United States

Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~September~~June 30, ~~2011~~2012

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission file number 0-11962

CAPITAL REALTY INVESTORS-III

LIMITED PARTNERSHIP

(Exact Name of Issuer as Specified in its Charter)

Maryland	52-1311532
(State of Incorporation)	(I.R.S. Employer Identification No.)

11200 Rockville Pike
Rockville, MD	20852
(Address of Principal Executive Offices)	(ZIP Code)

(301) 468-9200

(Issuer’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.

Yes x¨ No ox

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 definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated ~~filer o~~filero

Non-accelerated filer (Do not check if a smaller reporting company) o Smaller reporting companyx

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

INDEX TO FORM 10-Q

FOR THE THREE AND ~~NINE~~SIX MONTHS ENDED ~~SEPTEMBER~~JUNE 30, ~~2011~~2012

		Page
Part I	FINANCIAL INFORMATION
Item 1.	Condensed Financial Statements
	Balance Sheets
	Condensed Balance Sheets
	- September 30, 2011 and December 31, 2010	1
	- June 30, 2012 and December 31, 2011	1
	Statements of Operations and Accumulated Losses
	Condensed Statements of Operations and Accumulated Losses
	- for the three and nine months ended September 30, 2011 and 2010	2
	- for the three and six months ended June 30, 2012 and 2011	2
	Statements of Cash Flows
	Condensed Statements of Cash Flows
	- for the nine months ended September 30, 2011 and 2010	3
	- for the six months ended June 30, 2012 and 2011	3
	Notes to Financial Statements
	Notes to Condensed Financial Statements
	- September 30, 2011 and 2010	4
	- June 30, 2012 and 2011	4
Item 2.	Management's Discussion and Analysis of Financial Condition
	and Results of Operations	1012
Item 4.	Controls and Procedures	1214
Part II	OTHER INFORMATION
Item 1.	Legal Proceedings	1215
Item 5.	Other Information	1215
Item 6.	Exhibits	1315
Signature		1416

Part I. FINANCIAL INFORMATION

Part I.	FINANCIAL INFORMATION
Item 1.	Financial Statements

Item 1. Financial Statements

CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

CONDENSED BALANCE SHEETS

(Unaudited)

ASSETS

	September 30,		December 31,
	June 30,		December 31,
	2011		2010
	2012		2011
Investments in partnerships	$	2,~~867~~850,~~560~~397	$	23,~~836~~063,~~317~~461
Cash and cash equivalents		24,~~286~~456,~~208~~674		2,~~813~~172,~~153~~240
Acquisition fees, principally paid to related parties, net of
Acquisition fees, principally paid to related parties,
accumulated amortization of $72,919 and $70,990, respectively		4,235		6,164
net of accumulated amortization of $20,563 and $73,562, respectively		967		3,592
Property purchase costs, net of
Property purchase costs,
accumulated amortization of $43,976 and $42,764, respectively		4,506		5,718
net of accumulated amortization of $27,141 and $44,380, respectively		2,223		4,102
Other assets		529		14,446
Total assets	$	7,310,261	$	5,243,395
Total assets	$	5,163,038	$	5,675,798

LIABILITIES ~~AND PARTNERS' CAPITAL~~

Due on investment in partnership	$	119,544		$	119,544
Due on investments in partnerships	$	119,544		$	119,544
Accrued interest payable		33,976			33,976
Accounts payable and accrued expenses		5690,~~777~~450			4864,~~344~~123
Total liabilities		~~210~~243,~~297~~970			~~201~~217,~~864~~643
Commitments and contingencies
Partners' capital:
Capital paid-in:
General Partners		2,000			2,000
Limited Partners		60,001,500			60,001,500
		60,003,500			60,003,500
Less:
Accumulated distributions to partners		(27,472,135	)		(27,472,135	)
Offering costs		(6,156,933	)		(6,156,933	)
Accumulated losses		(2119,~~421~~308,~~691~~141	)		(2021,~~900~~348,~~498~~680	)
Total partners' capital		47,~~952~~066,~~741~~291			5,~~473~~025,~~934~~752
Total liabilities and partners' capital	$	57,~~163~~310,~~038~~261		$	5,~~675~~243,~~798~~395

The accompanying notes are an integral part

of these financial statements.

- 1 -

Part I. FINANCIAL INFORMATION

Part I.	FINANCIAL INFORMATION
Item 1.	Financial Statements

CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

~~Item~~CONDENSED 1.STATEMENTS ~~Financial~~OF ~~Statements~~OPERATIONS

CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

STATEMENTS OF OPERATIONS

AND ACCUMULATED LOSSES

(Unaudited)

