Filed Pursuant to Rule 424(b)(3)

Registration No. 333-207952

STEADFAST APARTMENT REIT III, INC.

SUPPLEMENT NO. 7 DATED OCTOBER 12, 2018

TO THE PROSPECTUS DATED APRIL 11, 2018

This document supplements, and should be read in conjunction with, our prospectus dated April 11, 2018, relating to our offering of up to $1,300,000,000 in shares of our common stock. This Supplement No. 7 supersedes and replaces all prior supplements to the prospectus. Terms used and not otherwise defined in this Supplement No. 7 shall have the same meanings as set forth in our prospectus. The purpose of this Supplement No. 7 is to disclose:

• the status of our public offering and termination of our primary offering;

• determination of our estimated value per share of our Class A common stock, Class R common stock and Class T common stock;

• an update on our share repurchase program;

• an update on our distribution reinvestment plan;

• our real estate portfolio;

• selected financial data;

• our performance—funds from operations and modified funds from operations;

• information regarding our indebtedness;

• information regarding our distributions;

• our net tangible book value per share;

• information regarding repurchases of shares;

• compensation paid to our advisor and its affiliates;

• updates to our risk factors;

• information on experts;

• incorporation of certain information by reference;

• our Account Update Form and updates to our Form of Application for Transfer; and

• our Quarterly Report on Form 10-Q for the period ended June 30, 2018, as filed with the Securities and Exchange Commission on August 10, 2018.

Status of Our Public Offering and Termination of our Primary Offering

We commenced our initial public offering of up to $1,300,000,000 in shares of our common stock on February 5, 2016. In our initial public offering, we offered up to $1,000,000,000 in shares of our common stock to the public in our primary offering, and up to $300,000,000 in shares of our common stock pursuant to our distribution reinvestment plan, consisting of Class A common shares, Class R common shares and Class T common shares. On August 31, 2018, we terminated our primary offering of up to $1,000,000,000 in shares of our common stock. As of October 4, 2018, we had received and accepted investors’ subscriptions for and issued 3,498,032 shares of our Class A common stock, 475,944 shares of our Class R common stock and 4,596,511 shares of our Class T common stock in our initial public offering, resulting in gross offering proceeds of approximately $206,090,488, including $7,057,381 in shares issued pursuant to our distribution reinvestment plan. Following the termination of our primary offering, we continue to offer shares of our common stock pursuant to our distribution reinvestment plan. As of October 4, 2018, approximately 46,142,404 shares of our common stock remained available for sale to the public pursuant to our distribution reinvestment plan.

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Determination of Our Estimated Value Per Share of Our Class A Common Stock, Class R Common Stock and Class T Common Stock

The following information supplements, and should be read in conjunction with, all discussions contained in our prospectus regarding our calculation of an estimated value per share.

In August 2018, our board of directors initiated a process to determine an estimated value per share of our Class A common stock, Class R common stock and Class T common stock. We are providing an estimated value per share to assist broker-dealers that participated in our public offering in meeting their customer account statement reporting obligations under National Association of Securities Dealers Conduct Rule 2340, as required by the Financial Industry Regulatory Authority, Inc., or FINRA. This valuation was performed in accordance with Practice Guideline 2013-01, Valuations of Publicly Registered Non-Listed REITs, issued by the Institute for Portfolio Alternatives (formerly known as the Investment Program Association, or the IPA, in April 2013, which we refer to as the “IPA Valuation Guidelines”. Our board of directors formed a valuation committee, or the Valuation Committee, comprised solely of independent directors, to oversee the process of determining the estimated value per share. Upon approval of our board of directors, we engaged CBRE Capital Advisors, Inc., or CBRE Cap, a FINRA registered broker-dealer firm that specializes in providing real estate financial services, to provide property-level and aggregate valuation analyses and a range for the estimated value per share of each class of our common stock as of June 30, 2018.

From the date of CBRE Cap’s engagement through the issuance of its valuation report on October 9, 2018, or the Valuation Report, CBRE Cap held discussions with our external advisor, Steadfast Apartment Advisor III, LLC, and our senior management and conducted or commissioned such investigations, research, review and analyses as it deemed necessary. CBRE Cap based its calculation of the range for the estimated value per share of our common stock upon appraisals of all of our real properties, or the Appraisals, performed by CBRE, Inc., or CBRE, an affiliate of CBRE Cap and an independent third party appraisal firm, and valuations performed by our advisor with respect to our other assets and liabilities. The Valuation Committee, upon its receipt and review of the Valuation Report, concluded that the range between $21.04 and $24.14 for our estimated value per share proposed in the Valuation Report was reasonable and recommended that the board of directors adopts $22.54 as the estimated value per share of each class of our common stock as of June 30, 2018. The estimated value per share represents the weighted average of the range reflecting the effect of using differing discount rates and terminal capitalization rates in the sensitivity analysis.On October 9, 2018, the board of directors accepted the Valuation Committee’s recommendation and approved $22.54 as the estimated value per share of each class of our common stock as of June 30, 2018. CBRE Cap is not responsible for the determination of the estimated value per share of our common stock as of June 30, 2018.

Valuation Methodology

In preparing the Valuation Report, CBRE Cap, among other things:

• reviewed financial and operating information requested from us or provided by our advisor;

• reviewed and discussed with us and our advisor the historical and anticipated future financial performance of our multifamily properties, including forecasts prepared by us and our advisor;

• reviewed appraisals commissioned by us that contained analysis on each of our multifamily properties and performed analyses and studies for each property;

• conducted or reviewed CBRE Cap proprietary research, including market and sector capitalization rate surveys;

• reviewed third-party research, including equity reports and online data;

• compared our financial information to similar information of companies that CBRE Cap deemed to be comparable;

• reviewed our reports filed with the SEC, including our Quarterly Report on Form 10-Q for the period ended June 30, 2018, and the unaudited financial statements therein; and

• reviewed our audited financial statements as of December 31, 2017.

The Appraisals were performed in accordance with Uniform Standards of Professional Appraisal Practice and were all Member of Appraisal Institute, or MAI, appraisals. The Appraisals were prepared by CBRE and personnel who are members and hold the MAI designation. CBRE Cap reviewed and took into consideration the Appraisals, and described the results of the Appraisals in its Valuation Report. Discreet values were assigned to each property in our portfolio.

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The Valuation Committee and our board of directors considered the following valuation methodology with respect to each multifamily property, which was applied by CBRE Cap in its Valuation Report. Unlevered, ten-year discounted cash flow analyses from Appraisals were created for our fully operational properties. For non-stabilized properties, lease-up discounts were applied to discounted cash flow to arrive at an “As Is” value. The “terminal capitalization rate” method was used to calculate terminal value of the assets, with such rates varying based on the specific geographic location and other relevant factors.

Valuation Summary: Material Assumptions

The valuation process we used to determine an estimated value per share of each class of our common stock was designed to follow the recommendations of the IPA Valuation Guidelines.

The following table summarizes the key assumptions that were employed by CBRE Cap in the discounted cash flow models to estimate the value of our real estate assets:

	Range	Weighted-Average
Terminal capitalization rate	5.62% - 5.91%	5.77%
Discount rate	6.85% - 7.20%	7.02%

While we believe that CBRE’s assumptions and inputs are reasonable, a change in these assumptions and inputs may significantly impact the appraised value of the real estate properties and our estimated value per share. The table below illustrates the impact on the estimated value per share if the terminal capitalization rates or discount rates were adjusted by 2.5% in either direction, which represents a 5% sensitivity analysis, in accordance with the IPA Valuation Guidelines, assuming all other factors remain unchanged:

	Increase (Decrease) on the Estimated Value per Share due to
	Decrease of 2.5%		Increase of 2.5%
Terminal capitalization rate	$	0.86	$	(0.79	)
Discount rate	$	0.75	$	(0.71	)

In its Valuation Report, CBRE Cap included an estimate of the June 30, 2018, value of our assets, including cash and selected other assets net of payables, and accruals and other liabilities including notes payable. The estimated values of our notes payable are equal to GAAP fair values for the period ended June 30, 2018, but do not equal the book value of the loans in accordance with GAAP. The GAAP fair values of our notes payable were determined using a discounted cash flow analysis. The discounted cash flow analysis was based on projected cash flow over the remaining loan terms and on management’s estimates of current market interest rates for instruments with similar characteristics. The carrying values of a majority of our other assets and liabilities are considered to equal their fair value due to their short term maturities or liquid nature. Certain balances, such as lease intangible assets and liabilities related to real estate investments and deferred financing costs, have been eliminated for the purpose of the valuation since the value of those balances was already considered in the Appraisals.

Our estimated value per share takes into consideration any potential liability related to an incentive fee our advisor is entitled to upon meeting certain stockholder return thresholds in accordance with our charter. For purposes of determining the estimated value per share, our advisor calculated the potential liability related to this incentive fee based on a hypothetical liquidation of our assets and liabilities at their estimated fair values, without considering the impact of any potential closing costs and fees related to the disposition of real estate properties, and determined that there would be a liability related to the incentive fee of $0.

