10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

Form 10-Q

(Mark One)

[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2013

or

[ ]   TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission file number 0-09262

REAL ESTATE ASSOCIATES LIMITED

(Exact name of registrant as specified in its charter)

California	95-3187912
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

80 International Drive

Greenville, South Carolina  29615

(Address of principal executive offices)

(864) 239-1000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. [X] Yes  [ ] No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes  [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]	Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No

PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

REAL ESTATE ASSOCIATES LIMITED

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

	March 31,	December 31,
	2013	2012
Assets
Cash and cash equivalents	$   122	$   185
Investments in and advances to Local Partnerships	--	--
Receivables and deposits	81	91
Restricted escrows	516	412
Other assets	83	163
Investment property:
Land	366	366
Buildings and related personal property	3,703	3,703
Total investment property	4,069	4,069
Less accumulated depreciation	(38)	(7)
Investment property, net	4,031	4,062
Total assets	$ 4,833	$ 4,913
Liabilities and Partners’ Capital (Deficiency)
Liabilities:
Accounts payable and accrued expenses	$    97	$   104
Accrued fees due to General Partner	549	535
Advances and accrued interest due to General Partner
or affiliates	888	877
Tenant security deposit liability	60	63
Accrued property taxes	105	85
Deferred revenue	23	23
Mortgage notes payable	3,141	3,221
Total liabilities	4,863	4,908
Contingencies	--	--
Partners' Capital (Deficiency):
General partner	(127)	(127)
Limited partners	97	132
Total partners’ capital (deficiency)	(30)	5
Total liabilities and partners' capital
(deficiency)	$ 4,833	$ 4,913

See Accompanying Notes to Consolidated Financial Statements

REAL ESTATE ASSOCIATES LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS

 (Unaudited)

(In thousands, except per interest data)

	Three Months Ended  March 31,
	2013	2012
Revenues:
Rental income	$   213	$    --
Other income	77	--
Total revenues	290	--
Expenses:
Operating	218	--
Depreciation and amortization	52	--
Property taxes	20	--
Management fees – General Partner	14	13
General and administrative	1	3
Legal and accounting	34	25
Interest expense	21	11
Total expenses	360	52
Loss from partnership operations	(70)	(52)
Distributions in excess of investment in Local
Partnerships	35	23
Net loss	$   (35)	$   (29)
Net loss allocated to general partner (1%)	$    --	$    --
Net loss allocated to limited partners (99%)	$   (35)	$   (29)
Net loss per limited partnership interest	$ (2.15)	$ (1.78)

See Accompanying Notes to Consolidated Financial Statements

REAL ESTATE ASSOCIATES LIMITED

CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICICIENCY)

 (Unaudited)

(In thousands)

	General	Limited
	Partner	Partners	Total
Partners' capital (deficiency),
December 31, 2012	$  (127)	$   132	$     5
Net loss for the three months
ended March 31, 2013	--	(35)	(35)
Partners' capital (deficiency),
March 31, 2013	$  (127)	$    97	$   (30)

See Accompanying Notes to Consolidated Financial Statements

REAL ESTATE ASSOCIATES LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Three Months Ended
	March 31,
	2013	2012
Cash flows from operating activities:
Net loss	$   (35)	$   (29)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization	52	--
Amortization of mortgage premium	(11)	--
Change in accounts:
Receivables and deposits	10	--
Restricted escrows	(104)	--
Other assets	59	--
Accounts payable and accrued expenses	(7)	(6)
Accrued fees due to General Partner	14	13
Accrued interest on advances	11	11
Tenant security deposit liability	(3)	--
Accrued property taxes	20	--
Net cash provided by (used in) operating
activities	6	(11)
Cash flows used in financing activities:
Principal payments on mortgage notes payable	(69)	--
Net decrease in cash and cash equivalents	(63)	(11)
Cash and cash equivalents, beginning of period	185	78
Cash and cash equivalents, end of period	$   122	$    67
Supplemental disclosure of cash flow information:
Cash paid for interest	$    10	$    --

See Accompanying Notes to Consolidated Financial Statements

REAL ESTATE ASSOCIATES LIMITED

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Organization and Summary of Significant Accounting Policies

General

The information contained in the following notes to the unaudited consolidated financial statements is condensed from that which would appear in the annual audited consolidated financial statements; accordingly, the consolidated financial statements included herein should be reviewed in conjunction with the consolidated financial statements and related notes thereto contained in the annual report for the fiscal year ended December 31, 2012. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end.  The results of operations for the interim periods presented are not necessarily indicative of the results expected for the entire year.

In the opinion of the Partnership’s management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting primarily of normal recurring items) considered necessary for a fair presentation. The consolidated balance sheet at December 31, 2012 has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements.

The general partner has a one percent interest in profits and losses of the Partnership.  The limited partners have the remaining 99 percent interest in proportion to their respective investments.  The general partner is National Partnership Investments, LLC, a California limited liability company (“NAPICO” or the "General Partner").  The General Partner is a subsidiary of Bethesda Holdings II, LLC, a privately held real estate asset management company (“Bethesda”).

At both March 31, 2013 and December 31, 2012, the Partnership had outstanding 16,251 limited partnership interests.

Basis of Presentation

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

The Partnership’s management evaluated subsequent events through the time this Quarterly Report on Form 10-Q was filed.

Principles of Consolidation

As a result of the assignment of the local operating general partner interest in Bethel Towers Limited Dividend Housing Association (“Bethel Towers”) to the Partnership on December 10, 2012 (as discussed in Note 2), the Partnership began consolidating the assets, liabilities, and operations of Bethel Towers as of December 10, 2012. The consolidated financial statements of the Partnership include its 99.99% general and limited partner interests in Bethel Towers. All significant inter-partnership balances have been eliminated. The apartment property owned by Bethel Towers is located in Detroit, Michigan.

Method of Accounting for Investments in Local Partnerships

With the exception of Bethel Towers, the investments in local partnerships (the “Local Partnerships”) are accounted for on the equity method.

Net Loss Per Limited Partnership Interest

Net loss per limited partnership interest was computed by dividing the limited partners’ share of net loss by the number of limited partnership interests outstanding at the beginning of the year.  The number of limited partnership interests used was 16,251 and 16,268 for the three months ended March 31, 2013 and 2012, respectively.

Variable Interest Entities

The Partnership consolidates any variable interest entities in which the Partnership holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Partnership’s investment; the obligation or likelihood for the Partnership or other investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors.  Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.

On December 10, 2012, the Partnership became the operating general partner of Bethel Towers, as a result of the assignment of the local operating general partner interest in Bethel Towers to the Partnership. Therefore, effective December 10, 2012, the Partnership began consolidating this Local Partnership and it is no longer considered a VIE (see Note 2).

At March 31, 2013 and December 31, 2012, the Partnership holds variable interests in 4 VIEs for which the Partnership is not the primary beneficiary.  The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in each of the Local Partnerships, that the general partner of each of the Local Partnerships is the primary beneficiary of the respective Local Partnership. In making this determination, the Partnership considered the following factors:

·the general partners conduct and manage the business of the Local Partnerships;

·the general partners have the responsibility for and sole discretion over selecting a property management agent for the Local Partnerships’ underlying real estate properties;

·the general partners are responsible for approving operating and capital budgets for the properties owned by the Local Partnerships;

·the general partners are obligated to fund any recourse obligations of the Local Partnerships;

·the general partners are authorized to borrow funds on behalf of the Local Partnerships; and

·the Partnership, as a limited partner in each of the Local Partnerships, does not have the ability to direct or otherwise significantly influence the activities of the Local Partnerships that most significantly impact such entities’ economic performance.