	For the three months ended						For the ~~nine~~six months ended
	September 30,						September 30,
	June 30,						June 30,
	2011			2010			2011			2010
	2012			2011			2012			2011
Share of income (loss) from partnerships	$	~~(18~~67,~~260~~637	)	$	12(6,~~400~~988	)	$	42117,~~778~~306		$	(661,~~188~~036	)
Other revenue and expenses:
Revenue:
Interest		6,836			--			20,654			9,521
Gain on disposition of property
		6,836			--			20,654			9,521
net of disposition fee		--			--			2,744,452			--
Interest and other		2,809			6,666			6,395			13,821
		2,809			6,666			2,750,847			13,821
Expenses:
General and administrative		5777,~~517~~682			55120,~~716~~039			~~231~~149,~~470~~763			~~232~~173,~~024~~953
Management fee		75,000			75,000			~~225~~150,000			~~225~~150,000
Professional fees		2645,~~563~~413			2113,~~670~~633			~~125~~93,~~014~~813			~~133~~98,~~923~~452
Amortization of deferred costs		~~1,047~~424			1,047			~~3,141~~848			32,~~141~~094
		160,127			153,433			584,625			594,088
Impairment loss		--			--			433,190			--
Total other revenue and expenses		(153,291	)		(153,433	)		(563,971	)		(584,567	)
		198,519			209,719			827,614			424,499
Net loss		(171,551	)		(141,033	)		(521,193	)		(590,755	)
Total other revenue and expenses		(195,710	)		(203,053	)		1,923,233			(410,678	)
Accumulated losses, beginning of period		(21,250,140	)		(21,076,926	)		(20,900,498	)		(20,627,204	)
Net (loss) income	$	(128,073	)	$	(210,041	)		2,040,539		$	(349,642	)
Accumulated losses, end of period	$	(21,421,691	)	$	(21,217,959	)	$	(21,421,691	)	$	(21,217,959	)
Accumulated losses, beginning of period		(19,180,068	)		(21,040,140	)		(21,348,680	)		(20,900,498	)
Net loss allocated
Accumulated losses, end of period	$	(19,308,141	)		(21,250,140	)	$	(19,308,141	)	$	(21,250,14	)
to General Partners (1.51%)	$	(2,590	)	$	(2,130	)	$	(7,870	)	$	(8,921	)
Net (loss) income allocated to
Net loss allocated
General Partners (1.51%)	$	(1,934	)	$	(3,172	)	$	30,812		$	(5,280	)
to Initial and Special Limited Partners (1.49%)	$	(2,556	)	$	(2,101	)	$	(7,766	)	$	(8,802	)
Net (loss) income allocated to
Net loss allocated
Initial and Special Limited Partners (1.49%)	$	(1,908	)	$	(3,130	)	$	30,404		$	(5,210	)
to Additional Limited Partners (97%)	$	(166,405	)	$	(136,802	)	$	(505,557	)	$	(573,032	)
Net (loss) income allocated to
Net loss per unit of
Additional Limited Partners (97%)	$	(124,231	)	$	(203,740	)	$	1,979,323		$	(339,153	)
Additional Limited Partner Interest,
Net (loss) income per unit of
based on 59,882 units outstanding	$	(2.78	)	$	(2.28	)	$	(8.44	)	$	(9.57	)
Additional Limited Partner interest,
based on 59,882 units outstanding	$	(2.07	)	$	(3.40	)	$	33.05		$	(5.66	)

The accompanying notes are an integral part

of these financial statements.

- 2 -

Part I. FINANCIAL INFORMATION

Part I.	FINANCIAL INFORMATION
Item 1.	Financial Statements

CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

~~Item~~CONDENSED 1.STATEMENTS ~~Financial~~OF ~~Statements~~CASH FLOWS

CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

STATEMENTS OF CASH FLOWS

(Unaudited)

	For the nine months ended
	For the six months ended
	September 30,
	June 30,
	2011			2010
	2012			2011
Cash flows from operating activities:
Net loss	$	(521,193	)	$	(590,755	)
Net income (loss)	$	2,040,539		$	( 349,642	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Share of (income) loss from partnerships		(42,778	)		6,188
Share of income from partnerships		( 117,306	)		(61,036	)
Amortization of deferred costs		~~3,141~~848			32,~~141~~094
Gain on disposition of property		(2,744,452	)		--
Impairment loss		433,190			--
Changes in assets and liabilities:
Decrease in other assets		~~13,917~~--			--13,123
Increase in accounts payable and accrued expenses		826,~~433~~327			3426,~~462~~374
Net cash used in operating activities		(~~538~~360,~~480~~854	)		(~~546~~369,~~964~~087	)
Cash flows from investing activities:
Advances to local partnerships		--			(13,686	)
Proceeds from disposition of investment in partnerships		3,611,288			--
Receipt of distribution from partnership		11,535			--
Disposition fee paid		(946,000	)
Net cash provided by (used in) investing activities		11,535			(13,686	)
Advances to Local Partnership		(20,000	)		--
Cash flows from financing activities:
Net cash provided by investing activities		2,645,288			--
Distribution to Limited Partners		--			(898,230	)
Net increase (decrease) in cash and cash equivalents		2,284,434			(369,087	)
Net cash used in financing activities		--			(898,230	)
Cash and cash equivalents, beginning of year		2,172,240			2,813,153
Net decrease in cash and cash equivalents		(526,945	)		(1,458,880	)
Cash and cash equivalents, end of year	$	4,456,674		$	2,444,066
Cash and cash equivalents, beginning of period		2,813,153			4,442,208
Significant non cash investing activities:
Cash and cash equivalents, end of period	$	2,286,208		$	2,983,328
Distribution receivable included in investment in and advances	$	82,820		$	--
to partnerships

The accompanying notes are an integral part

of these financial statements.

- 3 -

CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONDENSED FINANCIAL STATEMENTS

~~September~~June 30, ~~2011~~2012 and ~~2010~~2011

(Unaudited)

1. ORGANIZATION

Capital Realty Investors-III Limited Partnership (the “Partnership”) is a limited partnership which was formed under the Maryland Revised Uniform Limited Partnership Act on June 27, 1983. The Partnership was formed for the purpose of raising capital by offering and selling limited partnership interests and then investing in limited partnerships ("Local Partnerships"), each of which owns and operates an existing rental housing project which was originally financed and/or operated with one or more forms of rental assistance or financial assistance from the U.S. Department of Housing and Urban Development ("HUD"). The Partnership originally made investments in thirty-seven Local Partnerships. As of ~~September~~June 30, ~~2011~~2012, the Partnership retained investments in four Local Partnerships, which own three apartment complexes.

The General Partners of the Partnership are C.R.I., Inc. (“CRI”), which is the Managing General Partner, and current and former shareholders of CRI. Services for the Partnership are performed by CRI, as the Partnership has no employees of its own.

2. BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (US GAAP) and with the instructions to Form 10-Q. Certain information and accounting policies and footnote disclosures normally included in financial statements prepared in conformity with US GAAP have been condensed or omitted pursuant to such instructions. These condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Partnership's annual report on Form 10-K at December 31, ~~2010~~2011.

In the opinion of CRI, the Managing General Partner of the Partnership, the accompanying unaudited condensed financial statements reflect all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the financial position of the Partnership as of ~~September~~June 30, ~~2011~~2012, and the results of its operations and its cash flows for the three and ~~nine~~six month periods ended ~~September~~June 30, ~~2011~~2012 and ~~2010~~2011. The results of operations for the interim period ended ~~September~~June 30, ~~2011~~2012 are not necessarily indicative of the results to be expected for the full year.

