REAL ESTATE ASSOCIATES LIMITED III RESTATED CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP

EXHIBIT 3.2

REAL ESTATE ASSOCIATES LIMITED III

RESTATED CERTIFICATE AND

AGREEMENT OF LIMITED PARTNERSHIP

This Restated Certificate and Agreement of Limited Partnership by and

among National Partnership Investments Corp., a California corporation with

principal offices at 1901 Avenue of the Stars, Los Angeles, California 90067

(the "Corporate General Partner"), and National Partnership Investments

Associates, a limited partnership ("NPIA" or the "Non-Corporate General

Partner"), the general partner of which is Nicholas G. Ciriello, an individual

residing at 418 South Lucerne Boulevard, Los Angeles, California 90020, as

general partners (hereinafter collectively referred to as the "General

Partners"), and Patricia W. Toy, an individual residing at 1782 Westridge

Road, Los Angeles, California 90049 ("Initial Limited Partner"), is entered

into as of January 5, 1981. Such Initial Limited Partner, and any additional

or substituted limited partners hereafter admitted to the Limited Partnership

as herein provided, are referred to collectively as the "Limited Partners" and

individually as a "Limited Partner." The term "Partners" shall mean all

General and Limited Partners, and the term "Partner" means any General or

Limited Partner.

W I T N E S S E T H:

WHEREAS, on July 25, 1980, the Partnership was formed pursuant to the

laws of the State of California;

WHEREAS, the General Partners and the Initial Limited Partner desire

to change certain provisions in, and restate in full, their agreement; and

WHEREAS, it is the intention of the parties thereto to admit

additional Limited Partners to the Partnership for the purpose of acquiring

additional capital therefor;

NOW, THEREFORE, the parties hereto hereby agree as follows:

Section 1: Formation.

1.1 The General Partners and the Initial Limited Partner do hereby

form a limited partnership (the "Partnership") under the Limited Partnership

Act of the State of California.

Section 2: Name.

2.1 The business of the Partnership shall be conducted under the name

Real Estate Associates Limited III, which name may be changed by the General

Partners by written notice to the Limited Partners.

Section 3: Addresses of Parties.

3.1 The principal place of business of the Partnership shall be at

1901 Avenue of the Stars, Suite 1200, Los Angeles, California 90067, or at

such other place as the General Partners may from time to time designate in

writing to the Limited Partners. The Partnership may also maintain such other

offices at such other places as the General Partners may deem advisable.

3.2 The addresses of the General Partners shall be those stated in

the first paragraph of this Agreement; or at such other places as the General

Partners may from time to time designate in writing to the Limited Partners.

The addresses of the Limited Partners shall be those stated after their names

on Schedule A hereto or in any amended certificate hereto. A Limited Partner

may change such address by written notice to the General Partners, which

notice shall become effective upon receipt.

Section 4: Business of the Partnership.

4.1 The business of the Partnership shall be:

(a) to acquire interests as a limited partner in any partnership

or joint venture (a "local limited partnership") which will (i) acquire,

lease, hold, finance, construct, improve, rehabilitate, manage, and/or

operate government-assisted or other housing projects (the "Projects" and

the interests of the Partnership in the local limited partnerships shall

be referred to as "Project Interests"), (ii) monitor and supervise

management of construction and operations of the Projects, (iii) arrange

for and supervise the conversion of any Project to other uses, or (iv)

perform any act for a purpose authorized by this Agreement;

(b) to acquire, hold (in the Partnership's name or under any

other title arrangement selected by the General Partners), lease, sell,

mortgage, convey, or refinance any real or personal property, including,

but not limited to, the Project Interests described in paragraph (a)

above;

(c) to hold, own, maintain, manage, improve, develop, operate,

sell, transfer, convey, lease, mortgage; exchange, or otherwise dispose

of or deal in or with Projects and Project Interests described in

paragraph (a) above; and

(d) to perform any acts to accomplish the foregoing purposes.

Section 5: Contributions to Capital; Additional Limited Partners.