The 4 VIEs for which the Partnership is not the primary beneficiary consist of Local Partnerships that are directly engaged in the ownership and management of 4 apartment properties with a total of 204 units.  The Partnership is involved with those VIEs as a non-controlling limited partner equity holder. The Partnership’s maximum exposure to loss as a result of its involvement with the unconsolidated VIEs is limited to the Partnership’s recorded investments in and receivables from these VIEs, which were zero at March 31, 2013 and December 31, 2012. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future.

Note 2 – Investment in and Advances to Local Partnerships

As of March 31, 2013 and December 31, 2012, the Partnership holds limited partnership interests in 5 Local Partnerships. The Local Partnerships as of March 31, 2013 own residential low income rental projects consisting of 350 apartment units. The mortgage loans for these projects are payable to or insured by various government agencies.

Effective December 10, 2012, the Partnership designated itself as the operating general partner of Bethel Towers pursuant to the terms of the partnership agreement for Bethel Towers whereby the Partnership was to be named the operating general partner of Bethel Towers upon the death of the existing operating general partner.  Accordingly, the 0.99% local operating general partner interest in Bethel Towers was assigned to the Partnership as of December 10, 2012. As a result of this assignment, the Partnership now consolidates this Local Partnership (as discussed in Note 1). All assets and liabilities of Bethel Towers were consolidated, effective December 10, 2012, at fair value.  The Partnership recorded an intangible asset for the value of the in-place lease assets of approximately $131,000 determined by using internal valuation techniques that consider the terms of the in-place leases and current market data for comparable leases.  This intangible asset will be amortized over a period of six months.  The investment property was recorded at fair value determined by using internal valuation techniques that considered comparable market transactions, discounted cash flow techniques, replacement costs and other available information.  The investment property will be depreciated over 30 years.  The mortgage notes payable were recorded at fair value determined by discounting future cash flows using a discount rate commensurate with that currently believed to be available to the Partnership for similar term mortgage notes payable.  Due to the short term nature of the balances, the Partnership assumed the fair value of all other current assets and liabilities approximated their carrying value and no adjustments were recorded.  The consolidation resulted in a gain of $1,385,000 for the year ended December 31, 2012, as a result of the fair value of the assets of Bethel Towers exceeding the fair value of Bethel Towers’ liabilities.  The fair value measurements of the investment property, mortgage notes payable and intangible assets have been classified by the Partnership within Level 2 of the fair value hierarchy as defined in Note 4.

On August 14, 2012, Bethel Towers entered into a purchase and sale contract to sell its investment property to a third party for a gross sales price of$4,200,000. After payment of closing costs and repayment of the notes payable encumbering the property, the Partnership expects to receive a distribution of approximately $1,070,000. The sale is expected to close during the third quarter of 2013.

With the exception of its investment in Bethel Towers, the Partnership, as a limited partner, does not have a contractual relationship with the Local Partnerships or exercise control over the activities and operations, including refinancing or selling decisions, of the Local Partnerships that would require or allow for consolidation. Accordingly, the Partnership accounts for its investments in the Local Partnerships using the equity method. The Partnership is allocated profits and losses of the Local Partnerships based upon its respective ownership percentage (between 95% and 99%). Distributions of surplus cash from operations from most of the Local Partnerships are restricted by the Local Partnerships’ Regulatory Agreements with the United States Department of Housing and Urban Development (“HUD”). These restrictions limit the distribution to a portion, generally less than 10%, of the initial invested capital. The excess surplus cash is deposited into a residual receipts reserve, of which the ultimate realization by the Partnership is uncertain as HUD frequently retains it upon sale or dissolution of the Local Partnership. The Partnership is allocated profits and losses and receives distributions from refinancings and sales in accordance with the Local Partnerships’ partnership agreements. These agreements usually limit the Partnership’s distributions to an amount substantially less than its ownership percentage in the Local Partnership.

The individual investments are carried at cost plus the Partnership’s share of the Local Partnership’s profits less the Partnership’s share of the Local Partnership’s losses, distributions and impairment charges.  The Partnership is not legally liable for the obligations of the Local Partnerships and is not otherwise committed to provide additional support to them. Therefore, it does not recognize losses once its investment in each of the Local Partnerships reaches zero. Distributions from the Local Partnerships are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. When the investment balance has been reduced to zero, subsequent distributions received are recognized as income in the accompanying consolidated statements of operations. The Partnership received operating distributions of approximately $35,000 and $23,000 from one Local Partnership for the three months ended March 31, 2013 and 2012, respectively.

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

Prior to January 1, 2012, the investment balance in four of the Local Partnerships had been reduced to zero. The Partnership’s investment balance in Bethel Towers was zero prior to its consolidation effective December 10, 2012.

At times, advances are made to the Local Partnerships. Advances made by the Partnership to the individual Local Partnerships are considered part of the Partnership's investment in the Local Partnerships.  Advances made to Local Partnerships for which the investment has been reduced to zero are charged to expense.  During the three months ended March 31, 2013 and 2012 the Partnership made no such advances.

The following are unaudited condensed combined estimated statements of operations for the three months ended March 31, 2013 and 2012 for the Local Partnerships in which the Partnership has investments, excluding amounts for Bethel Towers which the Partnership consolidates (in thousands).

	Three Months Ended March 31, 2013	Three Months Ended March 31, 2012
Rental and other income	$  310	$  314
Expenses
Operating expense	229	229
Financial expenses	29	29
Depreciation and amortization	26	39
Total expenses	284	297
Net income	$   26	$   17

Note 3 – Transactions with Affiliated Parties

Under the terms of the Restated Certificate and Agreement of Limited Partners, the Partnership is obligated to NAPICO for an annual management fee equal to 0.5 percent of the Partnership’s original invested assets of the limited partnerships and is calculated at the beginning of each year.  Invested assets are defined as the costs of acquiring project interests, including the proportionate amount of the mortgage loans related to the Partnership's interest in the capital accounts of the respective Local Partnerships. The management fee incurred was approximately $14,000 and $13,000 for the three months ended March 31, 2013 and 2012, respectively. At March 31, 2013 and December 31, 2012, the Partnership owed NAPICO approximately $498,000 and $484,000, respectively, for management fees and this amount is included in accrued fees due to General Partner.

The General Partner was entitled to receive a liquidation fee of approximately $51,000 related to the sale of the limited partnership interest in Cherry Hill Apartments, which was sold in September 2003. This fee was accrued and is included in accrued fees due to General Partner. The fee will not be paid until the limited partners have received a return of their original invested capital.

The General Partner and its affiliates made no advances to the Partnership during the three months ended March 31, 2013 and 2012.  Interest on advances is charged at prime plus 2%, or 5.25% at March 31, 2013. Interest expense was approximately $11,000 for both the three months ended March 31, 2013 and 2012. At March 31, 2013 and December 31, 2012, the Partnership owed approximately $888,000 and $877,000, respectively, in advances and related accrued interest to the General Partner and its affiliates.