Taking into consideration the reasonableness of the valuation methodology, assumptions and conclusions contained in the Valuation Report, our board of directors determined the estimated value of our equity interest in its real estate portfolio to be in the range of $425,282,296 to $449,778,605 and our estimated net asset value to range between $165,473,712 and $189,912,032, or between $21.04 and $24.14 per share, based on a share count of 7,860,558 shares issued and outstanding as of June 30, 2018.

As with any valuation methodology, the methodologies considered by the Valuation Committee and our board of directors in reaching an estimate of the value of our shares are based upon all of the foregoing estimates, assumptions, judgments and opinions that may, or may not, prove to be correct. The use of different estimates, assumptions, judgments or opinions may have resulted in significantly different estimates of the value of our shares.

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The following table summarizes the material components of our estimated value and estimated value per share as of June 30, 2018.

	Components of Share Value
	Estimated Value			Estimated Value per Share
Real estate properties	$	437,110,000		$	55.60
Cash	26,240,456			3.33
Other assets	5,046,159			0.64
Mortgage debt	(280,858,805		)	(35.73		)
Other liabilities	(10,236,394		)	(1.30		)
Total estimated value	$	177,301,416		$	22.54

The estimated value of the real estate properties as of June 30, 2018, was $437,110,000, while the total cost of the real estate properties was $407,192,836 (comprised of the aggregate purchase price of $400,252,928, and capital expenditures subsequent to acquisition of $6,939,908).

The following table summarizes the total cost and estimated value of our real estate properties based on the length of its ownership of the real estate properties as of June 30, 2018.

	Total Cost		Estimated Value		% Increase
Properties owned > 1 year	$	182,872,077	$	200,110,000	9.4	%
Properties owned < 1 year	224,320,759		237,000,000		5.7	%
	$	407,192,836	$	437,110,000	7.3	%

Additional Information Regarding the Valuation, Limitations of Estimated Value per Share and the Engagement of CBRE Cap

In accordance with the IPA Valuation Guidelines, the Valuation Committee reviewed, confirmed and approved the processes and methodologies employed by CBRE Cap, their consistency with real estate industry standards and best practices and the reasonableness of the assumptions utilized in the valuation.

The Valuation Report issued on October 9, 2018, was based upon market, economic, financial and other information, circumstances and conditions existing prior to June 30, 2018, and any material change in such information, circumstances and/or conditions may have a material effect on the estimated value per share. CBRE Cap’s valuation materials were addressed solely to the board of directors to assist it in establishing an estimated value of our common stock. CBRE Cap’s valuation materials were restricted, were not addressed to the public and should not be relied upon by any other person to establish an estimated value of our common stock. The Valuation Report does not constitute a recommendation by CBRE Cap to purchase or sell any shares of our common stock and should not be represented as such.

Each of CBRE Cap and CBRE reviewed the information supplied or otherwise made available to it by us or our advisor for reasonableness, and assumed and relied upon the accuracy and completeness of all such information and of all information supplied or otherwise made available to it by any other party, and did not undertake any duty or responsibility to verify independently any of such information. With respect to operating or financial forecasts and other information and data provided to or otherwise reviewed by or discussed with CBRE Cap and CBRE, CBRE Cap and CBRE assumed that such forecasts and other information and data were reasonably prepared in good faith reflecting our and our advisor’s best currently available estimates and judgments and other subjective judgments, and relied upon us and our advisor to advise CBRE Cap and CBRE promptly if any information previously provided became inaccurate or was required to be updated during the period of its review. CBRE Cap assumes no obligation to update or otherwise revise these materials. In preparing its valuation materials, CBRE Cap did not, and was not requested to, solicit third-party indications of interest for us in connection with possible purchases of our securities or the acquisition of all or any part of our company.

In performing its analyses, CBRE Cap made numerous assumptions as of various points in time with respect to industry performance, general business, economic and regulatory conditions, current and future rental market for our operating properties and other matters, many of which are necessarily subject to change and beyond our and CBRE Cap’s control. The analyses performed by CBRE Cap are not necessarily indicative of actual values, trading values or actual future results of our common stock that might be achieved, all of which may be significantly more or less

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favorable than suggested by the Valuation Report. The analyses do not purport to be appraisals or to reflect the prices at which the properties may actually be sold, and such estimates are inherently subject to uncertainty. The actual value of our common stock may vary significantly depending on numerous factors that generally impact the price of securities, our financial condition and the state of the real estate industry more generally. Accordingly, with respect to the estimated value per share of our common stock, neither we nor CBRE Cap can give any assurance that:

• a stockholder would be able to resell shares at this estimated value;

• a stockholder would ultimately realize distributions per share equal to our estimated value per share upon liquidation of our assets and settlement of our liabilities or our sale;

• another independent third-party appraiser or third-party valuation firm would agree with our estimated value per share;

• a third party would offer the estimated value per share in an arm’s-length transaction to purchase all or substantially all of our shares of common stock;

• our shares would trade at a price equal to or greater than the estimated value per share if we listed them on a national securities exchange; or

• the methodology used to estimate our value per share would be acceptable to FINRA or under the Employees Retirement Income Security Act of 1974 for compliance with its reporting requirements.

Similarly, the amount a stockholder may receive upon repurchase of his or her shares pursuant to our share repurchase program, may be greater or less than the amount a stockholder paid for the shares, regardless of any increase in the underlying value of assets owned by us.

The June 30, 2018 estimated value per share was reviewed and recommended by the Valuation Committee and approved by our board of directors at meetings held on October 9, 2018. The value of our common stock will fluctuate over time as a result of, among other things, developments related to individual assets and responses to the real estate and capital markets. We expect to utilize an independent valuation firm to update the estimated value per share as of December 31, 2018, in accordance with the IPA Valuation Guidelines.

The estimated value per share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share does not take into account estimated disposition costs and fees for real estate properties that are not under contract to sell or debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of debt.

CBRE Cap is a FINRA registered broker-dealer and is an investment banking firm that specializes in providing real estate financial services. CBRE is actively engaged in the business of appraising commercial real estate properties similar to those owned by us in connection with public securities offerings, private placements, business combinations and similar transactions. We commissioned CBRE to deliver an appraisal report relating to our real estate properties and CBRE received fees upon delivery of such report. In addition, we agreed to indemnify CBRE Cap against certain liabilities arising out of this engagement. Each of CBRE Cap and CBRE is an affiliate of CBRE Group, Inc., or the CBRE Group, a Fortune 500 and S&P 500 company headquartered in Los Angeles, California, one of the world’s largest commercial real estate services and investment firms (in terms of 2017 revenue) and a parent holding company of affiliated companies that are engaged in the ordinary course of business in many areas related to commercial real estate and related services. CBRE Cap and its affiliates possess substantial experience in the valuation of assets similar to those owned by us and regularly undertake the valuation of securities in connection with public offerings, private placements, business combinations and similar transactions. For the preparation of the Valuation Report, we paid CBRE Cap a customary fee for services of this nature, no part of which was contingent relating to the provision of services or specific findings. We did not engage CBRE Cap for any other services. During the past three years, certain of our affiliates engaged affiliates of CBRE primarily for various real estate-related services and these affiliates of CBRE received fees in connection with such services. We anticipate that affiliates of CBRE will continue to provide similar or other real estate-related services in our future and the future of our affiliates. In addition, we may in our discretion engage CBRE Cap to assist our board of directors in future determinations of our estimated value per share. We are not affiliated with CBRE, CBRE Cap or any of their affiliates. CBRE Cap and CBRE and their affiliates may from time to time in the future perform other commercial real estate appraisal, valuation and financial advisory services for us and our affiliates in transactions related to the properties that are the subjects of the appraisals, so long as such other services do not adversely affect the independence of the applicable CBRE appraiser. While we and affiliates of our advisor have engaged and may engage CBRE Cap or its affiliates in the future for commercial real estate services of various kinds, we believe that there are no material conflicts of interest with respect to our engagement of CBRE Cap.

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In the ordinary course of their business, each of CBRE Cap and CBRE, and their respective affiliates, directors and officers may structure and effect transactions for their own accounts or for the accounts of their customers in commercial real estate assets of the same kind and in the same markets as our assets.

Update to Our Share Repurchase Program

The following information supplements, and should be read in conjunction with, the section entitled “Description of Capital Stock—Share Repurchase Program” beginning on page 144 of our prospectus.

In connection with the determination of the estimated value per share, the purchase price for shares repurchased under our share repurchase program will be, as set out below from the date of this Supplement No. 7 until our board of directors determines a new estimated value per share:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of the Lesser of Purchase Price or $22.54
2 years	95.0% of the Lesser of Purchase Price or $22.54
3 years	97.5% of the Lesser of Purchase Price or $22.54
4 years	100.0% of the Lesser of Purchase Price or $22.54
In the event of a stockholder’s death or disability	Average Issue Price for Shares(2)

_______________

(1)As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock. Repurchase price includes the full amount paid for each share, including all sales commissions and dealer manager fees.

(2) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares. The required one-year holding period does not apply to repurchases requested within 270 days after the death or disability of a stockholder.