5.1 The capital of the Limited Partnership shall be divided into no

less than 1 and up to 20 General Partners Interests and no less than 480 and

up to 14,000 non-assessable limited partnership interests, each of which

limited partnership interest is hereinafter referred to as a "Limited

Partnership Interest."

5.2 The General Partners shall contribute an aggregate of $12,500 to

the capital of the Partnership, for which the General Partners shall be

credited with the ownership of one General Partners Interest, and shall have

such interest in and to the profits and losses thereof as is described in

Section 7 hereof. Upon liquidation of the Partnership, the General Partners

will discharge any debit balance in their capital accounts by contributing to

the Partnership an amount up to the difference between 1% of total capital

contributions to the Partnership and $12,500. The General Partners may, but

are not required to, purchase Limited Partnership Interests and will

accordingly have as Limited Partners such additional pro rata interest in and

to the profits and losses of the Partnership pursuant to Section 7 hereof.

5.3 (a) The Initial Limited Partner has contributed $4,550 to the

capital of the Partnership pursuant to a promissory note, and has the right,

but not the obligation, to purchase additional Units as provided herein.

Furthermore, upon the admission of additional Limited Partners to the

Partnership, the Initial Limited Partner may withdraw such investment and

cease to be a Limited Partner.

(b) The General Partners are authorized to admit additional Limited

Partners to the Partnership by selling not more than 14,000 Limited

Partnership Interests for cash to selected persons as may apply to become

Limited Partners pursuant to the terms of an offering described in a

Prospectus (the "Prospectus") to which this Agreement will be annexed, by

completing a subscription agreement (the "Subscription Agreement") in the form

to be set forth in the Prospectus, provided that no person admitted as a

Limited Partner shall have been permitted to purchase more than 50 Units,

subject, however, to the right of the General Partners to establish special

requirements for larger subscriptions.

(c) The Limited Partnership Interests shall be sold to Limited

Partners in "Units". The minimum investment shall be one Unit at a purchase

price of $5,000 per Unit. Each Unit shall consist of two Limited Partnership

Interests and one warrant which will entitle the purchaser of a Unit to

acquire two additional Limited Partnership Interests ("Additional Limited

Partnership Interests") during the period January 1, 1982 to and including

January 22, 1982 at $2,500 each. The Partnership shall have the right to offer

for sale, at the best prices obtainable, any Limited Partnership Interest not

purchased pursuant to the exercise of Warrants. The foregoing sums relating to

the purchase of Units and Limited Partnership Interests shall be paid to the

Partnership concurrently with the recordation in the Official Records of Los

Angeles County, California, of an amendment of this Agreement reflecting the

admission of each Limited Partner to the Partnership or increase in the number

of Limited Partnership Interests held by such Limited Partner, as the case may

be. Investors whose subscriptions have been accepted by the General Partners

will be admitted as Limited Partners within 15 days after the minimum of

$1,400,000 from the sale of Units has been received by the General Partners.

Thereafter, investors will be admitted as Limited Partners no later than the

last day of the calendar month following the date the General Partners accept

their subscriptions. The General Partners will accept or reject subscriptions

within three days after receipt thereof.