3. PLAN OF LIQUIDATION

On November 21, 2005, the General Partners recommended that the limited partners approve a plan of liquidation and dissolution for the Partnership. The plan of liquidation and dissolution was approved by the limited partners on January 20, 2006. ~~Since~~ Currently, ~~the~~all ~~approval~~ of the ~~plan~~Properties ofin ~~liquidation~~which ~~and~~the ~~dissolution,~~Partnership weis ~~have~~invested ~~continued~~through toits ~~seek~~investments toin ~~sell~~ the ~~assets~~Local ofPartnerships ~~the~~are ~~Partnership~~under ~~and~~contract ~~use~~for ~~the~~sale. The ~~sales~~Villa ~~proceeds~~Mirage I and~~/or~~ ~~other~~Villa ~~Partnership~~Mirage ~~funds~~II toproperty ~~pay~~sales ~~all~~are ~~expenses~~anticipated to close in ~~connection~~the ~~with~~third ~~such~~quarter ~~sales,~~of ~~pay~~2012. The orMeadow ~~make~~Lanes ~~provision~~property ~~for~~sale ~~payment~~is ofanticipated ~~all~~to ~~Partnership~~close ~~obligations~~in ~~and~~the ~~liabilities,~~second ~~and~~quarter ~~distribute~~of 2013. Following the ~~remaining~~successful ~~assets~~closing asof ~~set~~these ~~forth~~property insales, the ~~Partnership~~Local ~~Agreement. Numerous variables~~Partnerships, ~~including~~in ~~adverse~~which ~~general~~the ~~economic~~Partnership ~~conditions~~is invested, aswill ~~well~~be ~~as,~~dissolved ~~partnership~~ and ~~regulatory~~terminated ~~restrictions,~~at ~~have~~which ~~impacted~~time the ~~timeframe~~General ~~required~~Partner towill ~~accomplish~~commence the ~~liquidation~~dissolution and ~~dissolution~~termination of the Partnership. There can be no assurance as to when the liquidation and dissolution of the Partnership will be completed but it is anticipated that the process will be completed prior to December 31, 2013.

- 4 -

CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONDENSED FINANCIAL STATEMENTS

~~September~~June 30, ~~2011~~2012 and ~~2010~~2011

(Unaudited)

4. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

At ~~September~~June 30, ~~2011~~2012 and ~~2010~~2011, the Partnership had limited partnership equity interests in four Local Partnerships, owning three and five apartment complexes, respectively.

During the first quarter of 2012, the Local Partnership owning Monterey/Hillcrest sold the properties. The Local Partnership is in the process of being terminated.

A schedule of the apartment communities owned by the Local Partnerships in which the Partnership is invested is provided below:

Property	City	State	Units
Meadow Lanes	Holland	MI	118
Monterey/Hillcrest	Waukesha	WI	300
Villa Mirage	Rancho Mirage	CA	50
Villa Mirage II	Rancho Mirage	CA	48
Monterey/Hillcrest	Monterey/Hillcrest was sold on January 31, 2012. At June 30, 2012, the Partnership still has a limited partner interest in the Local Partnership.

Under the terms of the Partnership's investment in each Local Partnership, the Partnership was required to make capital contributions to the Local Partnerships. These contributions were payable in installments upon each Local Partnership achieving specified levels of construction and/or operations. At ~~September~~June 30, ~~2011~~2012 and ~~2010~~2011, all such capital contributions had been paid to the Local Partnerships.

a. Summarized financial information

Combined statements of operations for the four Local Partnerships in which the Partnership was invested as of ~~September~~June 30, ~~2011~~2012 and ~~2010~~2011, respectively, follow. The combined statements have been compiled from information supplied by the management agents of the Local Partnership properties and are unaudited. The information for each of the periods is presented separately for those Local Partnerships which have investment basis (equity method), and for those Local Partnerships which have cumulative losses in excess of the amount of the Partnership’s investments in those Local Partnerships (equity method suspended). Appended after the combined statements is information concerning the Partnership’s share of income from partnerships related to cash distributions recorded as income, and related to the Partnership’s share of income from Local Partnerships.

- 5 -

CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES CONDENSED TO FINANCIAL STATEMENTS

~~September~~June 30, ~~2011~~2012 and ~~2010~~2011

(Unaudited)

4. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

COMBINED STATEMENTS OF OPERATIONS

(Unaudited)

	For the three months ended
	September 30,
	June 30,
	2011						2010
	2012						2011
	Equity						Equity
	Method			Suspended			Method			Suspended	~~Suspended~~
Number of Local Partnerships		2	(a)		2	(b)		12	(ca)			32	(db)
Revenue:
Rental	$	~~331~~356,~~710~~113		$	~~845~~130,~~522~~182		$	~~183~~326,~~171~~327			$	~~958~~826,~~111~~156
Other		5(39,~~441~~519	)		~~72,082~~378			3(36,~~735~~928	)			8095,~~117~~462
Total revenue		~~337~~316,~~151~~594			~~917~~130,~~604~~560			~~186~~289,~~906~~399				1921,~~038,228~~618
Expenses:
Operating		~~281~~182,~~348~~717			~~511~~24,~~152~~341			~~133~~222,~~928~~094				~~546~~469,~~354~~885
Interest		138,~~071~~492			~~204~~22,~~656~~345			~~(12~~13,~~391~~071	)			~~246~~204,~~543~~656
Depreciation and amortization		6159,~~364~~928			~~159,003~~582			5261,~~716~~364				~~214~~159,~~739~~003
Total expenses		~~355~~251,~~783~~137			~~874~~47,~~811~~268			~~174~~296,~~523~~529				1833,~~007,636~~544
Net (loss) income	$	(18,632	)	$	42,793		$	12,653			$	30,592
Net income (loss)	$	65,457		$	83,292		$	(7,130	)		$	88,074
Cash distributions	$	11,535		$	--		$	--			$	--
Partnership’s share of Local
Partnership's share of Local Partnership net income (loss)	$	(18,260	)	$	--		$	12,400			$	--
Partnership net income (loss)	$	67,637		$	--		$	(6,988	)		$	--
Advance to Local Partnership		--			--			--				--
Share of income (loss) from
Share of income (loss) from partnerships		$(18,260)						$12,400
Partnerships	$67,637						$(6,988)