Update to Our Distribution Reinvestment Plan

The following information supplements, and should be read in conjunction with, the section entitled “Description of Capital Stock—Distribution Reinvestment Plan” beginning on page 143 of our prospectus.

In connection with the determination of the estimated value per share, our board of directors determined that upon 10 days’ notice to stockholders, which notice is provided pursuant to the filing of our Current Report on Form 8-K filed with the SEC on October 12, 2018, distributions reinvested in additional shares pursuant to the distribution reinvestment plan will be reinvested at a price of $22.54 for each share of our Class A, Class T, and Class R common stock

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Our Real Estate Portfolio

As of September 30, 2018, our property portfolio consisted of 10 multifamily apartment communities comprising a total of 2,775 apartment homes. The following table provides information regarding our properties as of September 30, 2018:

	Property Name	Location	Number of Units	Average Monthly Occupancy		Average Monthly Rent(1)		Purchase Date	Total Purchase Price		Mortgage Debt Outstanding(2)
1	Carriage House Apartment Homes	Gurnee, Illinois	136	92.9	%	$	784	5/19/2016	$	7,525,000	$	5,700,000
2	Bristol Village Apartments	Aurora, Colorado	240	93.0	%	1,291		11/17/2016	47,400,000		35,016,000
3	Canyon Resort at Great Hills Apartments	Austin, Texas	256	94.8	%	1,290		12/29/2016	44,500,000		31,710,000
4	Reflections on Sweetwater Apartments	Lawrenceville, Georgia	280	96.3	%	1,068		1/12/2017	33,288,337		23,000,000
5	The Pointe at Vista Ridge Apartments	Lewisville, Texas	300	94.9	%	1,290		5/25/2017	45,188,223		29,106,000
6	Belmar Villas	Lakewood, Colorado	318	92.0	%	1,358		7/21/2017	64,503,255		47,112,000
7	Ansley at Princeton Lakes	Atlanta, Georgia	306	90.5	%	1,150		8/31/2017	44,594,087		32,360,000
8	Sugar Mill Apartments	Lawrenceville, Georgia	244	95.2	%	1,094		12/7/2017	36,305,492		24,797,000
9	Avery Point Apartments	Indianapolis, Indiana	512	91.3	%	794		12/15/2017	45,829,836		31,220,000
10	Cottage Trails at Culpepper Landing	Chesapeake, Virginia	183	97.6	%	1,325		5/31/2018	31,118,698		21,545,000
			2,775	93.5	%	$	1,130		$	400,252,928	$	281,566,000

(1)

Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs. The residential lease terms consist of lease durations equal to twelve months or less, and some residential leases contain provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated.

(2)

For more information on our indebtedness, see “Information Regarding Our Indebtedness.”

In management’s opinion, our properties are adequately insured. We will depreciate buildings based upon an estimated useful life of 30 years.

Selected Financial Data

The following selected financial data should be read in conjunction with our consolidated financial statements and the notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the year ended December 31, 2017, which is incorporated herein by reference, and our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2018, which is attached to this Supplement No. 7 as Exhibit C. Our historical results are not necessarily indicative of results for any future period.

	As of June 30,		As of December 31,
	2018		2017		2016
	(Unaudited)
Balance sheet data
Total real estate, net	$	384,940,901	$	360,485,475	$	98,947,503
Total assets	416,227,516		381,554,845		117,448,401
Mortgage notes payable, net	279,965,461		258,470,441		72,016,933
Total liabilities	290,201,855		270,430,279		77,241,609
Redeemable common stock	4,507,251		2,920,059		292,818
Total stockholders’ equity	121,518,410		108,204,507		39,913,974

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	For the Six Months Ended June 30,			For the Year Ended December 31,
	2018			2017			2016
	(Unaudited)
Operating data
Total revenues	$	18,061,792		$	19,591,577		$	1,264,906
Net loss	(7,451,200		)	(11,753,187		)	(4,920,712		)
Net loss attributable to noncontrolling interest	—			—			(100		)
Net loss attributable to common stockholders	(7,451,200		)	(11,753,187		)	(4,920,612		)
Net loss attributable to Class A common stockholders - basic and diluted	(3,162,222		)	(5,726,887		)	(3,160,451		)
Net loss per Class A common share - basic and diluted	(0.96		)	(2.49		)	(8.36		)
Net loss attributable to Class R common stockholders - basic and diluted	(374,268		)	(534,790		)	(165,258		)
Net loss per Class R common share - basic and diluted	(0.99		)	(2.55		)	(8.42		)
Net loss attributable to Class T common stockholders - basic and diluted	(3,914,710		)	(5,491,510		)	(1,594,903		)
Net loss per Class T common share - basic and diluted	(1.09		)	(2.75		)	(8.62		)
Other data
Net cash (used in) provided by operating activities	(258,320		)	2,712,339			(2,171,609		)
Net cash used in investing activities	(33,469,517		)	(273,850,530		)	(101,190,015		)
Net cash provided by financing activities	43,473,832			270,282,264			119,551,512
Total distributions declared to Class A common stockholders	2,290,903			3,286,288			560,327
Total distributions declared to Class R common stockholders	258,497			295,072			27,997
Total distributions declared to Class T common stockholders	2,343,102			2,607,893			232,376
Distributions declared per Class A common share(1)	0.744			1.500			0.930
Distributions declared per Class R common share(1)	0.709			1.425			0.598
Distributions declared per Class T common share(1)	0.615			1.241			0.764
Weighted-average number of Class A common shares outstanding, basic and diluted	3,077,174			2,190,070			374,595
Weighted-average number of Class R common shares outstanding, basic and diluted	364,202			204,514			19,587
Weighted-average number of Class T common shares outstanding, basic and diluted	3,809,424			2,100,058			189,037
FFO(2)	1,486,170			735,644			(4,094,977		)
MFFO(2)	944,232			1,340,468			(1,076,205		)

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(1) For information on our distributions, see “Information Regarding Our Distributions.”

(2) GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, established the measurement tool of funds from operations, or FFO. Since its introduction, FFO has become a widely used non-GAAP financial measure among REITs. Additionally, we use modified funds from operations, or MFFO, as defined by the IPA, as a supplemental measure to evaluate our operating performance. MFFO is based on FFO but includes certain adjustments we believe are necessary due to changes in accounting and reporting under GAAP since the establishment of FFO. Neither FFO nor MFFO should be considered as an alternative to net loss or other measurements under GAAP as indicators of our operating performance, nor should they be considered as an alternative to cash flow from operating activities or other measurements under GAAP as indicators of liquidity. For additional information on how we calculate FFO and MFFO and a reconciliation of FFO and MFFO to net loss, see “Our Performance—Funds From Operations and Modified Funds from Operations.”

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Our Performance—Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, NAREIT, an industry trade group, has promulgated the measure FFO, which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income (loss) as determined under GAAP.

We define FFO, a non-GAAP financial measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, or the White Paper. The White Paper defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of property and non-cash impairment charges of real estate related investments, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In particular, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges. Our FFO calculation complies with NAREIT’s policy described above. The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO, and MFFO, as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While other start-up entities may also experience significant acquisition activity during their initial years, we believe that public, non-listed REITs, like us, are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after acquisition activity ceases. Our board of directors will determine to pursue a liquidity event when it believes that the then-current market conditions are favorable. However, our board of directors does not anticipate evaluating a liquidity event (i.e., listing of our common stock on a national exchange, a merger or sale of our company or another similar transaction) until five years after the completion of our offering stage. Thus, as a limited life REIT, we will not continuously purchase assets and will have a limited life.

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Due to the above factors and other unique features of publicly registered, non-listed REITs, the IPA, an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registered non-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a public, non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income or loss as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate with a limited life and targeted exit strategy, as currently intended. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and other non-operating items included in FFO and also excludes acquisition fees and expenses that are not capitalized, as discussed below, and affect our operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is in place. By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our offering has been completed and our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our offering and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on our operating performance during the periods in which properties are acquired.

We define MFFO, a non-GAAP financial measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations, or Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized. While we rely on our advisor for managing interest rate, hedge and foreign exchange risk, we do not retain an outside consultant to review all our hedging agreements. Inasmuch as interest rate hedges are not a fundamental part of our operations, we believe it is appropriate to exclude such non-recurring gains and losses in calculating MFFO, as such gains and losses are not reflective of on-going operations.

Our MFFO calculation complies with the IPA’s Practice Guideline described above, except with respect to certain acquisition fees and expenses as discussed below. In calculating MFFO, we exclude acquisition related expenses that are not capitalized, amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Historically, under GAAP, acquisition fees and expenses were characterized as operating expenses in determining operating net income. However, following the recent publication of Accounting Standards Update 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, or ASU 2017-01, acquisition fees and expenses are capitalized and depreciated under certain conditions. In January 2017, we elected to early adopt ASU 2017-01 resulting in a substantial part of our acquisition fees and expenses being capitalized and therefore not excluded from the calculation of MFFO but captured as depreciation in calculating FFO. However, these expenses are paid in cash by us. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to our stockholders. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating

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activities. In addition, we view fair value adjustments of derivatives and gains and losses from dispositions of assets as non-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective of on-going operations and are therefore typically adjusted for when assessing operating performance.