(d) The Partnership presently contemplates the public offering of a

maximum of 3,000 Units at an offering price of $5,000 per Unit or an aggregate

offering price of $15,000,000. These Units represent 6,000 Limited Partnership

Interests and 3,000 Warrants to purchase an aggregate of 6,000 Additional

Limited Partnership Interests at a price of $2,500 per Additional Limited

Partnership Interest, or an aggregate exercise purchase price of $15,000,000,

provided, that if the Additional Limited Partnership Interests can not be sold

for $2,500 each, the General Partner shall have the authority to offer and

sell such Interests at the best prices that can be obtained. A sales

commission of 9% shall be paid to E.F. Hutton & Company Inc. ("Hutton") with

respect to the sale of Units; a sales commission of 8.75% shall be paid to

Hutton with respect to the sale of Limited Partnership Interests pursuant to

the exercise of Warrants, provided, however, that the sales commission to be

charged on Limited Partnership Interests available for sale by the Partnership

upon failure to exercise Warrants shall be 9%. The Partnership will also

reimburse Hutton for certain expenses. In anticipation of receipt of

subscriptions in excess of 3,000 Units, the Partnership will register with the

Securities and Exchange Commission a total of 3,300 Units (covering an

aggregate of 6,600 Limited Partnership Interests and Warrants to purchase an

aggregate of 6,600 Additional Limited Partnership Interests) and will grant to

Hutton the right, exercisable in its sole discretion, to sell these additional

Units so registered (on the same terms and conditions as the other Units) on

behalf of the Partnership. Such right to sell an additional 300 Units will

expire on the date of termination of the offering and will provide additional

compensation for Hutton.

(e) No Partner shall have the right, except as provided in Section

5.3(a), to withdraw or reduce his capital contribution. No Limited Partner

shall have the right to bring an action for partition against the Partnership

or to demand or receive property other than cash in return for his capital

contribution. No Limited Partner shall have priority over any other Limited

Partner, either as to the return of his capital contribution or as to profits,

losses, or distributions.

(f) The net proceeds to the Partnership will be $4,550 for each Unit.

A person acquiring Units will participate with other Limited Partners in the

income, gains, losses, deductions, credits, and cash distributions on a pro

rata basis in accordance with the number of Limited Partnership Interests

owned. A capital account shall be maintained for each Partner. To each Account

shall be credited (i) the amount of money paid by a Partner to the Partnership

to acquire his Limited Partnership Interests (but not Warrants), (ii) the

Partner's distributive share of Profits, and (iii) the Partner's distributive

share of any tax-exempt Partnership income, and from each Capital Account

there shall be debited (iv) the net fair market value of property distributed

to the Partner, (v) the amount of money distributed to the Partner, (vi) the

Partner's distributive share of Losses, and (vii) the Partner's distributive

share of Partnership expenditures not deductible in computing taxable income

and not properly capitalized.

(g) To accomplish the purpose of this Section 5.3, the General

Partners are hereby authorized to do all things necessary to admit such

additional Limited Partners, including, but not limited to, registering the

Units under the Securities Act of 1933, as amended, pursuant to the rules and

regulations of the Securities and Exchange Commission, qualifying the Units

for sale with state securities regulatory authorities or perfecting exemptions

from qualification, and entering into such underwriting or agency arrangements

for the solicitation of the Units upon such terms and conditions ' as the

General Partners may deem advisable.

5.4 Proceeds from contributions for Units and other Partnership funds

shall be held by the General Partners as fiduciaries for the exclusive use of

the Partnership and after the start of Partnership operations shall be

temporarily invested in U.S. Treasury Bills and Bonds, bank certificates of

deposit, bank repurchase obligations, commercial paper (investment grade), and

tax-exempt notes and bonds, or registered investment companies holding such

securities. Interest thereon shall inure to the benefit of the Partnership,

and the Limited Partners, as such, shall not receive interest on funds

contributed by them. Any funds (other than designated reserves) not invested

in Projects or Project Interests within 18 months from the effective date of

the Prospectus shall be distributed pro rata to the Limited Partners as a

return of capital.

Section 6: Organizational Expenses.

6.1 The Partnership shall pay all costs of qualifying and offering

the Units and Additional Limited Partnership interests (including sales

commissions) and all formation and organization expenses, including expenses

associated with the selection and acquisition of Projects (which expenses are,

however, subject to the limitation set forth in Section 9.6.1 hereof). The

General Partners will be liable for the amount, if any, by which the aggregate

organizational expenses and sales commissions exceed 15% of the gross proceeds

from the sale of Units and Additional Limited Partnership Interests.

Section 7: Profits and Losses.

