LOAN NO.: 26-5950380                                    THE MAYFLOWER APARTMENTS

                                                        VIRGINIA BEACH, VIRGINIA





                        INDEMNITY AND GUARANTY AGREEMENT



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

December  12,  2000  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,  INC.,  a  Virginia  corporation  ("Borrower"),  has

obtained a loan (the "Loan") in the principal amount of Ten Million Five Hundred

Thousand and No/100 Dollars ($10,500,000.00) 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 Ten Million Five Hundred Thousand and No/100

Dollars  ($10,500,000.00),  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

Virginia Beach,  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:





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         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 of its officers,  general  partners or members,  as the case may

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