As of March 31, 2013 and December 31, 2012, the accrued fees due to the General Partner exceeded the Partnership’s cash. The Partnership Agreement provides that the fees and advances due to the General Partner may only be paid from the Partnership’s available cash, however, the Partnership still remains liable for all such amounts.

Note 4 - Fair Value of Financial Instruments

Financial Accounting Standards Board Accounting Standards Codification Topic 825, “Financial Instruments”, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership is required to classify these fair value measurements into one of three categories, based on the nature of the inputs used in the fair value measurement.  Level 1 of the hierarchy includes fair value measurements based on unadjusted quoted prices in active markets for identical assets or liabilities the Partnership can access at the measurement date.  Level 2 includes fair value measurements based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.  Level 3 includes fair value measurements based on unobservable inputs.  The classification of fair value measurements is subjective and generally accepted accounting principles requires the Partnership to disclose more detailed information regarding those fair value measurements classified within the lower levels of the hierarchy. The Partnership believes that the carrying amount of its financial instruments approximates their fair value due to the short-term maturity of these instruments. At March 31, 2013, the Partnership believes that the carrying amount of assets and liabilities reported on the balance sheet that require such disclosure approximated their fair value. See Note 2 regarding fair value determinations for the assets and liabilities of Bethel Towers.

Note 5 - Contingencies

The General Partner is involved in various lawsuits arising from transactions in the ordinary course of business.  In the opinion of management and the General Partner, the claims will not result in any material liability to the Partnership.

ITEM 2.     Management's Discussion and Analysis of Financial Condition and Results of Operations

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Quarterly Report contains or may contain information that is forward-looking within the meaning of the federal securities laws, including without limitation, statements regarding the Partnership’s ability to maintain current or meet projected occupancy, rental rates and property operating results and the effect of redevelopments.  Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond the Partnership’s control, including, without limitation: financing risks, including the availability and cost of financing and the risk that the Partnership’s cash flows from operations may be insufficient to meet required payments of principal and interest; natural disasters and severe weather such as hurricanes; national and local economic conditions, including the pace of job growth and the level of unemployment; energy costs; the terms of governmental regulations that affect the Partnership, the Partnership’s property and the Partnership’s investment in Local Partnerships and interpretations of those regulations; the competitive environment in which the Partnership operates; real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for residents in such markets; insurance risk, including the cost of insurance; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the Local Partnerships in which the Partnership has invested. Readers should carefully review the Partnership’s consolidated financial statements and the notes thereto, as well as the other documents the Partnership files from time to time with the Securities and Exchange Commission.

The General Partner monitors developments in the area of legal and regulatory compliance.

The Partnership's consolidated investment property consists of one apartment complex. The following table sets forth the average occupancy of the property for the three months ended March 31, 2013 and 2012:

	Average Occupancy
Property	2013	2012
Bethel Towers	96%	93%
Detroit, Michigan

The Partnership’s financial results depend upon a number of factors including the ability to attract and maintain tenants at the consolidated investment property, interest rates on mortgage loans, costs incurred to operate the consolidated investment property, general economic conditions and weather.  Although Bethel Towers owns an apartment complex that must compete with other apartment complexes for tenants, government mortgage interest and rent subsidies make it possible to rent units to eligible tenants at below market rates. In general, the Partnership believes this insulates the property from market competition.

Liquidity and Capital Resources

The Partnership’s primary source of funds is the receipt of distributions received from Local Partnerships in which the Partnership has invested.  The Partnership received operating distributions of approximately $35,000 and $23,000 from one Local Partnership during the three months ended March 31, 2013 and 2012, respectively. An infrequent source of funds is funds received by the Partnership as its share of any proceeds from the sale of a property owned by a Local Partnership or the Partnership’s sale of its interest in a Local Partnership.

The properties in which the Partnership has invested, through the Partnership’s investments in the Local Partnerships, receive one or more forms of assistance from the Federal Government. As a result, the Local Partnerships' ability to transfer funds either to the Partnership or among the Local Partnerships in the form of cash distributions, loans or advances is generally restricted by these government assistance programs.

As of March 31, 2013 and December 31, 2012, the Partnership had cash and cash equivalents of approximately $122,000 and $185,000, respectively. The decrease in cash and cash equivalents of approximately $63,000 is due to approximately $69,000 of cash used in financing activities, partially offset by approximately $6,000 of cash provided by operating activities. Cash used in financing activities consisted of principal payments made on the mortgages encumbering the Partnership’s consolidated investment property.

The Partnership’s assets are thought to be generally sufficient for any of its near-term needs (exclusive of repayment of accrued fees owed to the General Partner and advances and accrued interest owed to the General Partner or affiliates).  The mortgage indebtedness encumbering the Partnership’s consolidated investment property of approximately $3,141,000 is amortized over 30 years with a balloon payment of approximately $2,160,000 due in 2016.

Results of Operations

Effective December 10, 2012, the Partnership designated itself as the operating general partner of Bethel Towers Limited Dividend Housing Association (“Bethel Towers”),pursuant to the terms of the partnership agreement for Bethel Towers whereby the Partnership is to be named the operating general partner of Bethel Towers upon the death of the existing operating general partner.  Accordingly, the 0.99% local operating general partner interest in Bethel Towers was assigned to the Partnership as of December 10, 2012. As a result of this assignment, the Partnership now consolidates this Local Partnership (see Note 2 to the consolidated financial statements included in “Item 1. Financial Statements”).  Therefore, the consolidated financial statements for the three months ended March 31, 2013 reflect the consolidation of Bethel Towers, whereas the financial statements for the three months ended March 31, 2012 reflect Bethel Towers as an equity method investment.

On August 14, 2012, Bethel Towers entered into a purchase and sale contract to sell its investment property to a third party for a gross sales price of$4,200,000. After payment of closing costs and repayment of the notes payable encumbering the property, the Partnership expects to receive a distribution of approximately $1,070,000. The sale is expected to close during the third quarter of 2013.

At March 31, 2013, the Partnership has investments in five Local Partnerships, which own housing projects that were substantially rented except for Clinton Apartments. The Partnership believes that the low occupancy for Clinton Apartments is attributable to a lack of qualified applicants to rent units designated for the elderly.

With the exception of its investment in Bethel Towers, the Partnership, as a limited partner, does not have a contractual relationship with the Local Partnerships or exercise control over the activities and operations, including refinancing or selling decisions of the Local Partnerships that would require or allow for consolidation. Accordingly, the Partnership accounts for its investment in the Local Partnerships, except for Bethel Towers, using the equity method.  Thus the individual investments are carried at cost plus the Partnership’s share of the Local Partnership’s profits less the Partnership’s share of the Local Partnership’s losses, distributions and impairment charges.  However, since the Partnership is not legally liable for the obligations of the Local Partnerships, or is not otherwise committed to provide additional support to them, it does not recognize losses once the Partnership’s investment in each of the Local Partnerships reaches zero.  Distributions from the Local Partnerships are accounted for as a reduction of the investment balance until the investment balance is reduced to zero.  Subsequent distributions received are recognized as income in the consolidated statements of operations.  For those investments where the Partnership has determined that the carrying value of the Partnership’s investments approximates the estimated fair value of those investments, the Partnership’s policy is to recognize equity in income of the Local Partnerships only to the extent of distributions received and amortization of acquisition costs from those Local Partnerships. Therefore, the Partnership limits its recognition of equity earnings to the amount the Partnership expects to ultimately realize.  During the three months ended March 31, 2013 and 2012, the Partnership did not recognize any equity in income of the Local Partnerships. During the three months ended March 31, 2013 and 2012, the Partnership received approximately $35,000 and $23,000, respectively, in operating distributions from one Local Partnership that were recognized as income in the consolidated statements of operations since the Partnership’s investment in the Local Partnership had been reduced to zero.