Our management uses MFFO and the adjustments used to calculate MFFO in order to evaluate our performance against other public, non-listed REITs which have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate MFFO allow us to present our performance in a manner that reflects certain characteristics that are unique to public, non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors. By excluding expensed acquisition costs that are not capitalized, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance to that of other public, non-listed REITs, although it should be noted that not all public, non-listed REITs calculate FFO and MFFO the same way, so comparisons with other public, non-listed REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO has limitations as a performance measure in an offering such as ours where the price of a share of common stock is a stated value and there is no regular net asset value determination during the early stage of the offering. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. MFFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining MFFO.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across the non-listed REIT industry and in response to such standardization we may have to adjust our calculation and characterization of FFO or MFFO accordingly.

Our calculation of FFO and MFFO is presented in the following table for the six months ended June 30, 2018, and for the year ended December 31, 2017:

	For the Six Months Ended June 30, 2018			For the Year Ended December 31, 2017
Reconciliation of net loss to MFFO:
Net loss	$	(7,451,200	)	$	(11,753,187	)
Depreciation of real estate assets	6,666,168			7,045,959
Amortization of lease-related costs	2,271,202			5,442,872
FFO	1,486,170			735,644
Acquisition fees and expenses(1)(2)	2,787			160,572
Unrealized (gain) loss on derivative instruments	(544,725		)	444,252
MFFO	$	944,232		$	1,340,468

________________

(1) By excluding expensed acquisition costs that are not capitalized, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with

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management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our advisor or third parties. Acquisition fees and expenses under GAAP were historically considered operating expenses and as expenses included in the determination of net income (loss) and income (loss) from continuing operations, both of which are performance measures under GAAP. Following the recent publication of ASU 2017-01, acquisition fees and expenses are capitalized and depreciated under certain conditions. We elected to early adopt as of January 1, 2017, ASU 2017-01, resulting in a substantial part of our acquisition fees and expenses being capitalized and therefore not excluded from the calculation of MFFO but are captured as depreciation in calculating FFO. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to its stockholders.

(2) Acquisition expenses for the six months ended June 30, 2018, and for the year ended December 31, 2017, of $2,787 and $160,572, respectively, did not meet the criteria for capitalization under ASU 2017-01 and are recorded in general and administrative expenses in the accompanying consolidated statements of operations. All acquisition fees for the six months ended June 30, 2018, and for the year ended December 31, 2017 were capitalized pursuant to ASU 2017-01 and therefore were not recorded in the statements of operations impacting net loss and MFFO.

Information Regarding Our Indebtedness

The following is a summary of mortgage notes payable secured by our real properties as of September 30, 2018:

Mortgage Loan	Payment Type	Maturity	Interest Rate	Mortgage Debt		Outstanding Principal Balance
Carriage House Apartment Homes	Principal and interest(1)	June 1, 2026	LIBOR + 2.47%(2)	$	5,700,000	$	5,700,000
Bristol Village Apartments	Principal and interest(3)	December 1, 2026	LIBOR + 2.52%(4)	35,016,000		35,016,000
Canyon Resort at Great Hills Apartments	Principal and interest(3)	January 1, 2027	LIBOR + 2.31%(5)	31,710,000		31,710,000
Reflections on Sweetwater Apartments	Principal and interest(3)	February 1, 2027	LIBOR + 2.46%(6)	23,000,000		23,000,000
The Pointe at Vista Ridge Apartments	Principal and interest(7)	June 1, 2027	LIBOR + 2.195%(8)	29,106,000		29,106,000
Belmar Villas	Principal and interest(1)	August 1, 2024	3.91%	47,112,000		47,112,000
Ansley at Princeton Lakes	Principal and interest(3)	September 1, 2027	LIBOR + 2.195%(9)	32,360,000		32,360,000
Sugar Mill Apartments	Principal and interest(1)	January 1, 2025	3.92%	24,797,000		24,797,000
Avery Point Apartments	Principal and interest(1)	January 1, 2025	3.82%	31,220,000		31,220,000
Cottage Trails at Culpepper Landing	Principal and interest(3)	June 1, 2028	4.66%	21,545,000		21,545,000
				$	281,566,000	$	281,566,000

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(1)	A monthly payment of interest only is due and payable for 36 months from the loan date, after which a monthly payment of principal and interest is due and payable until the maturity date.
(2)	We entered into an interest rate cap agreement that limits the London Interbank Offered Rate, or LIBOR, portion of the interest rate to 5.0% through June 1, 2019.
(3)	A monthly payment of interest only is due and payable for 60 months from the loan date, after which a monthly payment of principal and interest is due and payable until the maturity date.
(4)	We entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 2.5% through December 1, 2020.
(5)	We entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 2.5% through January 1, 2020.
(6)	We entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 2.5% through February 1, 2020.
(7)	A monthly payment of interest only is due and payable for 84 months from the loan date, after which a monthly payment of principal and interest is due and payable until the maturity date.
(8)	We entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 2.5% through June 1, 2020.
(9)	We entered into an interest rate cap agreement that limits the LIBOR portion of the interest rate to 2.5% through September 1, 2020.

Information Regarding Our Distributions

Our board of directors has declared daily distributions that are paid on a monthly basis. We expect to continue paying monthly distributions unless our results of operations, our general financial condition, general economic conditions or other factors prohibit us from doing so. Distributions declared (1) accrue daily to our stockholders of record as of the close of business on each day, (2) are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month and (3) are payable to stockholders from legally available funds therefor. There is no guarantee that we will continue to pay distributions at this rate or at all. For information on distribution rates paid during the six months ended June 30, 2018, see Note 6 (Stockholders’ Equity) to the condensed consolidated financial statements included in our Quarterly Report on Form 10-Q filed with the SEC on August 10, 2018, a copy of which is attached to this Supplement No. 7 as Exhibit C.

The following table presents distributions, including distributions reinvested pursuant to the distribution reinvestment plan, and sources of distributions for the period indicated below.

							Distributions Declared Per Class T Share(1)		Distributions Paid(2)						Sources of Distributions Paid				Net Cash (Used In) Provided by Operating Activities
Period	Distributions Declared(1)		Distributions Declared Per Class A Share(1)		Distributions Declared Per Class R Share(1)				Cash		Reinvested		Total		Cash Flow From Operations		Offering Proceeds
First Quarter 2018	$	2,325,053	$	0.370	$	0.352	$	0.306	$	1,165,331	$	1,075,644	$	2,240,975	$	—	$	2,240,975	$	(1,383,549	)
Second Quarter 2018	2,567,449		0.374		0.357		0.309		1,323,278		1,206,223		2,529,501		1,125,229		1,404,272		1,125,229
	$	4,892,502	$	0.744	$	0.709	$	0.615	$	2,488,609	$	2,281,867	$	4,770,476	$	1,125,229	$	3,645,247	$	(258,320	)

____________________

(1) Assumes each share was issued and outstanding each day during the period presented.

(2) Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately three days following month end.

For the three and six months ended June 30, 2018, we paid aggregate distributions of $2,529,501 and $4,770,476, including $1,323,278 and $2,488,609 of distributions paid in cash and 52,363 and 99,008 shares of our common stock issued pursuant to our distribution reinvestment plan for $1,206,223 and $2,281,867, respectively. For the three and six months ended June 30, 2018, our net loss was $3,526,366 and $7,451,200, and we had FFO of $707,379 and $1,486,170 and net cash provided by (used in) operations of $1,125,229 and $(258,320), respectively. For the three and six months ended June 30, 2018, we funded $1,125,229 and $1,125,229 or 44% and 24%, respectively, and $1,404,272 and $3,645,247 or 56% and 76%, respectively, of total distributions paid, including shares issued pursuant to our distribution reinvestment plan, from cash flow from operations and with proceeds from our public offering.

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Since inception, of the $11,034,069 in total distributions paid through June 30, 2018, including shares issued pursuant to our distribution reinvestment plan, 3% of such amounts were funded from cash flow from operations and 97% were funded from offering proceeds. For information on how we calculate FFO and the reconciliation of FFO to net loss, see “Our Performance—Funds from Operations and Modified Funds from Operations.”

On July 2, 2018, we paid distributions of $868,386, which related to distributions declared for each day in the period from June 1, 2018 through June 30, 2018 and consisted of cash distributions paid in the amount of $454,378 and $414,008 in shares issued pursuant to our distribution reinvestment plan. On August 1, 2018, we paid distributions of $918,143, which related to distributions declared for each day in the period from July 1, 2018 through July 31, 2018 and consisted of cash distributions paid in the amount of $479,293 and 438,850 in shares issued pursuant to our distribution reinvestment plan. On September 4, 2018, we paid distributions of $952,631, which related to distributions declared for each day in the period from August 1, 2018 through August 31, 2018 and consisted of cash distributions paid in the amount of $497,002 and $455,629 in shares issued pursuant to our distribution reinvestment plan. On October 1, 2018, we paid distributions of $952,682, which related to distributions declared for each day in the period from September 1, 2018 through September 30, 2018 and consisted of cash distributions paid in the amount of $498,055 and $454,627 in shares issued pursuant to our distribution reinvestment plan.

