LOAN NO.: 26-5950521                                       GREENBRIER APARTMENTS

                                                        FREDERICKSBURG, VIRGINIA





                        INDEMNITY AND GUARANTY AGREEMENT



         THIS INDEMNITY AND GUARANTY  AGREEMENT (this  "Agreement"),  made as of

March 23, 2001 by CORNERSTONE REALTY INCOME TRUST, INC., a Virginia  corporation

("Indemnitor"), whose address is 306 East Main Street, Richmond, Virginia 23219,

Attention:  Glade M. Knight,  in favor of FIRST UNION  NATIONAL BANK, a national

banking  association  ("Lender"),  whose address is One First Union Center,  301

South College Street,  Mailcode NC 0166,  Charlotte,  North Carolina 28288-0166,

Attention: Contract Finance.



                              W I T N E S S E T H:



         WHEREAS,  CRIT-VA II, INC., a Virginia  corporation  ("Borrower"),  has

obtained a loan (the "Loan") in the  principal  amount of Twelve  Million  Seven

Hundred Fifty Thousand and No/100 Dollars ($12,750,000.00) from Lender; and



         WHEREAS,  the Loan is evidenced by a Promissory Note (the "Note") dated

of even date herewith,  executed by Borrower and payable to the order of Lender,

in the stated  principal  amount of Twelve  Million Seven Hundred Fifty Thousand

and  No/100  Dollars  ($12,750,000.00),  and is  secured  by a Deed of Trust and

Security  Agreement  dated of even date  herewith  (the  "Deed of  Trust")  from

Borrower  for the benefit of Lender,  encumbering  that  certain  real  property

situated  in the  City of  Fredericksburg,  Commonwealth  of  Virginia,  as more

particularly  described on Exhibit A attached hereto and incorporated  herein by

this reference,  together with the buildings,  structures and other improvements

now or  hereafter  located  thereon  (the  "Property")  and by  the  other  Loan

Documents (as defined in the Deed of Trust); and



         WHEREAS,  as a  condition  to making the Loan to  Borrower,  Lender has

required that Indemnitor indemnify Lender from and against and guarantee payment

to Lender of those items for which Borrower has recourse liability and for which

Lender has recourse against Borrower under the terms of Section 2.6 of the Note;

and



         WHEREAS,  Indemnitor is the sole shareholder of Borrower, the extension

of the Loan to Borrower is of substantial  benefit to Indemnitor and, therefore,

Indemnitor desires to indemnify Lender from and against and guarantee payment to

Lender of those  items for which  Borrower  is  personally  liable and for which

Lender has recourse against Borrower under the terms of the Note and the Deed of

Trust.



         NOW, THEREFORE,  to induce Lender to extend the Loan to Borrower and in

consideration  of the  foregoing  premises  and  for  other  good  and  valuable

consideration,  the receipt and  sufficiency  of which are hereby  acknowledged,

Indemnitor hereby covenants and agrees for the benefit of Lender, as follows:



<PAGE>



         1. Indemnity and Guaranty.  Indemnitor  hereby  assumes  liability for,

hereby guarantees  payment to Lender of, hereby agrees to pay,  protect,  defend

and save Lender harmless from and against,  and hereby  indemnifies  Lender from

and against any and all liabilities,  obligations,  losses,  damages,  costs and

expenses (including, without limitation,  reasonable attorneys' fees), causes of

action,  suits,  claims,  demands  and  judgments  of any nature or  description

whatsoever  (collectively,  "Costs")  which may at any time be actually  imposed

upon, incurred by or awarded against Lender as a result of:



                  (a) Misapplication or misappropriation by Borrower of proceeds

paid under any insurance  policies (or paid to Borrower as a result of any other

claim or cause of action against any person or entity) by reason of damage, loss

or destruction to all or any portion of the Property, to the full extent of such

proceeds not previously  delivered to Lender,  but which, under the terms of the

Loan Documents, should have been delivered to Lender;



                  (b) Misapplication or misappropriation by Borrower of proceeds

or  awards   resulting  from  the  condemnation  or  other  taking  in  lieu  of

condemnation  of all or any  portion of the  Property to the full extent of such

proceeds or awards not  previously  delivered  to Lender,  but which,  under the

terms of the Loan Documents, should have been delivered to Lender;



                  (c)  Misapplication  or  misappropriation  by  Borrower of all

tenant  security  deposits  or  other  refundable  deposits  paid  to or held by

Borrower  or any other  person  or entity  under the  control  or  direction  of

Borrower,  if any,  in  connection  with  leases  of all or any  portion  of the

Property,  which are not applied in accordance  with the terms of the applicable

lease or other agreement;



                  (d) Misapplication or misappropriation by Borrower of rent and

other  payments  received from tenants under leases of all or any portion of the

Property paid more than one (1) month in advance;



                  (e) Misapplication or  misappropriation  by Borrower of rents,

issues,  profits and revenues of all or any portion of the Property  received by

Borrower  or any other  person  or entity  under the  control  or  direction  of

Borrower that are applicable to a period after the occurrence and continuance of

an Event of Default under the Loan Documents,  or any event which with notice or

the passage of time, or both,  would  constitute an Event of Default,  which are

not  either   applied  to  the  ordinary  and  necessary   expenses  or  capital

expenditures  in  connection  with owning and  operating the Property or paid to

Lender or otherwise as contemplated or permitted by the Loan Documents;



                  (f) Waste committed on the Property, or damage to the Property

as a result of the intentional misconduct or gross negligence of Borrower or any

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