At March 31, 2013 and December 31, 2012, the investment balance in four of the Local Partnerships had been reduced to zero.  The Partnership consolidates its investment in Bethel Towers.

The Partnership recognized a net loss of approximately $35,000 for the three months ended March 31, 2013, compared to a net loss of approximately $29,000 for the three months ended March 31, 2012.  The increase in net loss is due to an increase in total expenses, partially offset by an increase in total revenues and an increase in distributions received in excess of investment in Local Partnerships. The increase in total expenses is due to an increase in operating, depreciation and amortization, property taxes and interest expense. The increase in total revenues is due to an increase in both rental and other income. Both the increase in total expenses and the increase in total revenues are a result of the consolidation of Bethel Towers. Total expenses also increased due to an increase in legal and accounting expense.  Legal and accounting fees were approximately $34,000 and $25,000 for the three months ended March 31, 2013 and 2012, respectively.  The increase in legal and accounting fees is due to an increase in legal costs associated with the review of the Partnership’s investments and the anticipated sale of Bethel Towers.

An annual management fee is payable to the General Partner of the Partnership and is calculated at 0.5 percent of the Partnership's original remaining invested assets of the Local Partnerships and is calculated at the beginning of each year. The management fee is paid to the General Partner for the General Partner’s management of the Partnership’s affairs. The fee is payable beginning with the month following the Partnership's initial investment in a Local Partnership. Management fees were approximately $14,000 and $13,000 for the three months ended March 31, 2013 and 2012, respectively.

The General Partner and its affiliates made no advances to the Partnership during the three months ended March 31, 2013 and 2012.  Interest on advances is charged at prime plus 2%, or 5.25% at March 31, 2013. Interest expense was approximately $11,000 for both the three months ended March 31, 2013 and 2012. At March 31, 2013 and December 31, 2012, the Partnership owed approximately $888,000 and $877,000, respectively, in advances and related accrued interest to the General Partner and its affiliates.

At times, advances are made to the Local Partnerships. Advances made by the Partnership to the individual Local Partnerships are considered part of the Partnership's investment in the Local Partnerships.  Advances made to Local Partnerships for which the investment has been reduced to zero are charged to expense. During the three months ended March 31, 2013 and 2012 the Partnership made no such advances.

The Partnership, as a limited partner in the Local Partnerships in which it has invested, is subject to the risks incident to the construction, management, and ownership of improved real estate.  The Partnership investments are also subject to adverse general economic conditions, and, accordingly, the status of the national economy, including substantial unemployment, concurrent inflation and changing legislation which could increase vacancy levels, rental payment defaults, and operating expenses, which in turn, could substantially increase the risk of operating losses for the projects.

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

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

Off-Balance Sheet Arrangements

With the exception of Bethel Towers, the Partnership owns limited partnership interests in unconsolidated Local Partnerships in which the Partnership’s ownership percentage ranges from 95% to 99%.  However, based on the provisions of the relevant partnership agreements, the Partnership, as a limited partner, does not have control or a contractual relationship with the Local Partnerships that would require or allow for consolidation under accounting principles generally accepted in the United States (see “Note 1 – Organization and Summary of Significant Accounting Policies” of the consolidated financial statements in “Item 1. Financial Statements”).  There are no lines of credit, side agreements or any other derivative financial instruments between the Local Partnerships and the Partnership.  Accordingly the Partnership’s maximum risk of loss related to these unconsolidated Local Partnerships is limited to the recorded investments in and receivables from the Local Partnerships.  See “Note 2 – Investment in and Advances to Local Partnerships” of the consolidated financial statements in “Item 1. Financial Statements” for additional information about the Partnership’s investments in unconsolidated Local Partnerships.

Variable Interest Entities

The Partnership consolidates any variable interest entities in which the Partnership holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Partnership’s investment; the obligation or likelihood for the Partnership or other investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors.  Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.

On December 10, 2012, the Partnership became the operating general partner of Bethel Towers, as a result of the assignment of the local operating general partner interest in Bethel Towers to the Partnership. Therefore, effective December 10, 2012, the Partnership began consolidating this Local Partnership and it is no longer considered a VIE (see “Note 2 – Investment in and Advances to Local Partnerships” of the consolidated financial statements in “Item 1. Financial Statements”).

At March 31, 2013 and December 31, 2012, the Partnership holds variable interests in 4 VIEs for which the Partnership is not the primary beneficiary.  The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in each of the Local Partnerships, that the general partner of each of the Local Partnerships is the primary beneficiary of the respective Local Partnership. In making this determination, the Partnership considered the following factors:

·the general partners conduct and manage the business of the Local Partnerships;

·the general partners have the responsibility for and sole discretion over selecting a property management agent for the Local Partnerships’ underlying real estate properties;

·the general partners are responsible for approving operating and capital budgets for the properties owned by the Local Partnerships;

·the general partners are obligated to fund any recourse obligations of the Local Partnerships;

·the general partners are authorized to borrow funds on behalf of the Local Partnerships; and

·the Partnership, as a limited partner in each of the Local Partnerships, does not have the ability to direct or otherwise significantly influence the activities of the Local Partnerships that most significantly impact such entities’ economic performance.

The 4 VIEs at March 31, 2013 for which the Partnership is not the primary beneficiary consist of Local Partnerships that are directly engaged in the ownership and management of 4 apartment properties with a total of 204 units.  The Partnership is involved with those VIEs as a non-controlling limited partner equity holder. The Partnership’s maximum exposure to loss as a result of its involvement with the unconsolidated VIEs is limited to the Partnership’s recorded investments in and receivables from these VIEs, which were zero at March 31, 2013 and December 31, 2012. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future.

Critical Accounting Policies and Estimates

The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States, which require the Partnership to make estimates and assumptions. Judgments and assessments of uncertainties are required in applying the Partnership’s accounting policies in many areas.  The Partnership believes that of its significant accounting policies, the following may involve a higher degree of judgment and complexity.

Method of Accounting for Investments in Local Partnerships

With the exception of Bethel Towers, the Partnership, as a limited partner, does not have a contractual relationship with the Local Partnerships or exercise control over the activities and operations, including refinancing or selling decisions, of the Local Partnerships that would require or allow for consolidation. Accordingly, the Partnership accounts for its investments in the Local Partnerships, except for Bethel Towers, using the equity method. The Partnership is allocated profits and losses of the Local Partnerships based upon its respective ownership percentage (between 95% and 99%). Distributions of surplus cash from operations from most of the Local Partnerships are restricted by the Local Partnerships’ Regulatory Agreements with the United States Department of Housing and Urban Development (“HUD”). These restrictions limit the distribution to a portion, generally less than 10%, of the initial invested capital. The excess surplus cash is deposited into a residual receipts reserve, of which the ultimate realization by the Partnership is uncertain as HUD frequently retains it upon sale or dissolution of the Local Partnership. The Partnership is allocated profits and losses and receives distributions from refinancings and sales in accordance with the Local Partnerships’ partnership agreements. These agreements usually limit the Partnership’s distributions to an amount substantially less than its ownership percentage in the Local Partnership. 