7.1 Prior to the amendment to this Agreement for the purpose of

admitting additional Limited Partners to the Partnership in accordance with

Section 5.3(b) hereof, the General Partners shall be allocated, as they may

agree between themselves, 99% of each item of income, gain, loss, deduction,

and credit (collectively, "Partnership Tax Items" and individually

"Partnership Tax Item"). During such period, the Initial Limited Partner shall

be allocated 1% of each Partnership Tax Item. At all times thereafter, except

as provided in Section 7.2 and the remainder of this Section, the General

Partners shall be allocated 1% and the Limited Partners as a class shall be

allocated 99% of each Partnership Tax Item. Income recognized by the

Partnership upon expiration of Warrants shall be allocated 1% to the General

Partners and 99% to the non-exercising Limited Partners in proportion to their

respective Limited Partnership Interests.

7.2 Upon the total or partial liquidation of the Partnership or the

disposition or partial disposition of a Project or Project Interest, income

and losses of the Partnership shall be allocated as follows. Income not

exceeding an amount equal to the sum of the negative adjusted capital account

balances of all Partners with such balances (computed after any distributions

made under Section 9.6.2) shall be allocated among such Partners in proportion

to their respective negative capital account balances and without regard to

Section 7.3; and income in excess thereof shall be allocated 1% to the General

Partners and 99% to the Limited Partners as a class. Losses not exceeding an

amount equal to the sum of the positive adjusted capital account balances of

all Partners with such balances (computed after any distributions under

Section 9.6.2) shall be allocated among such Partners in proportion to their

respective positive adjusted capital account balances and without regard to

Section 7.3; and losses in excess thereof shall be allocated 1% to the General

Partners and 99% to the Limited Partners as a class. Notwithstanding any other

provision of this Agreement, the General Partners shall be allocated at least

1% of each Partnership Tax Item.

7.3 Each Limited Partner shall be allocated the same fractional share

of each Partnership Tax Item allocable to Limited Partners as a class as the

total number of Limited Partnership Interests owned by him divided by the

total number of Limited Partnership Interests outstanding, subject to the

following exception. Commencing with the 1982 taxable year, each Partnership

Tax Item allocable to Limited Partners as a class shall be allocated 62-1/2%

to holders of Additional Limited Partnership Interests, and 37-1/2% to holders

of 1981 Partnership Interests until the total amount of each Partnership Tax

Item allocated to each Additional Limited Partnership Interest equals the

total amount of each Partnership Tax Item (including a weighted average of

each 1981 Partnership Tax Item) allocated to each 1981 Partnership Interest.

The weighted average of each 1981 Partnership Tax Item shall be a fraction,

the numerator of which is a sum, consisting of the product, for each month

until January 1, 1982, of the total amount of that Partnership Tax Item

allocated to the group comprised of 1981 Limited Partnership Interests

purchased through that month times the number of months remaining, including

the month in question, until January 1, 1982, and the denominator of which is

a sum, consisting of the product, for each month until January 1, 1982, of

1981 Limited Partnership Interests purchased through that month times the

number of months remaining, including the month in question, until January 1,

1982. As each Partnership Tax Item is so equalized between 1981 Limited

Partnership Interests and Additional Limited Partnership Interests, this

allocation shall cease as to that Partnership Tax Item.

7.4 In determining whether Partnership Tax Items are realized, paid,

accrued, or incurred during any period in which any Limited Partner is a

member of the Partnership, such Items shall be allocated on any basis

permitted by Section 706(c) of the Internal Revenue Code of 1954, as

determined by the General Partners. In the event of the transfer of a Limited

Partnership Interest (other than in the case of a default), the distributive

share of these Partnership Tax Items (in respect of the Limited Partnership

Interest so transferred) shall be allocated between the transferor and the

transferee in accordance with this Section.

Section 8: Cash Distributions.

8.1 The General Partners shall distribute annually substantially all

of the Partnership's Net Cash Flow as defined herein. Except as provided

Section 8.2 hereof, the General Partners shall be entitled to receive 1% of

the Net Cash Flow to be distributed, but any such distributions to the General

Partners shall be reduced by the amount paid as an Annual Management Fee as

set forth in Section 9.5 hereof. The Limited Partners as a class shall receive

the balance of the distributed Net Cash Flow, which shall be distributed among

Limited Partners as Partnership Tax Items are allocated to them under Section

7.3.

