    -  
                                                            -------------------------------------------------------------

                                                                      12,998,513              19,975               88,589

Income before interest income (expense)                                7,963,956              36,119              126,352
Interest income                                                           93,010                 -                   -   
Interest expense                                                      (2,820,918)                -                   -   
                                                                 --------------------------------------------------------

Net Income                                                            $5,236,048             $36,119             $126,352

Net income per share                                                       $0.15                                         
                                                                          ======                                         

Wgt. avg. number of shares outstanding                                35,701,334                                         
                                                                     ===========
Hampton
                                                                     Pointe           1998
                                                                   Pro Forma        Pro Forma                     Total
                                                                  Adjustments       Adjustments                  Pro Forma
                                                           --------------------------------------------      --------------
Date of Acquisitions                                                3/31/98                                             -

Rental and other income                                          $495,061              -                      $21,728,565
                                                                                                                        -
Rental expenses:

           Property and maintenance                               157,479              -                        5,746,003
           Taxes and insurance                                     54,874              -                        1,598,288
           Property management                                       -                 -                          512,319
           General and administrative                                -                 -                          356,339
           Amortization and other depreciation                       -                 -                           16,138
           Depreciation of rental property                           -             147,656  (A)                 4,831,040
           Other                                                     -                 -                          406,959
                                                           ---------------------------------------      -----------------

                                                                  212,353          147,656                     13,467,086

Income before interest income (expense)                           282,708         (147,656)                     8,261,479
Interest income                                                     -                -                             93,010
Interest expense                                                    -             (409,092) (B)                (3,230,010)
                                                           --------------------------------------------      --------------

Net Income                                                       $282,708        ($556,748)                    $5,124,479

Net income per share                                                                                                $0.14
                                                                                                               ==========

Wgt. avg. number of shares outstanding                                                                         35,701,334
                                                                                                               ==========
(A) Represents the depreciation  expense of the properties acquired based on the
purchase price, excluding amounts allocated  to land, for the period of time not
owned by the Company.  The weighted average life of the property depreciated was
27.5 years.

(B) Represents the interest expense for the 3 Properties for the period in which
the  properties  were not owned for the three month period ended March 31, 1998,
interest was computed based on interest rates under the Company's line of credit
in effect at the time of the respective acquisition.

                                      -24-
SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned hereunto duly authorized.

                                           Cornerstone Realty Income Trust, Inc.

Date:  June 11, 1998                      By:  /s/ Stanley J. Olander, Jr.
                                                --------------------------------
                                                Stanley J. Olander, Jr.,
                                                Chief Financial Officer Of
                                                Cornerstone Realty Income
                                                Trust, Inc.

                                      -25-
EXHIBIT INDEX

                      Cornerstone Realty Income Trust, Inc.
                         Form 8-K dated March 31, 1998

Exhibit Number               Exhibit

     10.1                    Purchase Contract for Hampton Point Apartments

     10.2                    Purchase Contract for Pinnacle Ridge (formerly
                             Edgewood Knoll) Apartments

     23.1                    Consent of Independent Auditors

     23.2                    Consent of Independent Auditors

                                      -16-