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

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

Impairment of Long-Lived Assets

Investment property is stated at fair value as of the date the Partnership began consolidating Bethel Towers, less accumulated depreciation, unless the carrying amount of the asset is not recoverable. If events or circumstances indicate that the carrying amount of the property may not be recoverable, the Partnership will make an assessment of its recoverability by comparing the carrying amount to the Partnership’s estimate of the undiscounted future cash flows, excluding interest charges, of the property.   If the carrying amount exceeds the estimated aggregate undiscounted future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property.

Real property investment is subject to varying degrees of risk.  Several factors may adversely affect the economic performance and value of the Partnership’s investment property. These factors include, but are not limited to, general economic climate; competition from other apartment communities and other housing options; local conditions, such as loss of jobs or an increase in the supply of apartments that might adversely affect apartment occupancy or rental rates; changes in governmental regulations and the related cost of compliance; increases in operating costs (including real estate taxes) due to inflation and other factors, which may not be offset by increased rents; changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing; and changes in interest rates and the availability of financing. Any adverse changes in these and other factors could cause an impairment of the Partnership’s asset.

Revenue Recognition

Bethel Towers generally leases apartment units for twelve-month terms or less.  Rental income attributable to leases, net of any concessions, is recognized as rents become due. Bethel Towers evaluates all accounts receivable from residents and establishes an allowance, after the application of security deposits, for all receivables due from former tenants.

ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.     CONTROLS AND PROCEDURES

(a)   Disclosure Controls and Procedures.

The Partnership’s management, with the participation of the Senior Managing Director and Director of Reporting of Bethesda, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, has evaluated the effectiveness of the Partnership’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this report. Based on such evaluation, the Senior Managing Director and Director of Reporting of Bethesda, who are the equivalent of the Partnership’s principal executive officer and principal financial officer, respectively, have concluded that, as of the end of such period, the Partnership’s disclosure controls and procedures are effective.

(b)   Changes in Internal Control Over Financial Reporting.

There has been no change in the Partnership’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 6.     EXHIBITS

See Exhibit Index.

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 thereunto duly authorized.

	REAL ESTATE ASSOCIATES LIMITED
	(a California Limited Partnership)
	By:   National Partnership Investments, LLC
	General Partner
Date: May 13, 2013	By:   /s/Brian Flaherty
	Brian Flaherty
	Senior Managing Director
Date: May 13, 2013	By:   /s/Edward Schmidt
	Edward Schmidt
	Director of Reporting

REAL ESTATE ASSOCIATES LIMITED

EXHIBIT INDEX

Exhibit     Description of Exhibit

3.1        Articles of incorporation and bylaws: The Registrant is not incorporated. The Partnership Agreement was filed with Form S-11 registration #260561, incorporated by reference.

3.2        Amendments to Third Restated Certificate and Agreement of Limited Partnership, incorporated by reference to the Registrant’s Current Report on Form 8-K dated January 23, 2004.

3.3        Third Restated Certificate and Agreement of Limited Partnership, incorporated by reference to the Registrant’s Current Report on Form 8-K dated January 23, 2004.

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

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

32.1       Certification of the equivalent of the Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101        XBRL (Extensible Business Reporting Language). The following materials from Real Estate Associates Limited’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2013, formatted in XBRL: (i) consolidated balance sheets, (ii) consolidated statements of operations, (iii) consolidated statement of changes in partners’ capital (deficiency), (iv) consolidated statements of cash flows, and (v) notes to consolidated financial statements (1).

(1)        As provided in Rule 406T of Regulation S-T, this information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Brian Flaherty, certify that:

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

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

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

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

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

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Date: May 13, 2013

/s/Brian Flaherty

Brian Flaherty

Senior Managing Director of National Partnership Investments, LLC, equivalent of the chief executive officer of the Partnership

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Edward Schmidt, certify that:

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

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

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

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

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

(b)   Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

EX-32.1

Exhibit 32.1

Certification of CEO and CFO

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report on Form 10-Q of Real Estate Associates Limited (the "Partnership"), for the quarterly period ended March 31, 2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), Brian Flaherty, as the equivalent of the chief executive officer of the Partnership, and Edward Schmidt, as the equivalent of the chief financial officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge:

(1)   The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)   The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.

      /s/Brian Flaherty

Name: Brian Flaherty

Date: May 13, 2013

      /s/Edward Schmidt

Name: Edward Schmidt

Date: May 13, 2013

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

XML

Note 4 - Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2013

Notes

Note 4 - Fair Value of Financial Instruments

Note 4 - Fair Value of Financial Instruments

Financial Accounting Standards Board Accounting Standards Codification Topic 825, “Financial Instruments”, requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership is required to classify these fair value measurements into one of three categories, based on the nature of the inputs used in the fair value measurement.  Level 1 of the hierarchy includes fair value measurements based on unadjusted quoted prices in active markets for identical assets or liabilities the Partnership can access at the measurement date.  Level 2 includes fair value measurements based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.  Level 3 includes fair value measurements based on unobservable inputs.  The classification of fair value measurements is subjective and generally accepted accounting principles requires the Partnership to disclose more detailed information regarding those fair value measurements classified within the lower levels of the hierarchy. The Partnership believes that the carrying amount of its financial instruments approximates their fair value due to the short-term maturity of these instruments. At March 31, 2013, the Partnership believes that the carrying amount of assets and liabilities reported on the balance sheet that require such disclosure approximated their fair value. See Note 2 regarding fair value determinations for the assets and liabilities of Bethel Towers.

XML

Note 3 - Transactions With Affiliated Parties

3 Months Ended

Mar. 31, 2013

Notes

Note 3 - Transactions With Affiliated Parties

Note 3 – Transactions with Affiliated Parties

Under the terms of the Restated Certificate and Agreement of Limited Partners, the Partnership is obligated to NAPICO for an annual management fee equal to 0.5 percent of the Partnership’s original invested assets of the limited partnerships and is calculated at the beginning of each year.  Invested assets are defined as the costs of acquiring project interests, including the proportionate amount of the mortgage loans related to the Partnership's interest in the capital accounts of the respective Local Partnerships. The management fee incurred was approximately $14,000 and $13,000 for the three months ended March 31, 2013 and 2012, respectively. At March 31, 2013 and December 31, 2012, the Partnership owed NAPICO approximately $498,000 and $484,000, respectively, for management fees and this amount is included in accrued fees due to General Partner.

The General Partner was entitled to receive a liquidation fee of approximately $51,000 related to the sale of the limited partnership interest in Cherry Hill Apartments, which was sold in September 2003. This fee was accrued and is included in accrued fees due to General Partner. The fee will not be paid until the limited partners have received a return of their original invested capital.

The General Partner and its affiliates made no advances to the Partnership during the three months ended March 31, 2013 and 2012.  Interest on advances is charged at prime plus 2%, or 5.25% at March 31, 2013. Interest expense was approximately  $11,000 for both the three months ended March 31, 2013 and 2012. At March 31, 2013 and December 31, 2012, the Partnership owed approximately $888,000 and $877,000, respectively, in advances and related accrued interest to the General Partner and its affiliates.