8.2 Upon the total or partial liquidation of the Partnership or the

disposition or partial disposition of a Project or Project Interest, net

assets available for distribution remaining after all distributions required

to be made under Section 9.6.2 shall be distributed to the Partners in

proportion to their positive adjusted capital account balances (computed after

the allocation of income or loss under Section 7.2).

8.3 "Net Cash Flow" shall mean the Partnership's share of all

receipts derived from the ownership of Projects and Project Interests therein

(exclusive of any proceeds from the sale or financing of Projects or Project

Interests, refinancing or other extraordinary transactions not in the ordinary

course of business) less (a) expenses, (b) such reserves as the General

Partners deem reasonably necessary for the proper operation of the

Partnership's business, and (c) any fees and expenditures authorized by this

Agreement (except for construction expenditures paid out of capital or loan

proceeds). The General Partners may at their discretion reinvest or distribute

all or any portion of the proceeds from the disposition or refinancing of any

Project or Project Interest therein, provided that in the event of a sale, the

Partners shall have first received any distributions to which they are

entitled under Section 9.6.2. To the extent that such proceeds are not

reinvested or committed within twelve months from the date of the sale or

refinancing, they shall be distributed. Distributions of the net proceeds from

the sale or financing of Projects or Project Interests, refinancing thereof,

or other extraordinary transactions not in the ordinary course of business

shall be distributed to the General and Limited Partners in the same manner as

net cash is distributed under Section 8.2.

8.4 The General Partners shall designate a record date to determine

Partners entitled to cash distributions, which shall not be less than 15 days

nor more than 30 days before each cash distribution. The Partnership shall

cause to be maintained records reflecting the name, address, and number of

Limited Partnership Interests and General Partners Interests held by each

Partner for the purpose of determining recipients of cash distributions and

notices.

Section 9: The General Partners.

9.1 The General Partners shall have complete discretion in the

management and control of the business of the Partnership for the purposes

herein stated, shall make all decisions affecting the business of the

Partnership and shall manage and control the affairs of the Partnership to the

best of their abilities and use their best efforts to carry out the purposes

of the Partnership. The powers of the General Partners include, but are not

limited to, the powers:

(a) to expend the capital and profits of the Partnership in

furtherance of the Partnership's business;

(b) to acquire, hold (in the Partnership's name or, in the best

interest of the Partnership, under any other title arrangement selected

by the General Partners), lease, sell, mortgage, convey, or refinance any

real or personal property, including Projects and Project Interests at

such price and upon such terms, as they deem to be in the best interests

of the Partnership, including the power to vote to amend a local limited

partnership agreement in such a manner as to reduce the limited

partnership interest of the Partnership in the local limited partnership,

to vote to reduce the Partnership's interests in the profits, losses, and

special allocations of the local limited partnerships and assign a part

of the limited partnership interest in such partnership, provided that

such action is necessary to preserve the economic value of the

Partnership's Project Interest;

(c) to monitor the construction and operations of any of the

Projects, Project Interests, or other Partnership property and to make

recommendations with respect thereto;

(d) to retain independent consultants to evaluate the Projects,

Project Interests, and other Partnership property;

(e) to borrow money and execute promissory notes and to secure

the same by mortgage upon the Partnership's property;

(f) to invest in short-term debt obligations (including

obligations of federal and state governments and their agencies bank

repurchase obligations, commercial paper, and certificates of deposit of

commercial banks, savings banks, or savings and loan associations) such

funds as are temporarily not required for investment in Projects, Project

Interests, or other Partnership property;

(g) to lend money or provide advances in furtherance of the

Partnership's purposes; and

(h) to enter into and carry out agreements of any kind, provided

that all contracts with the General Partners or their affiliates must

provide for termination by the Partnership on 60 days written notice,

without penalty, and to do any and all other acts and things necessary,

proper, convenient, or advisable to effectuate and carry out the purposes

of the Partnership.