- 6 -

CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONDENSED FINANCIAL STATEMENTS

~~September~~June 30, ~~2011~~2012 and ~~2010~~2011

(Unaudited)

4. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

COMBINED STATEMENTS OF OPERATIONS

(Unaudited)

For the nine months ended

For the six months ended

September 30,

June 30,

2011

2010

2012

2011

Equity

Method

Suspended

Method

Suspended

Number of Local Partnerships

(a)

(b)

(ca)

(db)

Revenue:

Rental

~~990~~699,~~192~~356

2494,~~502,572~~302

~~532~~658,~~898~~483

21,~~789~~657,~~868~~050

Other

1312,~~126~~218

~~229~~19,~~044~~087

197,~~380~~685

~~233~~156,~~079~~963

Total revenue

1711,~~003,318~~574

2513,~~731,616~~389

~~552~~666,~~278~~168

31,~~022~~814,~~947~~013

Expenses:

Operating

~~736~~448,~~362~~390

1259,~~467,598~~728

~~423~~455,~~652~~014

1956,~~506,370~~446

Interest

3916,~~215~~984

~~613~~100,~~967~~698

~~(37~~26,~~172~~143

)

~~739~~409,~~630~~312

Depreciation and amortization

~~184~~119,~~091~~856

~~477~~39,~~010~~653

~~158~~122,~~147~~728

~~644~~318,~~216~~006

Total expenses

~~959~~585,~~668~~230

2400,~~558,575~~079

~~544~~603,~~627~~885

21,~~890~~683,~~216~~764

Net income

43126,~~650~~344

~~173~~113,~~041~~310

762,~~651~~283

~~132~~130,~~731~~249

Cash distributions

~~11,535~~--

Partnership's share of Local

Partnership net income

127,306

61,036

)

Advance to Local Partnership

(10,000

)

Share of income from

Partnerships

$117,306

$61,036

Partnership's share of Local Partnership net income (loss)	$	42,778	$	--	$	7,498	$	--
Advance to Local Partnership		--		--		--		(13,686	)
Share of income (loss) from partnerships		$42,778				$(6,188)

	(a)	Meadow Lanes; Village Mirage I
	(b)	Villa Mirage II; Monterey/Hillcrest

~~____________________~~Cash distributions received from Local Partnerships which have investment basis (equity method) are recorded as a reduction of investments in partnerships and as cash receipts on the respective balance sheets. Cash distributions received from Local Partnerships which have cumulative losses in excess of the amount of the Partnership’s investments in those Local Partnerships (equity method suspended) are recorded as share of income from partnerships on the respective statements of operations and as cash receipts on the respective balance sheets. As of both June 30, 2012 and 2011, the Partnership's share of cumulative losses to date for two of four Local Partnerships exceeded amount of the Partnership's investments in and advances to those Local Partnerships by $8,961,364 and $9,237,159, respectively. As the Partnership has no further obligation to advance funds or provide financing to these Local Partnerships, the excess losses have not been reflected in the accompanying financial statements.

(a) Meadow Lanes; Village Mirage I

(b) Monterey/Hillcrest; Villa Mirage II.

(d) Monterey/Hillcrest; Villa Mirage I; Villa Mirage II.

Cash distributions received from Local Partnerships which have investment basis (equity method) are recorded as a reduction of investments in partnerships and as cash receipts on the respective balance sheets. Cash distributions received from Local Partnerships which have cumulative losses in excess of the amount of the Partnership’s investments in those Local Partnerships (equity method suspended) are recorded as share of income from partnerships on the respective statements of operations and as cash receipts on the respective balance sheets. As of both September 30, 2011 and 2010, the Partnership's share of cumulative losses to date for two of four Local Partnerships and three of four Local Partnerships, respectively, exceeded amount of the Partnership's investments in and advances to those Local Partnerships by $9,194,728 and $9,444,944, respectively. As the Partnership has no further obligation to advance funds or provide financing to these Local Partnerships, the excess losses have not been reflected in the accompanying financial statements.

- 7 -

CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONDENSED FINANCIAL STATEMENTS

~~September~~June 30, ~~2011~~2012 and ~~2010~~2011

(Unaudited)

4. INVESTMENTS IN PARTNERSHIPS - Continued

b. Due on investments in partnerships and accrued interest payable

Notes

Due on investment in partnership includes $119,544 due to a previous owner related to Meadow Lanes Apartments at both ~~September~~June 30, ~~2011~~2012 and December 31, ~~2010~~2011; accrued interest payable thereon was $33,976 at both ~~September~~June 30, ~~2011~~2012 and December 31, ~~2010~~2011. These amounts ~~will~~are scheduled to be paid upon the occurrence of certain specific events, as outlined in the note agreement. At ~~The~~June ~~fair~~30, ~~value~~2012 ofand December 31, 2011, the Partnership is in dispute with the previous owner regarding amounts owed under the note ~~approximates~~agreement. Management ~~its~~cannot ~~carrying~~determine ~~value~~the outcome of the dispute at this time. Accordingly, the financial statements do not reflect any adjustment due to the uncertainty.

c. ~~Advances~~Sale toof Local ~~Partnerships~~Limited Partnership

~~On April 14, 2010, the Partnership advanced $13,686 to~~ Monterey/Hillcrest ~~for non-resident withholding taxes. For financial statement purposes, the advances were charged off by the Partnership as a non-recoverable tax-related expense.~~

dOn September 29, 2011, the general partners of Pebble Valley Housing Partners Limited Partnership, a Wisconsin limited partnership entered into a contract with an unaffiliated third party to sell its property (Monterey/Hillcrest) and the transaction closed on January 31, 2012. ~~Asset~~ ~~held~~The ~~for~~sales price was $18,920,000, and expected cash proceeds to the Partnership are $3,694,108. Proceeds received in February 2012 totaled $3,611,288. The investment balance in the Local Partnership was $0 at December 31, 2011. Net unamortized acquisition costs and property purchase costs of $3,656 were written off and netted against the gain on sale of property. Of the remaining expected proceeds, $82,820 is expected to be received in October 2012. The receivable of $82,820 is included in investments in and advances to partnerships on the condensed balance sheets.