As of March 31, 2013 and December 31, 2012, the accrued fees due to the General Partner exceeded the Partnership’s cash. The Partnership Agreement provides that the fees and advances due to the General Partner may only be paid from the Partnership’s available cash, however, the Partnership still remains liable for all such amounts.

XML

Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2013	Dec. 31, 2012
Assets
Cash and cash equivalents	$ 122	$ 185
Investments in and advances to Local Partnerships	0	0
Receivables and deposits	81	91
Restricted escrows	516	412
Other assets	83	163
Investment property:
Land	366	366
Buildings and related personal property	3,703	3,703
Total investment property	4,069	4,069
Less accumulated depreciation	38	7
Investment property, net	4,031	4,062
Total assets	4,833	4,913
Liabilities:
Accounts payable and accrued expenses	97	104
Accrued fees due to General Partner	549	535
Advances and accrued interest due to General Partner or affiliates	888	877
Tenant security deposit liability	60	63
Accrued property taxes	105	85
Deferred revenue	23	23
Mortgage notes payable	3,141	3,221
Total liabilities	4,863	4,908
Contingencies	0	0
Partners' Capital (Deficiency):
General partner	(127)	(127)
Limited partners	97	132
Total partners' capital (deficiency)	(30)	5
Total liabilities and partners' capital (deficiency)	$ 4,833	$ 4,913

XML

Note 1 - Organization and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2013

Notes

Note 1 - Organization and Summary of Significant Accounting Policies

Note 1 – Organization and Summary of Significant Accounting Policies

General

The information contained in the following notes to the unaudited consolidated financial statements is condensed from that which would appear in the annual audited consolidated financial statements; accordingly, the consolidated financial statements included herein should be reviewed in conjunction with the consolidated financial statements and related notes thereto contained in the annual report for the fiscal year ended December 31, 2012. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end.  The results of operations for the interim periods presented are not necessarily indicative of the results expected for the entire year.

In the opinion of the Partnership’s management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting primarily of normal recurring items) considered necessary for a fair presentation. The consolidated balance sheet at December 31, 2012 has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements.

The general partner has a one percent interest in profits and losses of the Partnership.  The limited partners have the remaining 99 percent interest in proportion to their respective investments.  The general partner is National Partnership Investments, LLC, a California limited liability company (“NAPICO” or the "General Partner").  The General Partner is a subsidiary of Bethesda Holdings II, LLC, a privately held real estate asset management company (“Bethesda”).

At both March 31, 2013 and December 31, 2012, the Partnership had outstanding 16,251 limited partnership interests.

Basis of Presentation

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

The Partnership’s management evaluated subsequent events through the time this Quarterly Report on Form 10-Q was filed.

Principles of Consolidation

As a result of the assignment of the local operating general partner interest in Bethel Towers Limited Dividend Housing Association (“Bethel Towers”) to the Partnership on December 10, 2012 (as discussed in Note 2), the Partnership began consolidating the assets, liabilities, and operations of Bethel Towers as of December 10, 2012. The consolidated financial statements of the Partnership include its 99.99% general and limited partner interests in Bethel Towers. All significant inter-partnership balances have been eliminated. The apartment property owned by Bethel Towers is located in Detroit, Michigan.

Method of Accounting for Investments in Local Partnerships

With the exception of Bethel Towers, the investments in local partnerships (the “Local Partnerships”) are accounted for on the equity method.

Net Loss Per Limited Partnership Interest

Net loss per limited partnership interest was computed by dividing the limited partners’ share of net loss by the number of limited partnership interests outstanding at the beginning of the year.  The number of limited partnership interests used was 16,251 and 16,268 for the three months ended March 31, 2013 and 2012, respectively.

Variable Interest Entities

The Partnership consolidates any variable interest entities in which the Partnership holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Partnership’s investment; the obligation or likelihood for the Partnership or other investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors.  Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.

On December 10, 2012, the Partnership became the operating general partner of Bethel Towers, as a result of the assignment of the local operating general partner interest in Bethel Towers to the Partnership. Therefore, effective December 10, 2012, the Partnership began consolidating this Local Partnership and it is no longer considered a VIE (see Note 2).

At March 31, 2013 and December 31, 2012, the Partnership holds variable interests in 4 VIEs for which the Partnership is not the primary beneficiary.  The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in each of the Local Partnerships, that the general partner of each of the Local Partnerships is the primary beneficiary of the respective Local Partnership. In making this determination, the Partnership considered the following factors:

·        the general partners conduct and manage the business of the Local Partnerships;

·        the general partners have the responsibility for and sole discretion over selecting a property management agent for the Local Partnerships’ underlying real estate properties;

·        the general partners are responsible for approving operating and capital budgets for the properties owned by the Local Partnerships;

·        the general partners are obligated to fund any recourse obligations of the Local Partnerships;

·        the general partners are authorized to borrow funds on behalf of the Local Partnerships; and

·        the Partnership, as a limited partner in each of the Local Partnerships, does not have the ability to direct or otherwise significantly influence the activities of the Local Partnerships that most significantly impact such entities’ economic performance.

The 4 VIEs for which the Partnership is not the primary beneficiary consist of Local Partnerships that are directly engaged in the ownership and management of 4 apartment properties with a total of 204 units.  The Partnership is involved with those VIEs as a non-controlling limited partner equity holder. The Partnership’s maximum exposure to loss as a result of its involvement with the unconsolidated VIEs is limited to the Partnership’s recorded investments in and receivables from these VIEs, which were zero at March 31, 2013 and December 31, 2012. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future.

XML

Note 2 - Investment in and Advances To Local Partnerships: Schedule of Statement of Operations of Investment Partnerships (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Details
Rental and other income	$ 310	$ 314
Operating expense	229	229
Financial expenses	29	29
Depreciation & amortization expenses	26	39
Total expenses - Local Partnerships	284	297
Net income	$ 26	$ 17

XML

Note 2 - Investment in and Advances To Local Partnerships

3 Months Ended

Mar. 31, 2013

Notes

Note 2 - Investment in and Advances To Local Partnerships

Note 2 – Investment in and Advances to Local Partnerships

As of March 31, 2013 and December 31, 2012, the Partnership holds limited partnership interests in 5 Local Partnerships. The Local Partnerships as of March 31, 2013 own residential low income rental projects consisting of 350 apartment units. The mortgage loans for these projects are payable to or insured by various government agencies.

Effective December 10, 2012, the Partnership designated itself as the operating general partner of Bethel Towers pursuant to the terms of the partnership agreement for Bethel Towers whereby the Partnership was to be named the operating general partner of Bethel Towers upon the death of the existing operating general partner.  Accordingly, the 0.99% local operating general partner interest in Bethel Towers was assigned to the Partnership as of December 10, 2012. As a result of this assignment, the Partnership now consolidates this Local Partnership (as discussed in Note 1). All assets and liabilities of Bethel Towers were consolidated, effective December 10, 2012, at fair value.  The Partnership recorded an intangible asset for the value of the in-place lease assets of approximately $131,000 determined by using internal valuation techniques that consider the terms of the in-place leases and current market data for comparable leases.  This intangible asset will be amortized over a period of six months.  The investment property was recorded at fair value determined by using internal valuation techniques that considered comparable market transactions, discounted cash flow techniques, replacement costs and other available information.  The investment property will be depreciated over 30 years.  The mortgage notes payable were recorded at fair value determined by discounting future cash flows using a discount rate commensurate with that currently believed to be available to the Partnership for similar term mortgage notes payable.  Due to the short term nature of the balances, the Partnership assumed the fair value of all other current assets and liabilities approximated their carrying value and no adjustments were recorded.  The consolidation resulted in a gain of $1,385,000 for the year ended December 31, 2012, as a result of the fair value of the assets of Bethel Towers exceeding the fair value of Bethel Towers’ liabilities.  The fair value measurements of the investment property, mortgage notes payable and intangible assets have been classified by the Partnership within Level 2 of the fair value hierarchy as defined in Note 4.

