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                 [REAL ESTATE ASSOCIATES LIMITED III LETTERHEAD]


  March 11, 1998


  RE: REAL ESTATE ASSOCIATES LIMITED III


  Dear Investor:


           Several limited partners have called or written us to tell us that
  they have received an unsolicited tender offer to buy their interests in REAL
  III. The buyers, Bond Purchase LLC, represent that these purchases would be
  for investment purposes only.

          The General Partners are unable to value the interests because of a
  lack of market for them, and therefore cannot comment on the fairness of Bond
  Purchase LLC's offer. Limited Partners should also be aware that a sale of
  their interests in REAL III will have tax consequences that should be
  evaluated in consultation with each Limited Partner's own tax advisor.

          In addition, the General Partners of REAL III expect to solicit the
  consent of the Limited Partners to a proposed transaction pursuant to which
  several of the properties in which REAL III has invested would be sold to a
  real estate investment trust (the "REIT") to be organized by affiliates of the
  General Partners of REAL III. Proxy materials have not yet been filed with the
  Securities and Exchange Commission and solicitation of consents is not
  expected to commence until the second quarter of 1998. If the REIT transaction
  is consummated, limited partners would receive distributions of net sales
  proceeds according to their interests in the Partnership. It should be noted
  that the REIT transaction will be subject to a number of conditions in
  addition to approval by limited partners of REAL III, including completion of
  a proposed private placement of shares of the REIT. Accordingly, there can be
  no assurance that the proposed purchases by the REIT of the REAL III
  properties will be consummated or that, if consummated, would be on the
  currently proposed terms.

          Most of the limited partners have negative capital account balances
  with respect to their interests in REAL III. Our accountants tell us that on
  average, the negative capital account balance for a $5,000 investor at the end
  of December 1997 was approximately $8,100. This means that an investor would
  recognize gain from the sale of his REAL III interest in an amount equal to
  approximately $8,710 (the $8,100 negative capital account balance plus the
  $615 cash sales price). This gain would be "passive" and would be offset by
  passive losses which such investor may have from REAL III (suspended from
  prior years) or other sources. Unless a limited partner has suspended or
  current losses from other sources, a substantial portion of the gain would
  still be subject to tax liability.

           PLEASE CONSULT WITH YOUR TAX ADVISOR ABOUT THE IMPACT OF SUCH A SALE
  ON YOUR OWN PARTICULAR SITUATION.

                                     [LOGO]
        CORPORATE GENERAL PARTNER: National Partnership Investments Corp.



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  REAL III


          The General Partners urge each investor to carefully consider the
  foregoing information before tendering his or her units to Bond Purchase LLC.
  Although the offer letter states that investors cannot withdraw units which
  may already have been tendered, you should consult with your attorney to
  determine if this requirement is enforceable should you wish to reconsider
  your decision to tender.


                                   Sincerely,


                     National Partnership Investments Corp.


      /s/ CHARLES H. BOXENBAUM                     /s/ BRUCE E. NELSON

     Charles H. Boxenbaum                          Bruce E. Nelson
     Chairman of the Board                         President