Our Net Tangible Book Value Per Share

As of June 30, 2018, our net tangible book value for each Class A share, Class R share and Class T share was $15.98, compared to our current offering price of $25.00 per Class A share, $22.50 per Class R share and $23.81 per Class T share. Net tangible book value per share of our common stock is determined by dividing the net tangible book value based on the June 30, 2018, net book value of tangible assets (consisting of total assets less intangible assets, which are comprised of deferred leasing costs and acquired in-place lease value, net of liabilities to be assumed) by the number of shares of our common stock outstanding as of June 30, 2018. Net tangible book value is used generally as a conservative measure of net worth that we do not believe reflects our estimated value per share. It is not intended to reflect the value of our assets upon an orderly liquidation of the company in accordance with our investment objectives. Additionally, investors who purchased shares in our public offering will experience dilution in the percentage of their equity investment in us as we issue additional common shares in the future pursuant to the distribution reinvestment plan, if we sell securities that are convertible into common shares or if we issue shares upon the exercise of options, warrants or other rights.

Information Regarding Repurchases of Shares

The following table sets forth the repurchases of our common stock pursuant to our share repurchase program during the six months ended June 30, 2018:

	Total Number of Shares Requested to be Repurchased(1)	Total Number of Shares Repurchased	Average Price Paid per Share(2)(3)		Approximate Dollar Value of Shares Available That May Yet Be Repurchased Under the Program
January 2018	3,574	3,044	$	23.35	(4)
February 2018	4,723	—	—		(4)
March 2018	8,081	—	—		(4)
April 2018	1,270	—	—		(4)
May 2018	769	16,481	22.80		(4)
June 2018	—	—	—		(4)
	18,417	19,525

____________________

(1) We generally repurchase shares approximately 30 days following the end of the applicable quarter in which requests were received. At June 30, 2018, we had 2,039 shares, representing outstanding and unfulfilled repurchase requests of 2,039 Class A shares, all of which were fulfilled on July 31, 2018.

(2) Prior to October 12, 2018, we repurchased shares at prices determined as follows:

• 92.5% of the purchase price for stockholders who have held their shares for at least one year;

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• 95.0% of the purchase price for stockholders who have held their shares for at least two years;

• 97.5% of the purchase price for stockholders who have held their shares for at least three years; and

• 100% of the purchase price for stockholders who have held their shares for at least four years.

As discussed in this Supplement No. 7, effective October 12, 2018, we will repurchase shares at prices determined as follows:

• 92.5% of the lesser of the purchase price or $22.54, which is the most recent estimated value per share, for stockholders who have held their shares for at least one year;

• 95.0% of the lesser of the purchase price or $22.54, which is the most recent estimated value per share, for stockholders who have held their shares for at least two years;

• 97.5% of the lesser of the purchase price or $22.54, which is the most recent estimated value per share, for stockholders who have held their shares for at least three years; and

• 100% of the lesser of the purchase price or $22.54, which is the most recent estimated value per share, for stockholders who have held their shares for at least four years.

Notwithstanding the above, the repurchase price for repurchases sought upon a stockholder’s death or disability will be equal to the average issue price per share for all of the stockholder’s shares. The required one-year holding period does not apply to repurchases requested within 270 days after the death or disability of a stockholder.

(3) For the six months ended June 30, 2018, the source of the cash used to redeem shares were 100% from the sale of shares pursuant to our distribution reinvestment plan.

(4) The number of shares that may be repurchased pursuant to the share repurchase program during any calendar year is limited to: (1) 5% of the weighted-average number of shares of our common stock outstanding during the prior calendar year and (2) those that can be funded from the net proceeds we received from the sale of shares under the distribution reinvestment plan during the prior calendar year, plus such additional funds as may be reserved for that purpose by our board of directors.

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Compensation Paid to Our Advisor and its Affiliates

The following data supplements, and should be read in conjunction with, the section of our prospectus titled “Management Compensation” beginning on page 116 of our prospectus.

The following table summarizes the cumulative compensation, fees and reimbursements we incurred and paid to our advisor, Steadfast Apartment Advisor III, LLC, and its affiliates, including our dealer manager, during the six months ended June 30, 2018, and the year ended December 31, 2017.

Type of Fee or Reimbursement	Incurred in the Six Months Ended June 30, 2018		Paid during the Six Months Ended June 30, 2018		Incurred in the Year Ended December 31, 2017		Paid during the Year Ended December 31, 2017
Organizational and Offering Stage:
Sales commissions	$	1,128,878	$	1,128,878	$	3,983,927	$	3,983,927
Dealer manager fees	718,190		718,190		2,604,330		2,604,330
Organization and offering expenses	1,404,887		1,810,661		6,167,169		7,377,882
Operational Stage:
Acquisition fees	624,854		2,347,495		5,575,417		4,801,907
Acquisition expenses	161,423		161,423		956,799		1,012,990
Investment management fees	2,013,825		2,066,863		1,655,649		1,642,290
Other operating expenses	576,371		537,834		1,024,078		1,230,843
Distribution and shareholder servicing fees	553,820		463,213		2,446,084		479,721
Property management fees and reimbursements	2,155,011		1,973,396		2,221,834		2,030,664
Construction management fees and reimbursements	274,040		260,675		399,170		380,642
Other fees	206,416		204,613		206,153		199,967
Property insurance	111,306		95,244		74,890		89,938
Capital expenditures	21,538		21,538		50,990		50,990

Updates to Our Risk Factors

The following information supersedes and replaces the “Risk Factors—We may not provide stockholders with an estimated value per share of our common stock until a date that is no later than 150 days following the second anniversary of breaking escrow in our initial public offering. Therefore, you will not be able to determine the true value of your shares on an ongoing basis during this offering” section on page 38 of the prospectus.

Our estimated value per share of each of our Class A common stock, Class R common stock and Class T common stock is an estimate as of a given point in time and likely will not represent the amount of net proceeds that would result if we were liquidated or dissolved or completed a merger or other sale of us.

On October 9, 2018, our board of directors determined an estimated value per share of each of our Class A common stock, Class R common stock and Class T common stock as of June 30, 2018. Our estimated value per share was based upon valuations of all of our assets by independent third-party appraisers and qualified independent valuation experts recommended by our advisor and approved by our board of directors. The price at which stockholders purchased shares and any subsequent values are likely to differ from the price at which a stockholder could resell such shares because: (1) there is no public trading market for our shares at this time; (2) the price does not reflect, and will not reflect, the fair value of our assets as we acquire them, nor does it represent the amount of net proceeds that would result from an immediate liquidation of our assets or sale of the company, because the amount of proceeds available for investment from this offering is net of selling commissions, dealer manager fees, other organization and offering expense reimbursements and acquisition fees and expenses; (3) the estimated value does not take into account how market fluctuations affect the value of our investments, including how the current conditions in the financial and real estate markets may affect the value of our investments; (4) the estimated value does not take into account how developments related to individual assets may increase or decrease the value of our portfolio; and (5) the estimated value does not take into account any portfolio premium or premiums to value that may be achieved in a liquidation of our assets or sale of our portfolio.

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Further, the estimated value of our shares will fluctuate over time as a result of, among other things, developments related to individual assets and responses to the real estate and capital markets. The estimated value per share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share also does not take into account estimated disposition costs and fees for real estate properties that are not under contract to sell or debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of debt.

There are currently no SEC, federal and state rules that establish requirements specifying the methodology to employ in determining an estimated value per share; provided, however, that pursuant to FINRA rules the determination of the estimated value per share must be conducted by, or with the material assistance or confirmation of, a third-party valuation expert and must be derived from a methodology that conforms to standard industry practice. Subsequent estimates of our estimated value per share will be done at least annually. Our estimated value per share is an estimate as of a given point in time and likely does not represent the amount of net proceeds that would result from an immediate sale of our assets.

The following risk factors supplement, and should be read in conjunction with, the “Risk Factors—General Investment Risks” section beginning on page 32 of the prospectus:

Our estimated value per share of each class of our common stock is based upon a number of estimates, assumptions, judgments and opinions that may not be, or may later prove not to be, accurate or complete, which could make the estimated valuations incorrect. As a result, our estimated value per share of each class of our common stock may not reflect the amount that you might receive for your shares in a market transaction, and the purchase price you paid may be higher than the value of our assets per share of common stock at the time of your purchase.

The per share price for the Class A shares, Class R shares and Class T shares issued pursuant to our distribution reinvestment plan are based on our most recent estimated value per share of each respective class of common stock. Currently, there are no SEC, federal or state rules that establish requirements specifying the methodology to employ in determining an estimated value per share. The valuation committee of our board of directors, pursuant to authority delegated by our board of directors, was responsible for the oversight of the valuation process, including the review and approval of the valuation process and methodology used to determine our estimated value per share, the consistency of the valuation and appraisal methodologies with real estate industry standards and practices and the reasonableness of the assumptions used in the valuations and appraisals.