OnFrom ~~September~~the ~~29,~~sales ~~2011~~proceeds, ~~Pebble~~the ~~Valley Housing Partners Limited~~ Partnership. ~~entered~~is ~~into~~obligated ato ~~Purchase~~pay ~~and~~the ~~Sale~~managing ~~Agreement~~general ~~with~~partner ~~Varin/Monterey, LLC,~~ a ~~Wisconsin~~fee ~~limited~~in ~~liability company, to sell~~ the ~~Monterey/Hillcrest~~amount ~~property. There~~of is$946,000 nofor ~~assurance~~services ~~that~~provided ~~sale~~in ~~will~~connection ~~conclude~~with by the ~~extended~~sale ~~contract closing date~~ of ~~January 30, 2011 or at~~ the ~~current~~Monterey/Hillcrest ~~price of eighteen million nine hundred twenty thousand dollars ($18,920,000)~~property.

~~5. RELATED~~Villa ~~PARTY~~Mirage ~~TRANSACTIONS~~I and Villa Mirage II

InOn ~~accordance~~November ~~with~~15, ~~the terms of the Partnership Agreement~~2011, the ~~Partnership~~general ispartners ~~obligated~~of toVilla ~~reimburse~~Mirage ~~the~~I, ~~Managing~~a ~~General~~California ~~Partner~~limited orpartnership, ~~its affiliates for certain direct expenses~~ and ~~payroll~~Villa ~~expenses~~Mirage inII, ~~connection~~a ~~with~~California ~~managing~~limited ~~the~~partnership, ~~Partnership. Payroll~~entered ~~expenses~~into ~~are reimbursed at~~ a ~~factor~~contract ofwith ~~1.75~~an ~~times~~unaffiliated ~~base~~third ~~salary. For~~party ~~the~~to ~~three~~sell ~~and~~their ~~nine~~properties ~~month~~for ~~periods~~an ~~ended~~aggregate ~~September~~sale ~~30,~~price ~~2011,~~of ~~the Partnership paid~~ $356,~~427 and $116~~500,~~514,~~000. It ~~respectively,~~is ~~and~~expected ~~$42,723~~that ~~and $128,678 for~~ the ~~three~~sale ~~and~~will ~~nine~~be ~~month~~consummated ~~periods~~during ~~ended September 30, 2010, respectively, to~~ the ~~Managing~~third ~~General~~quarter ~~Partner~~of or2012. ~~its~~It ~~affiliates~~is asanticipated ~~direct~~that ~~reimbursement~~all ofsale ~~expenses~~proceeds ~~incurred~~will onbe ~~behalf~~used ofto ~~the~~satisfy Local Partnership~~. In~~ ~~addition,~~obligations ~~certain~~and ~~employees~~any ofremaining ~~the~~funds ~~Managing~~available ~~General~~will ~~Partner~~be ~~provided~~distributed ~~legal~~to ~~and~~partners ~~tax~~in ~~accounting~~accordance ~~services~~with to the ~~Partnership. These~~Villa ~~are~~Mirage ~~reimbursed~~I ~~comparable~~and toVilla ~~third~~Mirage ~~party~~II ~~service~~partnership ~~charges~~agreements. ~~For~~There ~~the~~can ~~three~~be ~~and~~no ~~nine~~assurance ~~month~~that ~~periods ended September 30, 2011,~~ the ~~Partnership~~sale ~~paid~~transaction ~~$12,563~~contemplated ~~and~~will ~~$57,795,~~be ~~respectively,~~consummated ~~and~~upon ~~$27,180 and $76,271 for~~ the ~~three~~terms and ~~nine~~conditions ~~month~~of ~~periods ended September 30, 2010, respectively, to~~ the ~~Managing~~contract ~~General Partner~~ or ~~its~~at ~~affiliates for these services~~all. ~~Such reimbursed expenses are included in the accompanying statements of operations as general and administrative expenses.~~

The Partnership’s investment basis in Villa Mirage I Local Partnership at June 30, 2012 was $175,068. The Partnership expects to receive $690,183 as a result of the sale. The Partnership’s investment basis in Villa Mirage II Local Partnership at June 30, 2012 was $0. The Partnership expects to receive $406,099 as a result of the sale.

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CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONDENSED FINANCIAL STATEMENTS

~~September~~June 30, ~~2011~~2012 and ~~2010~~2011

(Unaudited)

54. ~~RELATED~~INVESTMENTS ~~PARTY~~IN ~~TRANSACTIONS~~PARTNERSHIPS - Continued

InMeadow accordance with the terms of the Partnership Agreement, the Partnership is obligated to pay the Managing General Partner an annual incentive management fee (“Management Fee”) after all other expenses of the Partnership are paid. The Partnership paid the Managing General Partner a Management Fee of $75,000 for each of the three month periods ended September 30, 2011 and 2010, and $225,000 for each of the nine month periods ended September 30, 2011 and 2010.Lanes

The Partnership has been notified by the general partners of Meadow Lanes–II Associates Limited Dividend Housing Association Limited Partnership, a Michigan limited partnership, that an agreement to sell its property to an unaffiliated third party has been reached and that a contract to memorialize the agreement is currently being negotiated between the parties. It is expected that the sale will be consummated during the second quarter of 2013. It is anticipated that all sale proceeds will be used to satisfy Local Partnership obligations and any remaining funds available will be distributed to partners in accordance with the Meadow Lanes–II Associates Limited Dividend Housing Association Limited Partnership Agreement. There can be no assurance that the sale transaction contemplated will be consummated upon the terms and conditions anticipated or at all.

On June 18, 2012, the Local Partnership entered into a purchase and sale agreement to sell Meadow Lanes Apartments for $2,900,000. The Partnership’s investment basis in this Local Partnership at June 30, 2012 was $3,025,699. The Partnership expects to receive $2,592,509 as a result of the sale. The difference between the investment basis at June 30, 2012 and expected proceeds is $433,190. This amount represents the impairment loss on the condensed statements of operations.