9.2 The General Partners shall (a) diligently and faithfully devote

such of their time to the business of the Partnership as they deem necessary

to conduct it for the greatest advantage of the Partnership; (b) file and

publish all certificates, notices, statements, or other instruments required

by law for formation and operation of the Partnership in all appropriate

jurisdictions; (c) cause the Partnership to carry adequate public liability,

property damage, and other insurance, any or all of which may name the General

Partners as the sole insured; (d) indemnify and hold the Partnership harmless

from any loss, damage or liability due to, or arising out of, any General

Partner's breach of fiduciary duty; and (e) maintain capital accounts on the

books and records of the Partnership in respect of each interest in the

Partnership. The General Partners may become Limited Partners and thereby

become entitled to all of the rights of Limited Partners to the extent of the

Limited Partnership Interests so acquired, provided that such acquisition of

Limited Partnership Interests shall not reduce any liability of the General

Partners under this Agreement. Notwithstanding the foregoing, the General

Partners shall have fiduciary responsibility for the safekeeping and use of

all funds and assets of the Partnership, whether or not in their immediate

possession or control and they shall not employ, or permit another to employ,

such funds, or assets in any manner except for the exclusive benefit of the

Partnership.

9.3 Notwithstanding any provision in this Agreement to the contrary,

it is understood and agreed that (i) in conducting, carrying on, and managing

the business of the Partnership, the General Partners shall be bound by the

following investment policies, which may not be changed, altered, or amended

except as provided in Section 14 hereof and (ii) the General Partners shall

endeavor to conduct the Partnership's business in accordance with the policies

set forth in the Prospectus:

(a) except for interim commitments in short-term government

obligations, commercial paper (investment grade), certificates of

deposit, bank repurchase obligations, and tax-exempt notes and bonds or

registered investment companies holding such securities, investments will

be initially limited to Project Interests, provided that (i) not less

than 85% of the amount of public offering proceeds available for

investment will be invested in Project Interests in partnerships or joint

ventures which will own or tease federal, state, or local

government-assisted housing projects and (ii) the Partnership may

subsequently refinance or convert such Project Interests to other uses

with a view to realizing higher revenue or capital gains, although

reinvestment of cash flow (excluding proceeds resulting from a

disposition or refinancing of property) shall not be allowed.

(b) Projects or Project Interests will be acquired with a view

toward maximizing tax deductions, with cash income and long-term

appreciation as additional considerations, and not with a view to early

resale;

(c) the Partnership will seek to avoid depreciation recapture

and defer taxes by not selling any Projects or Project Interests within

ten years, except (i) to qualified tenant cooperatives as defined in the

Internal Revenue Code, and (ii) under circumstances described in the

Prospectus;

(d) upon any sale or refinancing, the Partnership shall not

reinvest any proceeds thereof;

(e) the Partnership may (i) borrow money only against individual

Projects or Project Interests to acquire Projects or interests therein,

to defray expenses or preserve its interest in each individual Project or

interest therein, but may not pledge or encumber other Projects or

Project Interests for this purpose, and (ii) borrow only such amount for

which the Partnership can reasonably expect to meet debt service

requirements from anticipated Net Cash Flow. The Partnership may make or

cause its affiliates to make loans or advances for the acquisition of

Projects or Project Interests, but may not receive interest or other

financing charges or fees in excess of the amounts which would be charged

by unrelated banks for comparable loans for the same purpose in the

locality of the Project or in amounts which otherwise are unreasonable or

require any prepayment charge or penalty, provided that in connection

with any of the foregoing transactions, (A) the Partnership shall not

enter into transactions involving the use of "all-inclusive" or

"wrap-around" notes except as permitted by the Rules of the Department of

Corporations of the State of California, and (B) the Partnership shall

not incur any indebtedness whereby the lender will have or acquire, at

any time as a result of making such loan, any direct or indirect interest

in the profits, capital, or