Pursuant to the prior approval of the valuation committee of our board of directors, which is solely comprised of our independent directors, in accordance with the valuation policies previously adopted by our board of directors, we engaged CBRE Cap, an independent third-party valuation firm, to assist with determining the estimated value per share. Our estimated value per share was determined after consultation with our advisor and CBRE Cap. CBRE Cap prepared a valuation report summarizing key information and assumptions and setting forth the range of the estimated value per share of each of our Class A, Class R and Class T common stock as of June 30, 2018. The valuation was based upon the estimated value of our assets less the estimated value of our liabilities divided by the number of shares outstanding on an adjusted fully diluted basis, calculated as of June 30, 2018, and was performed in accordance with the IPA Valuation Guidelines. The estimated value per share was determined by our board of directors. Subsequent estimates of our estimated value per share for each of our Class A common stock, Class R Common Stock and Class T common stock will be prepared at least annually.

Our estimated value per share is an estimate as of a given point in time and likely does not represent the amount of net proceeds that would result from an immediate sale of our assets. The estimated value per share is not intended to be related to any values at which individual assets may be carried on financial statements under applicable accounting standards. While the determination of our most recent estimated value per share was conducted with the material assistance of a third-party valuation expert, with respect to asset valuations, we are not required to obtain asset-by-asset appraisals prepared by certified independent appraisers, nor must any appraisals conform to formats or standards promulgated by any trade organization. Other than the information included in our Current Report on Form 8-K filed with the SEC on October 12, 2018 regarding the estimated value per share, we do not intend to release individual property value estimates or any of the data supporting the estimated value per share.

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It may be difficult to reflect accurately material events that may impact the estimated value per share of each class of our common stock between valuations, and accordingly we may be selling and repurchasing shares at too high or too low a price.

Our independent third-party valuation expert will calculate estimates of the market value of our principal real estate and real estate-related assets, and our board of directors will determine the net value of our real estate and real estate-related assets and liabilities taking into consideration such estimates provided by the independent third-party valuation expert. Our board of directors is ultimately responsible for determining the estimated value per share. Since our board of directors will determine the estimated value per share at least annually, there may be changes in the value of our properties that are not fully reflected in the most recent estimated value per share. As a result, the published estimated value per share may not fully reflect changes in value that may have occurred since the prior valuation. Furthermore, our advisor will monitor our portfolio, but it may be difficult to reflect changing market conditions or material events that may impact the value of our portfolio between valuations, or to obtain timely or complete information regarding any such events. Therefore, the estimated value per share published before the announcement of an extraordinary event may differ significantly from the actual value per share until such time as sufficient information is available and analyzed, the financial impact is fully evaluated, and the appropriate adjustment is made to the estimated value per share, as determined by our board of directors. Any resulting disparity may be to the detriment of a stockholder investing in our shares through the distribution reinvestment program or a stockholder selling shares pursuant to our share repurchase program.

The following information supersedes and replaces the “Risk Factors—General Investment Risks—We have paid, and it is likely we will continue to pay, distributions from sources other than our cash flow from operations, including from the proceeds of our public offering. To the extent that we pay distributions from sources other than our cash flow from operations, we will have reduced funds available for investment and the overall return to our stockholders may be reduced” section beginning on page 33 of our prospectus.

We have paid, and it is likely we will continue to pay, distributions from sources other than our cash flow from operations, including from the proceeds of our public offering. To the extent that we pay distributions from sources other than our cash flow from operations, we will have reduced funds available for investment and the overall return to our stockholders may be reduced.

Our organizational documents permit us to pay distributions from any source, including net proceeds from our public offerings, borrowings, advances from our sponsor or advisor and the deferral of fees and expense reimbursements by our advisor, in its sole discretion. To the extent that our cash flow from operations has been or is insufficient to fully cover our distributions, we have paid, and may continue to pay, distributions from the net proceeds from our public offering or sources other than cash flow from operations. We have not established a limit on the amount of offering proceeds, or other sources other than cash flow from operations, which we may use to fund distributions.

If we are unable to consistently fund distributions to our stockholders entirely from our cash flow from operations, the value of your shares upon a listing of our common stock, the sale of our assets or any other liquidity event may be reduced. To the extent that we fund distributions from sources other than our cash flow from operations, our funds available for investment will be reduced relative to the funds available for investment if our distributions were funded solely from cash flow from operations, our ability to achieve our investment objectives will be negatively impacted and the overall return to our stockholders may be reduced. In addition, if we make a distribution in excess of our current and accumulated earnings and profits, the distribution will be treated first as a tax-free return of capital, which will reduce the stockholder’s tax basis in its shares of common stock. The amount, if any, of each distribution in excess of a stockholder’s tax basis in its shares of common stock will be taxable as gain realized from the sale or exchange of property.

For the year ended December 31, 2017, we paid aggregate distributions of $5,684,151, including $2,964,771 of distributions paid in cash and 117,614 shares of our common stock issued pursuant to our distribution reinvestment plan for $2,719,380. For the six months ended June 30, 2018, we paid aggregate distributions of $4,770,476, including $2,488,609 of distributions paid in cash and 99,008 shares of our common stock issued pursuant to our distribution reinvestment plan for $2,281,867. For the six months ended June 30, 2018, our net loss was $7,451,200, we had FFO of $1,486,170 and net cash used in operations of $258,320. For the six months ended June 30, 2018, we funded

$1,125,229 or 24% and $3,645,247 or 76% of total distributions paid, including shares issued pursuant to our distribution reinvestment plan, from cash flow from operations and with proceeds from our public offering, respectively. Since inception, of the $11,034,069 in total distributions paid through June 30, 2018, including shares

18

issued pursuant to our distribution reinvestment plan, 3% of such amounts were funded from cash flow from operations and 97% were funded from offering proceeds. For information on how we calculate FFO and the reconciliation of FFO to net loss, see “Our Performance—Funds from Operations and Modified Funds from Operations.”

The following risk factor supplements the section entitled “Risk Factors—Risks Relating to Our Organizational Structure” beginning on page 40 of our prospectus.

Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our stockholders.

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that Court does not have jurisdiction, the U.S. District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of our company, (ii) any action asserting a claim of breach of any duty owed by any of our directors or officers or employees to us or to our stockholders, (iii) any action asserting a claim against us or any of our directors or officers or employees arising pursuant to any provision of the Maryland General Corporation Law, or the MGCL, or our charter or bylaws or (iv) any action asserting a claim against us or any of our directors or officers or employees that is governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in our shares shall be deemed to have notice of and to have consented to these provisions of our bylaws, as they may be amended from time to time. Our board of directors, without stockholder approval, adopted this provision of the bylaws so that we can respond to such litigation more efficiently and reduce the costs associated with our responses to such litigation, particularly litigation that might otherwise be brought in multiple forums. This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder believes is favorable for disputes with us or our directors, officers, agents or employees, if any, and may discourage lawsuits against us and our directors, officers, agents or employees, if any. Alternatively, if a court were to find this provision of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings notwithstanding that the MGCL expressly provides that the charter or bylaws of a Maryland corporation may require that any internal corporate claim be brought only in courts sitting in one or more specified jurisdictions, we may incur additional costs that we do not currently anticipate associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition and results of operations.

The following risk factor supersedes and replaces the risk factor entitled “A recent final regulation issued by the U.S. Department of Labor regarding the definitional scope of ‘investment advice’ under ERISA and the Internal Revenue Code, could have a negative impact on our ability to raise capital” in the section entitled “Risk Factors—Retirement Plan Risks” on page 59 of our prospectus.

The proposed SEC standard of conduct for investment professionals could impact our ability to raise capital.

On April 18, 2018, the SEC proposed “Regulation Best Interest,” a new standard of conduct for broker-dealers under the Exchange Act that includes: (i) the requirement that broker-dealers refrain from putting the financial or other interests of the broker-dealer ahead of the retail customer, (ii) a new disclosure document, the consumer or client relationship summary, or Form CRS, which would require both investment advisers and broker-dealers to provide disclosure highlighting details about their services and fee structures and (iii) proposed interpretative guidance that would establish a federal fiduciary standard for investment advisers. The public comment period on Regulation Best Interest ended in August 2018.

Proposed Regulation Best Interest is complex and may be subject to revision or withdrawal. Plan fiduciaries and the beneficial owners of IRAs are urged to consult with their own advisors regarding the impact that proposed Regulation Best Interest may have on purchasing and holding interests in our company.  Proposed Regulation Best Interest or any other legislation or regulations that may be introduced or become law in the future could have negative implications on our ability to raise capital from potential investors, including those investing through IRAs.