On August 14, 2012, Bethel Towers entered into a purchase and sale contract to sell its investment property to a third party for a gross sales price of$4,200,000. After payment of closing costs and repayment of the notes payable encumbering the property, the Partnership expects to receive a distribution of approximately $1,070,000. The sale is expected to close during the third quarter of 2013.

With the exception of its investment in Bethel Towers, the Partnership, as a limited partner, does not have a contractual relationship with the Local Partnerships or exercise control over the activities and operations, including refinancing or selling decisions, of the Local Partnerships that would require or allow for consolidation. Accordingly, the Partnership accounts for its investments in the Local Partnerships using the equity method. The Partnership is allocated profits and losses of the Local Partnerships based upon its respective ownership percentage (between 95% and 99%). Distributions of surplus cash from operations from most of the Local Partnerships are restricted by the Local Partnerships’ Regulatory Agreements with the United States Department of Housing and Urban Development (“HUD”). These restrictions limit the distribution to a portion, generally less than 10%, of the initial invested capital. The excess surplus cash is deposited into a residual receipts reserve, of which the ultimate realization by the Partnership is uncertain as HUD frequently retains it upon sale or dissolution of the Local Partnership. The Partnership is allocated profits and losses and receives distributions from refinancings and sales in accordance with the Local Partnerships’ partnership agreements. These agreements usually limit the Partnership’s distributions to an amount substantially less than its ownership percentage in the Local Partnership.

The individual investments are carried at cost plus the Partnership’s share of the Local Partnership’s profits less the Partnership’s share of the Local Partnership’s losses, distributions and impairment charges.  The Partnership is not legally liable for the obligations of the Local Partnerships and is not otherwise committed to provide additional support to them. Therefore, it does not recognize losses once its investment in each of the Local Partnerships reaches zero. Distributions from the Local Partnerships are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. When the investment balance has been reduced to zero, subsequent distributions received are recognized as income in the accompanying consolidated statements of operations. The Partnership received operating distributions of approximately $35,000 and $23,000 from one Local Partnership for the three months ended March 31, 2013 and 2012, respectively.

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

Prior to January 1, 2012, the investment balance in four of the Local Partnerships had been reduced to zero. The Partnership’s investment balance in Bethel Towers was zero prior to its consolidation effective December 10, 2012.

At times, advances are made to the Local Partnerships. Advances made by the Partnership to the individual Local Partnerships are considered part of the Partnership's investment in the Local Partnerships.  Advances made to Local Partnerships for which the investment has been reduced to zero are charged to expense.  During the three months ended March 31, 2013 and 2012 the Partnership made no such advances.

The following are unaudited condensed combined estimated statements of operations for the three months ended March 31, 2013 and 2012 for the Local Partnerships in which the Partnership has investments, excluding amounts for Bethel Towers which the Partnership consolidates (in thousands).

	Three Months Ended March 31, 2013	Three Months Ended March 31, 2012
Rental and other income	$  310	$  314
Expenses
Operating expense	229	229
Financial expenses	29	29
Depreciation and amortization	26	39
Total expenses	284	297
Net income	$   26	$   17

XML

Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Revenues:
Rental income	$ 213	$ 0
Other income	77	0
Total revenues	290	0
Expenses:
Operating	218	0
Depreciation and amortization	52	0
Property taxes	20	0
Management fees - General Partner	14	13
General and administrative	1	3
Legal and accounting	34	25
Interest expense	21	11
Total expenses	360	52
Loss from partnership operations	(70)	(52)
Distributions in excess of investment in Local Partnerships	35	23
Net loss	(35)	(29)
Net loss allocated to general partner (1%)	0	0
Net loss allocated to limited partners (99%)	$ (35)	$ (29)
Net loss per limited partnership interest	$ (2.15)	$ (1.78)

XML

Note 2 - Investment in and Advances To Local Partnerships: Schedule of Statement of Operations of Investment Partnerships (Tables)

3 Months Ended

Mar. 31, 2013

Tables/Schedules

Schedule of Statement of Operations of Investment Partnerships

	Three Months Ended March 31, 2013	Three Months Ended March 31, 2012
Rental and other income	$  310	$  314
Expenses
Operating expense	229	229
Financial expenses	29	29
Depreciation and amortization	26	39
Total expenses	284	297
Net income	$   26	$   17

XML

Document and Entity Information	3 Months Ended
	Mar. 31, 2013
Document and Entity Information:
Entity Registrant Name	REAL ESTATE ASSOCIATES LTD/CA
Document Type	10-Q
Document Period End Date	Mar. 31, 2013
Amendment Flag	false
Entity Central Index Key	0000225789
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding	16,251
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q1

XML

Note 1 - Organization and Summary of Significant Accounting Policies: General (Details)	Mar. 31, 2013	Dec. 31, 2012
Details
Outstanding Limited Partnership Interests	16,251	16,251

XML

Consolidated Statement of Shareholder Deficit (USD $) In Thousands	General Partner	Limited Partners	Total
Partners' capital (deficiency), beginning balance at Dec. 31, 2012	$ (127)	$ 132	$ 5
Net loss	0	(35)	(35)
Partners' capital (deficiency), ending balance at Mar. 31, 2013	$ (127)	$ 97	$ (30)

XML

Note 1 - Organization and Summary of Significant Accounting Policies: Basis of Presentation (Policies)

3 Months Ended

Mar. 31, 2013

Policies

Basis of Presentation

Basis of Presentation

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

The Partnership’s management evaluated subsequent events through the time this Quarterly Report on Form 10-Q was filed.

XML

Note 1 - Organization and Summary of Significant Accounting Policies: General (Policies)

3 Months Ended

Mar. 31, 2013

Policies

General

General

The information contained in the following notes to the unaudited consolidated financial statements is condensed from that which would appear in the annual audited consolidated financial statements; accordingly, the consolidated financial statements included herein should be reviewed in conjunction with the consolidated financial statements and related notes thereto contained in the annual report for the fiscal year ended December 31, 2012. Accounting measurements at interim dates inherently involve greater reliance on estimates than at year end.  The results of operations for the interim periods presented are not necessarily indicative of the results expected for the entire year.

In the opinion of the Partnership’s management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting primarily of normal recurring items) considered necessary for a fair presentation. The consolidated balance sheet at December 31, 2012 has been derived from the audited financial statements at that date but does not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements.

The general partner has a one percent interest in profits and losses of the Partnership.  The limited partners have the remaining 99 percent interest in proportion to their respective investments.  The general partner is National Partnership Investments, LLC, a California limited liability company (“NAPICO” or the "General Partner").  The General Partner is a subsidiary of Bethesda Holdings II, LLC, a privately held real estate asset management company (“Bethesda”).