In the event the transactions contemplated above are consummated, the Partnership will be liquidated.

d. Advances to Local Partnerships

On October 23, 2009, the Partnership advanced $56,680 to Pebble Valley Housing Partners Ltd. Partnership (Monterey/Hillcrest) for non-resident withholding taxes paid on behalf of the Partnership. On November 5, 2009, the Partnership advanced $2,000 to Monterey/Hillcrest for non-resident withholding taxes paid on behalf of the Partnership. On September 15, 2009, the Partnership advanced $3,000 to Monterey/Hillcrest for non-resident withholding taxes paid on behalf of the Partnership. On April 14, 2010, the Partnership advanced $13,686 to Monterey/Hillcrest for non-resident withholding taxes paid on behalf of the Partnership. For financial statement purposes, the advances were charged off by the Partnership as a result of losses at the Local Partnership level during prior years.

On February 8, 2012, the Partnership advanced $10,000 to Villa Mirage I and $10,000 to Villa Mirage II Limited Partnerships for the issuance of a prepayment letter, as required by CalHFA. For financial statement purposes the advance to Villa Mirage II was charged off by the Partnership as a result of losses at the Local Partnership level during prior years.

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CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2012 and 2011

(Unaudited)

4. INVESTMENTS IN PARTNERSHIPS - Continued

e. Investment Reconciliation

The following is a reconciliation of investments in partnerships at June 30, 2012.

Investments in partnerships at December 31, 2011:	$3,063,461

Share of income from partnerships	117,306
Distribution receivable from Local Partnership	82,820
Advance to Local Partnership	20,000
Impairment loss	(433,190)

Investments in partnerships at June 30, 2012:	$2,850,397

5. RELATED PARTY TRANSACTIONS

In accordance with the terms of the Partnership Agreement, the Partnership is obligated to reimburse the Managing General Partner or its affiliates for certain direct expenses and payroll expenses in connection with managing the Partnership. Payroll expenses are reimbursed at a factor of 1.75 times base salary. For the three and six month periods ended June 30, 2012, the Partnership paid $28,905 and $55,540, respectively, and $38,498 and $81,087 for the three and six month periods ended June 30, 2011, respectively, to the Managing General Partner or its affiliates as direct reimbursement of expenses incurred on behalf of the Partnership. In addition, certain employees of the Managing General Partner provided legal and tax accounting services to the Partnership. These are reimbursed comparable to third party service charges. For the three and six month periods ended June 30, 2012, the Partnership paid $36,729 and $70,941, respectively, and $25,641 and $45,233 for the three and six month periods ended June 30, 2011, respectively, to the Managing General Partner or its affiliates for these services. Such reimbursed expenses are included in the accompanying statements of operations as general and administrative expenses.

In accordance with the terms of the Partnership Agreement, the Partnership is obligated to pay the Managing General Partner an annual incentive management fee (“Management Fee”) after all other expenses of the Partnership are paid. The Partnership paid the Managing General Partner a Management Fee of $75,000 for each of the three month periods ended June 30, 2012 and 2011, and $150,000 for each of the six month periods ended June 30, 2012 and 2011.

In accordance with the terms of the Partnership agreement, the managing general partner and/or its affiliates may receive a fee of not more than five percent of the sale price of an investment in a Local Partnership or the property it owns, payable under certain conditions upon the sale of an investment in a Local Partnership or the property it owns. The payment of the fee is subject to certain restrictions, including the achievement of a certain level of sales proceeds and making certain distributions to limited partners. In accordance with the terms of the Partnership agreement, in February 2012, the managing general partner was paid a disposition fee of $946,000 related to sale of Monterey/Hillcrest, which was netted against the related gain on disposition of property.

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CAPITAL REALTY INVESTORS-III LIMITED PARTNERSHIP

NOTES TO CONDENSED FINANCIAL STATEMENTS

June 30, 2012 and 2011

(Unaudited)

6. CASH DISTRIBUTIONS

OnFor ~~July 28, 2010,~~ the ~~Partnership~~three ~~paid~~month aperiod ~~cash~~ended ~~distribution~~June of30, ~~$898~~2012,~~230~~ ~~($15 per unit) to~~ the ~~Limited~~Partnership ~~Partners~~had ~~who~~not ~~were~~received ~~holders~~cash offlow ~~record~~distributions asfrom ofthe ~~July~~Local ~~1, 2010~~Partnerships.

7. CASH CONCENTRATION RISK

Financial instruments that potentially subject the Partnership to concentrations of risk consist primarily of cash. The Partnership maintains one cash account at SunTrust Bank and three cash accounts at Eagle Bank. As of ~~September~~June 30, ~~2011~~2012, the uninsured portion of the cash balances was $1,~~923~~734,~~116~~715.

-8. SIGNIFICANT ~~9 -~~SUBSIDIARIES

The following Local Partnership invested in by the Partnership represents more than 20% of the Partnership’s total assets or equity as of June 30, 2012 and 2011 or net income (loss) for the six-month periods ended. The following financial information represents the performance of this Local Partnership for the six-month periods ended June 30, 2012 and 2011. The combined statements have been compiled from information supplied by the management agents of the Local Partnership properties and are unaudited.

Meadow Lanes	2012	2011
Total Assets	$3,696,552	$3,597,467
Total Liabilities	438,958	571,051
Revenue	420,946	388,065
Net Income	47,958	13,831

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Part I.	FINANCIAL INFORMATION
Item 2.	Management's Discussion and Analysis of Financial Condition
	and Results of Operations

The Management's Discussion and Analysis of Financial Condition and Results of Operations section is based on the financial statements, and contains information that may be considered forward looking, including statements regarding the effect of governmental regulations. Actual results may differ materially from those described in the forward looking statements and will be affected by a variety of factors including national and local economic conditions, the general level of interest rates, governmental regulations affecting the Partnership and interpretations of those regulations, the competitive environment in which the Partnership operates, and the availability of working capital.