Experts

The consolidated financial statements of Steadfast Apartment REIT III, Inc. appearing in its Annual Report (Form 10-K) for the year ended December 31, 2017 (including the related financial statement schedule appearing therein) have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon included therein, and incorporated herein by reference. Such consolidated financial statements are

19

incorporated herein by reference in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

The (1) statement of revenues over certain operating expenses of the Bristol Village Apartments for the year ended December 31, 2015, incorporated by reference in this prospectus from Steadfast Apartment REIT III, Inc.’s Current Report on Form 8-K/A filed with the SEC on January 9, 2017, (2) the statements of revenues over certain operating expenses of the Canyon Resort at Great Hills and Reflections on Sweetwater Apartments for the year ended December 31, 2015, incorporated by reference in this prospectus from Steadfast Apartment REIT III, Inc.’s Current Report on Form 8-K/A filed with the SEC on February 13, 2017, (3) the statement of revenues over certain operating expenses of The Pointe at Vista Ridge for the year ended December 31, 2016, incorporated by reference in this prospectus from Steadfast Apartment REIT III, Inc.’s Current Report on Form 8-K/A filed with the SEC on June 29, 2017, (4) the statement of revenues over certain operating expenses of Belmar Villas for the year ended December 31, 2016, incorporated by reference in this prospectus from Steadfast Apartment REIT III, Inc.’s Current Report on Form 8-K/A filed with the SEC on August 31, 2017, (5) the statement of revenues over certain operating expenses of Ansley at Princeton Lakes for the year ended December 31, 2016, incorporated by reference in this prospectus from Steadfast Apartment REIT III, Inc.’s Current Report on Form 8-K/A filed with the SEC on October 6, 2017, and (6) the statement of revenues over certain operating expenses of Avery Point Apartments for the year ended December 31, 2016, incorporated by reference in this prospectus from Steadfast Apartment REIT III, Inc.’s Current Report on Form 8-K/A filed with the SEC on January 12, 2018, have been audited by Ernst & Young LLP, independent auditors, as set forth in their reports included therein, and incorporated herein by reference. Such statements of revenues over certain operating expenses are incorporated herein by reference in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.

Incorporation of Certain Information by Reference

We have elected to “incorporate by reference” certain information into this prospectus. By incorporating by reference, we are disclosing important information to you by referring you to documents we have filed separately with the SEC. The information incorporated by reference is deemed to be part of this prospectus, except for information incorporated by reference that is superseded by information contained in this prospectus. You can access documents that are incorporated by reference into this prospectus at the website we maintain at www.steadfastreits.com. There is additional information about us and our affiliates at our website, but unless specifically incorporated by reference herein as described in the paragraphs below, the contents of that site are not incorporated by reference in or otherwise a part of this prospectus.

The following documents filed with the SEC are incorporated by reference in this prospectus (Commission File No. 333-207952), except for any document or portion thereof deemed to be “furnished” and not filed in accordance with SEC rules:

• Annual Report on Form 10-K filed with the SEC on March 16, 2018;

• Current Report on Form 8-K/A filed with the SEC on January 9, 2017;

• Current Report on Form 8-K/A filed with the SEC on February 13, 2017;

• Current Report on Form 8-K/A filed with the SEC on June 29, 2017;

• Current Report on Form 8-K/A filed with the SEC on August 31, 2017;

• Current Report on Form 8-K/A filed with the SEC on October 6, 2017;

• Current Report on Form 8-K/A filed with the SEC on January 12, 2018;

• Current Report on Form 8-K filed with the SEC on February 2, 2018; and

• Current Report on Form 8-K filed with the SEC on March 15, 2018.

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We will provide to each person, including any beneficial owner of our shares of common stock, to whom this prospectus is delivered, upon request, a copy of any or all of the information that we have incorporated by reference into this prospectus but not delivered with this prospectus. To receive a free copy of any of the documents incorporated by reference in this prospectus, other than exhibits, unless they are specifically incorporated by reference in those documents, call or write us at:

Stira Capital Markets Group, LLC

18100 Von Karman Avenue

Suite 500

Irvine, California 92612

(888) 223-9951

Attention: Investor Relations

The information relating to us contained in this prospectus does not purport to be comprehensive and should be read together with the information contained in the documents incorporated or deemed to be incorporated by reference in this prospectus.

Our Account Update Form and Updates to Our Form of Application for Transfer

Our form of Subscription Agreement contained in Appendix B of our prospectus is hereby superseded and replaced by the Account Update Form attached to this Supplement No. 7 as Exhibit A. Our form of Application for Transfer contained in Appendix E of our prospectus is hereby superseded and replaced with the revised form of Application for Transfer attached to this Supplement No. 7 as Exhibit B.

Quarterly Report for the Quarter Ended June 30, 2018

On August 10, 2018, we filed with the SEC our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, a copy of which is attached to this Supplement No. 7 as Exhibit C (without exhibits).

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EXHIBIT A

ACCOUNT UPDATE FORM

EXHIBIT B

FORM OF APPLICATION FOR TRANSFER

EXHIBIT C

QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2018

(WITHOUT EXHIBITS)

32

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

þ	QUARTERLYREPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended June 30, 2018

OR

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 000-55772

STEADFAST APARTMENT REIT III, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	47-4871012
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

18100 Von Karman Avenue, Suite 500
Irvine, California	92612
(Address of Principal Executive Offices)	(Zip Code)

(949) 852-0700

(Registrant’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 þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated filer o	Accelerated filer o
Non-Accelerated filer o	Smaller reporting company þ
Emerging growth company þ

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

As of August 3, 2018, there were 3,366,499 shares of the Registrant’s Class A common stock issued and outstanding, 426,515 shares of the Registrant’s Class R common stock issued and outstanding and 4,337,259 shares of the Registrant’s Class T common stock issued and outstanding.

1

STEADFAST APARTMENT REIT III, INC.

INDEX

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements	X
Consolidated Balance Sheets as of June 30, 2018 (unaudited) and December 31, 2017	2
Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017 (unaudited)	3
Consolidated Statements of Stockholders’ Equity for the year ended December 31, 2017 and for the six months ended June 30, 2018 (unaudited)	4
Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017 (unaudited)	5
Condensed Notes to Consolidated Financial Statements as of June 30, 2018 (unaudited)	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	37
Item 3. Quantitative and Qualitative Disclosures About Market Risk	56
Item 4. Controls and Procedures	57
PART II — OTHER INFORMATION
Item 1. Legal Proceedings	58
Item 1A. Risk Factors	58
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	59
Item 3. Defaults Upon Senior Securities	60
Item 4. Mine Safety Disclosures	60
Item 5. Other Information	61
Item 6. Exhibits	61
Signatures	62

1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

STEADFAST APARTMENT REIT III, INC.

CONSOLIDATED BALANCE SHEETS

	June 30, 2018			December 31, 2017
	(Unaudited)
ASSETS
Assets:
Real Estate:
Land	$	45,908,171		$	42,059,897
Building and improvements	352,724,601			323,636,510
Tenant origination and absorption costs	456,431			4,214,078
Total real estate, cost	399,089,203			369,910,485
Less accumulated depreciation and amortization	(14,148,302		)	(9,425,010		)
Total real estate, net	384,940,901			360,485,475
Cash and cash equivalents	26,240,456			15,533,961
Restricted cash	3,384,492			4,344,992
Rents and other receivables	537,200			488,287
Other assets	1,124,467			702,130
Total assets	$	416,227,516		$	381,554,845
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities	$	5,736,354		$	5,726,298
Mortgage notes payable, net	279,965,461			258,470,441
Distributions payable	868,386			746,360
Due to affiliates	3,631,654			5,487,180
Total liabilities	290,201,855			270,430,279
Commitments and contingencies (Note 9)
Redeemable common stock	4,507,251			2,920,059
Stockholders’ Equity:
Preferred stock, $0.01 par value per share; 100,000,000 shares authorized, no shares issued and outstanding	—			—
Class A common stock, $0.01 par value per share; 480,000,000 shares authorized, 3,276,197 and 2,887,731 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively	32,764			28,878
Class R common stock, $0.01 par value per share; 240,000,000 shares authorized, 409,536 and 309,518 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively	4,096			3,096
Class T common stock, $0.01 par value per share; 480,000,000 shares authorized, 4,174,825 and 3,369,991 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively	41,749			33,700
Additional paid-in capital	157,467,255			131,822,585
Cumulative distributions and net losses	(36,027,454		)	(23,683,752		)
Total stockholders’ equity	121,518,410			108,204,507
Total liabilities and stockholders’ equity	$	416,227,516		$	381,554,845

See accompanying notes to consolidated financial statements.