At both March 31, 2013 and December 31, 2012, the Partnership had outstanding 16,251 limited partnership interests.

XML

Note 3 - Transactions With Affiliated Parties (Details) (USD $)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Details
Management fee expense - related party	$ 14,000	$ 13,000
Unpaid management fees - related party	498,000		484,000
Unpaid liquidation fee accrued prior years - related party	51,000		51,000
Interest expense on advances - related party	11,000	11,000
Unpaid advances & accrued interest - related party	$ 888,000		$ 877,000

XML

Note 1 - Organization and Summary of Significant Accounting Policies: Net Income (loss) Per Limited Partnership Interest (Details)	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Details
Limited Partnership Interests Outstanding for net income (loss) per interest calculations	16,251	16,268

XML

Note 1 - Organization and Summary of Significant Accounting Policies: Net Income (loss) Per Limited Partnership Interest (Policies)

3 Months Ended

Mar. 31, 2013

Policies

Net Income (loss) Per Limited Partnership Interest

Net Loss Per Limited Partnership Interest

Net loss per limited partnership interest was computed by dividing the limited partners’ share of net loss by the number of limited partnership interests outstanding at the beginning of the year.  The number of limited partnership interests used was 16,251 and 16,268 for the three months ended March 31, 2013 and 2012, respectively.

XML

Note 1 - Organization and Summary of Significant Accounting Policies: Principles of Consolidation (Policies)

3 Months Ended

Mar. 31, 2013

Policies

Principles of Consolidation

Principles of Consolidation

As a result of the assignment of the local operating general partner interest in Bethel Towers Limited Dividend Housing Association (“Bethel Towers”) to the Partnership on December 10, 2012 (as discussed in Note 2), the Partnership began consolidating the assets, liabilities, and operations of Bethel Towers as of December 10, 2012. The consolidated financial statements of the Partnership include its 99.99% general and limited partner interests in Bethel Towers. All significant inter-partnership balances have been eliminated. The apartment property owned by Bethel Towers is located in Detroit, Michigan.

XML

Note 1 - Organization and Summary of Significant Accounting Policies: Method of Accounting For Investments in Local Partnerships (Policies)

3 Months Ended

Mar. 31, 2013

Policies

Method of Accounting For Investments in Local Partnerships

Method of Accounting for Investments in Local Partnerships

With the exception of Bethel Towers, the investments in local partnerships (the “Local Partnerships”) are accounted for on the equity method.

XML

Note 1 - Organization and Summary of Significant Accounting Policies: Variable Interest Entities (Policies)

3 Months Ended

Mar. 31, 2013

Policies

Variable Interest Entities

Variable Interest Entities

The Partnership consolidates any variable interest entities in which the Partnership holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

In determining whether it is the primary beneficiary of a VIE, the Partnership considers qualitative and quantitative factors, including, but not limited to: which activities most significantly impact the VIE’s economic performance and which party controls such activities; the amount and characteristics of the Partnership’s investment; the obligation or likelihood for the Partnership or other investors to provide financial support; and the similarity with and significance to the business activities of the Partnership and the other investors.  Significant judgments related to these determinations include estimates about the current and future fair values and performance of real estate held by these VIEs and general market conditions.

On December 10, 2012, the Partnership became the operating general partner of Bethel Towers, as a result of the assignment of the local operating general partner interest in Bethel Towers to the Partnership. Therefore, effective December 10, 2012, the Partnership began consolidating this Local Partnership and it is no longer considered a VIE (see Note 2).

At March 31, 2013 and December 31, 2012, the Partnership holds variable interests in 4 VIEs for which the Partnership is not the primary beneficiary.  The Partnership has concluded, based on its qualitative consideration of the partnership agreement, the partnership structure and the role of the general partner in each of the Local Partnerships, that the general partner of each of the Local Partnerships is the primary beneficiary of the respective Local Partnership. In making this determination, the Partnership considered the following factors:

·        the general partners conduct and manage the business of the Local Partnerships;

·        the general partners have the responsibility for and sole discretion over selecting a property management agent for the Local Partnerships’ underlying real estate properties;

·        the general partners are responsible for approving operating and capital budgets for the properties owned by the Local Partnerships;

·        the general partners are obligated to fund any recourse obligations of the Local Partnerships;

·        the general partners are authorized to borrow funds on behalf of the Local Partnerships; and

·        the Partnership, as a limited partner in each of the Local Partnerships, does not have the ability to direct or otherwise significantly influence the activities of the Local Partnerships that most significantly impact such entities’ economic performance.

The 4 VIEs for which the Partnership is not the primary beneficiary consist of Local Partnerships that are directly engaged in the ownership and management of 4 apartment properties with a total of 204 units.  The Partnership is involved with those VIEs as a non-controlling limited partner equity holder. The Partnership’s maximum exposure to loss as a result of its involvement with the unconsolidated VIEs is limited to the Partnership’s recorded investments in and receivables from these VIEs, which were zero at March 31, 2013 and December 31, 2012. The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future.

XML

Note 2 - Investment in and Advances To Local Partnerships (Details) (USD $)	3 Months Ended		12 Months Ended
	Mar. 31, 2013	Mar. 31, 2012	Dec. 31, 2012
Details
Limited Partnership Interests held by Partnership	5		5
Apartment units within Investment Partnerships	350
Other Assets, Fair Value Disclosure			$ 131,000
Gain on consolidation Fair Value of Assets exceeding Liabilities of Bethel Towers			1,385,000
Investment Partnership under contract 2013 sale date, sale price Bethel Towers	4,200,000
Estimated distribution to Partnership upon sale - Bethel Towers	1,070,000
Operating distributions received from Investment Partnerships	$ 35,000	$ 23,000

XML

Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2013	Mar. 31, 2012
Cash flows from operating activities:
Net loss	$ (35)	$ (29)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	52	0
Amortization of mortgage premium	(11)	0
Change in accounts:
Receivables and deposits	10	0
Restricted escrows	(104)	0
Other assets	59	0
Accounts payable and accrued expenses	(7)	(6)
Accrued fees due to General Partner	14	13
Accrued interest on advances	11	11
Tenant security deposit liability	(3)	0
Accrued property taxes	20	0
Net cash provided by (used in) operating activities	6	(11)
Cash flows used in financing activities:
Principal payments on mortgage notes payable	(69)	0
Net decrease in cash and cash equivalents	(63)	(11)
Cash and cash equivalents, beginning of period	185	78
Cash and cash equivalents, end of period	122	67
Supplemental disclosure of cash flow information:
Cash paid for interest	$ 10	$ 0

XML

Note 5 - Contingencies

3 Months Ended

Mar. 31, 2013

Notes

Note 5 - Contingencies

Note 5 - Contingencies

The General Partner is involved in various lawsuits arising from transactions in the ordinary course of business.  In the opinion of management and the General Partner, the claims will not result in any material liability to the Partnership.

XML

Note 1 - Organization and Summary of Significant Accounting Policies: Variable Interest Entities (Details)	Mar. 31, 2013	Dec. 31, 2012
Details
Number of Variable Interest Entities held by Partnership	4	4
Number of apartment properties held by VIEs	4	4
Number of apartment units within VIEs	204	204