Critical Accounting Policies

The Partnership has disclosed its selection and application of significant accounting policies in Note 1 of the notes to financial statements included in the Partnership’s annual report on Form 10-K at December 31, ~~2010~~2011. The Partnership accounts for its investments in partnerships (Local Partnerships) by the equity method because the Partnership is a limited partner in the Local Partnerships. As such the Partnership has no control over the selection and application of accounting policies, or the use of estimates, by the Local Partnerships. Environmental and operational trends, events and uncertainties that might affect the properties owned by the Local Partnerships would not necessarily have a significant impact on the Partnership’s application of the equity method of accounting, since the equity method has been suspended for ~~two~~three Local Partnerships which have cumulative losses in excess of the amount of the Partnership’s investments in those Local Partnerships. The Partnership reviews property assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. Recoverability is measured by a comparison of the carrying amount of an asset to the estimated future net cash flows expected to be generated by the asset. If an asset were determined to be impaired, its basis would be adjusted to fair value through the recognition of an impairment loss.

~~Financial~~Generally ~~Condition/Liquidity~~accepted accounting principles (GAAP) in the United States provides guidance on when a company should include the assets, liabilities, and activities of a variable interest entity (VIE) in its financial statements and when it should disclose information about its relationship with a VIE. 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 will receive a majority of the VIE’s expected losses, receive a majority of a VIE’s expected residual returns, or both.

The Partnership does not consolidate the Partnership's ~~liquidity,~~interests ~~with~~in ~~unrestricted~~these ~~cash~~VIE’s ~~resources~~under ofthis $2guidance,~~286,208~~ as ofit ~~September~~is ~~30,~~not ~~2011,~~considered ~~along~~to ~~with~~be ~~anticipated~~the ~~future~~primary ~~cash~~beneficiary. Accounting ~~distributions~~guidance ~~from~~requires ~~Local~~continued ~~Partnerships,~~reconsideration isas ~~expected~~ to bethe ~~adequate~~consideration toof ~~meet~~the ~~its~~primary ~~current~~beneficiary. ~~and~~The ~~anticipated~~Partnership ~~operating~~currently ~~cash~~records ~~needs. As~~the amount of ~~December~~its 16investment in these partnerships as an asset on its balance sheet, ~~2011~~recognizes its share of partnership income or losses in the statements of operations, ~~there~~and ~~were~~discloses nohow ~~material~~it ~~commitments~~accounts for ~~capital~~material ~~expenditures~~types of these investments in its financial statements.

The Partnership’s ~~closely~~balance ~~monitors~~in ~~its~~investment ~~cash~~in ~~flow~~Local ~~and~~Partnerships ~~liquidity~~represents ~~position~~its inmaximum anexposure ~~effort~~ to ~~ensure that sufficient cash is available for operating requirements~~loss. ~~For~~ The ~~the~~Partnership’s ~~nine~~exposure ~~month~~to ~~period~~loss ~~ended~~on ~~September~~these ~~30,~~partnerships ~~2011,~~is ~~existing~~mitigated ~~cash~~by ~~resources~~the ~~were~~condition ~~adequate to support operating cash requirements. Cash~~ and ~~cash~~financial ~~equivalents~~performance ~~decreased~~of ~~$526,945 during~~ the ~~nine~~underlying ~~month~~properties ~~period~~as ~~ended~~well ~~September~~as ~~30,~~the ~~2011,~~strength ~~primarily~~of ~~due~~the tolocal ~~cash~~general ~~used in operating activities~~partners.

- 1012 -

Part I.	FINANCIAL INFORMATION
Item 2.	Management's Discussion and Analysis of Financial Condition
	and Results of Operations - Continued

Financial Condition/Liquidity

The Partnership's liquidity, with unrestricted cash resources of $4,456,674 as of June 30, 2012, along with anticipated future cash distributions from Local Partnerships, is expected to be adequate to meet its current and anticipated operating cash needs. As of September 14, 2012, there were no material commitments for capital expenditures.

The Partnership closely monitors its cash flow and liquidity position in an effort to ensure that sufficient cash is available for operating requirements. For the six month period ended June 30, 2012, existing cash resources were adequate to support operating cash requirements. Cash and cash equivalents increased $2,284,434 during the six month period ended June 30, 2012, primarily due to cash received related to the sale of the Monterey/Hillcrest properties.

Results of Operations

The Partnership’s net loss for the three month period ended ~~September~~June 30, ~~2011~~2012 ~~increased~~decreased compared to ~~2010~~2011, primarily due to an increase in ~~professional fees and a decrease in~~ share of income from Local Partnerships.

The Partnership’s had net ~~loss~~income for the ~~nine~~six month period ended ~~September~~June 30, ~~2011~~2012 ~~decreased~~ compared to ~~2010,~~a ~~primarily~~net ~~due~~loss tofor ~~decrease~~the insix ~~professional~~month ~~fees~~period ended June 30, an2011, ~~increase~~primarily indue ~~share~~to a gain on disposition of ~~income~~property ~~from~~as ~~Local~~a ~~Partnerships~~result ~~and~~of anthe ~~increase~~sale inof ~~interest~~the ~~income~~Monterey/Hillcrest properties.

For financial reporting purposes, the Partnership, as a limited partner in the Local Partnerships, does not record losses from the Local Partnerships in excess of its investment to the extent that the Partnership has no further obligation to advance funds or provide financing to the Local Partnerships. As a result, the Partnership's share of income from partnerships for the three and ~~nine~~six month periods ended ~~September~~June 30, ~~2011~~2012, did not include ~~losses~~income of $4281,~~431~~806 and $~~170~~111,~~837~~224, respectively, compared to excluded losses of $1386,~~813~~753 and $34128,~~774~~406 for the three and ~~nine~~six month periods ended ~~September~~June 30, ~~2010~~2011, respectively.

Certain taxing authorities may assert claims against the Partnership for failure to withhold and remit income tax on operating profit or where the sale(s) of property in which the Partnership was invested failed to produce sufficient cash proceeds with which to pay the tax and/or to pay statutory partnership filing fees. The Partnership is unable to quantify the amount of such potential claims at this time. The Partnership has consistently advised its Partners that they should consult with their tax advisors as to the necessity of filing non-resident returns in such states with respect to their proportional taxes due.

No other significant changes in the Partnership's operations have taken place during the three month period ended ~~September~~June 30, ~~2011~~2012.

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Part I.	FINANCIAL INFORMATION
Item 2.	Management's Discussion and Analysis of Financial Condition
	and Results of Operations - Continued

Plan of Liquidation and Dissolution

On November 21, 2005, the General Partners recommended that the ~~Limited~~limited ~~Partners~~partners approve a plan of liquidation and dissolution for the Partnership. The plan of liquidation and dissolution was approved by the ~~Limited~~limited ~~Partners~~partners on January 20, 2006. ~~Since~~ Currently, ~~the~~all ~~approval~~ of the ~~plan~~Properties ofin ~~liquidation~~which ~~and~~the ~~dissolution,~~Partnership weis ~~have~~invested ~~continued~~through toits ~~seek~~investments toin ~~sell~~ the ~~assets~~Local ofPartnerships ~~the~~are ~~Partnership~~under ~~and~~contract ~~use~~for ~~the~~sale. The ~~sales~~Villa ~~proceeds~~Mirage I and~~/or~~ ~~other~~Villa ~~Partnership~~Mirage ~~funds~~II toproperty ~~pay~~sales ~~all~~are ~~expenses~~anticipated to close in ~~connection~~the ~~with~~third ~~such~~quarter ~~sales,~~of ~~pay~~2012. The orMeadow ~~make~~Lanes ~~provision~~property ~~for~~sale ~~payment~~is ofanticipated ~~all~~to ~~Partnership~~close ~~obligations~~in ~~and~~the ~~liabilities,~~second ~~and~~quarter ~~distribute~~of 2013. Following the ~~remaining~~successful ~~assets~~closing asof ~~set~~these ~~forth~~property insales, the ~~Partnership~~Local ~~Agreement. Numerous variables~~Partnerships, ~~including~~in ~~adverse~~which ~~general~~the ~~economic~~Partnership ~~conditions~~is invested, aswill ~~well~~be ~~as,~~dissolved ~~partnership~~ and ~~regulatory~~terminated ~~restrictions,~~at ~~have~~which ~~impacted~~time the ~~timeframe~~General ~~required~~Partner towill ~~accomplish~~commence the ~~liquidation~~dissolution and ~~dissolution~~termination of the Partnership. There can be no assurance as to when the liquidation and dissolution of the Partnership will be completed but it is anticipated that the process will be completed prior to December 31, 2013.

-Item 114 -Controls and Procedures

Part I.	FINANCIAL INFORMATION
Item 4.	Controls and Procedures

a) Disclosure Controls and Procedures.

The Partnership’s management, with the participation of the principal executive officer and principal financial officer of the Managing General Partner, 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. A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met. Based on such evaluation, the principal executive officer and principal financial officer of the Managing General Partner, who are the ~~equivalent~~equivalents 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 were not effective as a result of insufficient accounting systems and processes in place to ensure timely reports. We are currently in the process of the remediation of the weakness in our internal control over financial reporting by the employment of a consultant with the requisite accounting expertise to resolve the above issue and expect to implement changes in the near term.

The Partnership must rely on the Local Limited Partnerships to provide the Partnership with certain information necessary for the timely filing of the Partnership’s periodic reports. Factors in the accounting at the Local Limited Partnerships have caused delays in the provision of such information during past reporting periods, and resulted in the Partnership’s inability to file its periodic reports in a timely manner.

Once the Partnership has received the necessary information from the Local Limited Partnerships, the Partnership’s principal executive officer and principal financial officer believe that the material information required to be disclosed in the Partnership’s periodic report filings with SEC is effectively recorded, processed, summarized and reported, albeit not in a timely manner. Going forward, the Partnership will use the means reasonably within its power to impose procedures designed to obtain from the Local Limited Partnerships the information necessary for the timely filing of the Partnership’s periodic reports.

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 1.	Legal Proceedings

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Part II	OTHER INFORMATION
Item 1.	Legal Proceedings

The Partnership is unaware of any pending or outstanding litigation involving it or the underlying investment property of the Local Partnerships in which the Partnership invests that are not of a routine nature arising in the ordinary course of business or that would have a material adverse effect on the business of the Partnership.

Item 5.

Other Information

There has not been any information required to be disclosed in a report on Form 8-K during the quarter ended ~~September~~June 30, ~~2011~~2012, but not reported, whether or not otherwise required by this Form 10-Q at ~~September~~June 30, ~~2011~~2012.

There is no established market for the purchase and sale of units of limited partner interest (Units) in the Partnership, although various informal secondary market services may exist. Due to the limited markets, however, investors may be unable to sell or otherwise dispose of their Units.

On ~~July~~March 2831, ~~2010~~2012, the Partnership ~~paid~~issued a ~~cash~~press ~~distribution~~release ofregarding ~~$898~~a “mini-tender offer” commenced by MacKenzie Patterson Fuller,~~230~~ ~~($15~~LP ~~per~~for ~~Unit)~~up to 2.1% of the ~~Limited~~Units ~~Partners~~in ~~who~~the ~~were~~Partnership, ~~holders~~including ofthose ~~record~~already asowned ofby ~~July~~the 1,offeror ~~2010~~and its affiliates.

OnItem ~~March 31, 2011, the Partnership issued a press release regarding a “mini-tender offer” commenced by MacKenzie Patterson Fuller, LP for up to 2~~6.1% ~~of the Units in the Partnership, including those already owned by the offeror and its affiliates.~~Exhisit

-Exhibit 12No. -Description

Part II.	OTHER INFORMATION
31.1		Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
Item 6.	Exhibits
31.2		Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Exhibit No.		Description
31.1		Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32		Certification of Principal Executive Officer and Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

All other Items are not applicable.

- 1315 -

SIGNATURE

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CAPITAL REALTY INVESTORS-III
	~~LIMITED PARTNERSHIP~~	LIMITED PARTNERSHIP
	(Registrant)
	by:	C.R.I., Inc.
September 14, 2012	by:		/s/ H. William Willoughby
		Managing General Partner
DATE			H. William Willoughby
January 6, 2012		by:	/s/ H. William Willoughby
			Director, President, Secretary,
DATE	H. William Willoughby
			Principal Financial Officer and
			Principal Acount Officer

~~Director,~~- ~~President, Secretary, Principal Financial Officer and Principal Accounting Officer~~16-

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Filing Compare · CAPITAL REALTY INVESTORS III LTD PARTNERSHIP