2

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Revenues:
Rental income	$	8,165,612		$	3,243,715		$	15,975,760		$	6,040,431
Tenant reimbursements and other	1,064,004			358,092			2,086,032			677,091
Total revenues	9,229,616			3,601,807			18,061,792			6,717,522
Expenses:
Operating, maintenance and management	2,554,111			908,380			4,878,029			1,613,585
Real estate taxes and insurance	1,240,072			557,570			2,643,426			1,039,025
Fees to affiliates	1,400,171			372,359			2,746,011			656,511
Depreciation and amortization	4,233,745			2,555,319			8,937,370			4,916,266
Interest expense	2,684,924			1,145,526			4,910,295			2,124,012
General and administrative expenses	642,959			710,291			1,397,861			1,338,152
Total expenses	12,755,982			6,249,445			25,512,992			11,687,551
Net loss attributable to common stockholders	$	(3,526,366	)	$	(2,647,638	)	$	(7,451,200	)	$	(4,970,029	)
Net loss attributable to Class A common stockholders — basic and diluted	$	(1,475,758	)	$	(1,369,535	)	$	(3,162,222	)	$	(2,607,449	)
Net loss per Class A common share — basic and diluted	$	(0.43	)	$	(0.64	)	$	(0.96	)	$	(1.41	)
Weighted average number of Class A common shares outstanding — basic and diluted	3,168,666			2,051,047			3,077,174			1,772,569
Distributions declared per Class A common share	$	0.374		$	0.374		$	0.744		$	0.744
Net loss attributable to Class R common stockholders — basic and diluted	$	(183,927	)	$	(116,698	)	$	(374,268	)	$	(223,476	)
Net loss per Class R common share — basic and diluted	$	(0.45	)	$	(0.65	)	$	(0.99	)	$	(1.43	)
Weighted average number of Class R common shares outstanding — basic and diluted	394,918			174,769			364,202			151,921
Distributions declared per Class R common share	$	0.357		$	0.357		$	0.709		$	0.710
Net loss attributable to Class T common stockholders — basic and diluted	$	(1,866,681	)	$	(1,161,405	)	$	(3,914,710	)	$	(2,139,104	)
Net loss per Class T common share — basic and diluted	$	(0.50	)	$	(0.71	)	$	(1.09	)	$	(1.55	)
Weighted average number of Class T common shares outstanding — basic and diluted	4,008,035			1,739,346			3,809,424			1,454,183
Distributions declared per Class T common share	$	0.309		$	0.307		$	0.615		$	0.611

See accompanying notes to consolidated financial statements.

3

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEAR ENDED DECEMBER 31, 2017 AND

FOR THE SIX MONTHS ENDED JUNE 30, 2018 (Unaudited)

	Common Stock															Additional Paid-In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Class A					Class R					Class T
	Shares		Amount			Shares		Amount			Shares		Amount
BALANCE, December 31, 2016	1,247,420		$	12,474		99,043		$	990		889,434		$	8,894		$	45,632,928		$	(5,741,312	)	$	39,913,974
Issuance of common stock	1,640,311		16,404			210,475		2,106			2,481,444		24,815			104,046,957			—			104,090,282
Commissions on sales of common stock and related dealer manager fees to affiliates	—		—			—		—			—		—			(9,034,341		)	—			(9,034,341		)
Transfers to redeemable common stock	—		—			—		—			—		—			(2,698,321		)	—			(2,698,321		)
Repurchase of common stock	—		—			—		—			(887	)	(9		)	(21,060		)	—			(21,069		)
Other offering costs to affiliates	—		—			—		—			—		—			(6,167,169		)	—			(6,167,169		)
Distributions declared	—		—			—		—			—		—			—			(6,189,253		)	(6,189,253		)
Amortization of stock-based compensation	—		—			—		—			—		—			63,591			—			63,591
Net loss	—		—			—		—			—		—			—			(11,753,187		)	(11,753,187		)
BALANCE, December 31, 2017	2,887,731		28,878			309,518		3,096			3,369,991		33,700			131,822,585			(23,683,752		)	108,204,507
Issuance of common stock	403,065		4,032			103,626		1,036			806,151		8,062			31,432,433			—			31,445,563
Commissions on sales of common stock and related dealer manager fees to affiliates	—		—			—		—			—		—			(2,400,888		)	—			(2,400,888		)
Transfers to redeemable common stock	—		—			—		—			—		—			(1,563,270		)	—			(1,563,270		)
Repurchase of common stock	(14,599	)	(146		)	(3,608	)	(36		)	(1,317	)	(13		)	(446,644		)	—			(446,839		)
Other offering costs to affiliates	—		—			—		—			—		—			(1,404,887		)	—			(1,404,887		)
Distributions declared	—		—			—		—			—		—			—			(4,892,502		)	(4,892,502		)
Amortization of stock-based compensation	—		—			—		—			—		—			27,926			—			27,926
Net loss	—		—			—		—			—		—			—			(7,451,200		)	(7,451,200		)
BALANCE, June 30, 2018	3,276,197		$	32,764		409,536		$	4,096		4,174,825		$	41,749		$	157,467,255		$	(36,027,454	)	$	121,518,410

See accompanying notes to consolidated financial statements.

4

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended June 30,
	2018			2017
Cash Flows from Operating Activities:
Net loss	$	(7,451,200	)	$	(4,970,029	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization	8,937,370			4,916,266
Amortization of deferred financing costs	113,103			39,199
Amortization of stock-based compensation	27,926			18,549
Amortization of stock-based annual compensation	13,750			13,750
Change in fair value of interest rate cap agreements	(544,725		)	414,364
Changes in operating assets and liabilities:
Rents and other receivables	(47,271		)	(115,132		)
Other assets	122,388			(40,086		)
Accounts payable and accrued liabilities	124,063			1,887,082
Due to affiliates	(1,553,724		)	(1,161,052		)
Net cash (used in) provided by operating activities	(258,320		)	1,002,911
Cash Flows from Investing Activities:
Acquisition of real estate investments	(30,118,698		)	(76,726,460		)
Additions to real estate investments	(2,350,819		)	(1,075,397		)
Escrow deposits for pending real estate acquisitions	(1,000,000		)	(2,850,000		)
Purchase of interest rate cap agreements	—			(222,790		)
Cash used in investing activities	(33,469,517		)	(80,874,647		)
Cash Flows from Financing Activities:
Proceeds from issuance of mortgage notes payable	21,545,000			52,106,000
Proceeds from issuance of Class A common stock	9,003,182			25,059,691
Proceeds from issuance of Class R common stock	2,253,500			2,528,450
Proceeds from issuance of Class T common stock	17,891,622			27,637,433
Payments of commissions on sale of common stock and related dealer manager fees	(2,310,280		)	(3,825,141		)
Reimbursement of other offering costs to affiliates	(1,810,661		)	(4,329,824		)
Payment of deferred financing costs	(163,083		)	(403,652		)
Distributions to common stockholders	(2,488,609		)	(1,073,653		)
Repurchase of common stock	(446,839		)	—
Net cash provided by financing activities	43,473,832			97,699,304
Net increase in cash, cash equivalents and restricted cash	9,745,995			17,827,568
Cash, cash equivalents and restricted cash, beginning of period	19,878,953			17,142,199
Cash, cash equivalents and restricted cash, end of period	$	29,624,948		$	34,969,767

5

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)

	Six Months Ended June 30,
	2018			2017
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	5,016,918		$	1,422,014
Supplemental Disclosures of Noncash Flow Transactions:
Increase in distributions payable	$	122,026		$	255,869
Application of escrow deposits to acquire real estate	$	1,000,000		$	1,750,100
Increase (decrease) in amounts receivable from transfer agent for Class A common stock	$	72,517		$	(57,125	)
(Decrease) increase in amounts receivable from transfer agent for Class T common stock	$	(70,875	)	$	149,782
Decrease in amounts payable to affiliates for other offering costs	$	(405,774	)	$	(1,013,681	)
Distributions paid to common stockholders through common stock issuances pursuant to the distribution reinvestment plan	$	2,281,867		$	985,244
Increase in redeemable common stock	$	1,563,270		$	985,244
Increase in stock-based annual compensation and meeting fees	$	13,750		$	13,750
Increase in redemptions payable	$	—		$	20,779
(Decrease) increase in accounts payable and accrued liabilities from additions to real estate investments	$	(90,085	)	$	39,136
Increase in due to affiliates from additions to real estate investments	$	13,364		$	30,297
Increase in due to affiliates from distribution and shareholder servicing fee	$	90,608		$	1,156,452

See accompanying notes to consolidated financial statements.

6

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

1.Organization and Business

Steadfast Apartment REIT III, Inc. (the “Company”) was formed on July 29, 2015, as a Maryland corporation that elected to be taxed, and currently qualifies, as a real estate investment trust (“REIT”) commencing with the taxable year ended December 31, 2016. On August 24, 2015, the Company was initially capitalized with the sale of 8,000 shares of Class A common stock to Steadfast Apartment Advisor III, LLC (the “Advisor”), a Delaware limited liability company, at a purchase price of $25.00 per share for an aggregate purchase price of $200,000.

The Company intends to use substantially all of the net proceeds from the Public Offering (defined below) to invest in and manage a diverse portfolio of multifamily and independent senior-living properties located in targeted markets throughout the United States. In addition to the Company’s focus on multifamily and independent senior-living properties, the Company may also make selective strategic acquisitions of other types of commercial properties. The Company may also selectively acquire debt collateralized by multifamily and independent senior-living properties and securities of other companies owning multifamily and independent senior-living properties.

As of June 30, 2018, the Company owned ten multifamily properties comprising a total of 2,775 apartment homes. For more information on the Company’s real estate portfolio, see Note 3 (Real Estate).

Public Offering

On February 5, 2016, the Company commenced its initial public offering to offer a maximum of $1,000,000,000 in shares of common stock for sale to the public in the primary offering (the “Primary Offering”). The Company initially offered Class A shares and Class T shares in the Public Offering at an initial price of $25.00 for each Class A share ($500,000,000 in Class A shares) and $23.81 for each Class T share ($500,000,000 in Class T shares), with discounts available for certain categories of purchasers. The Company also registered up to $300,000,000 in shares pursuant to the Company’s distribution reinvestment plan (the “DRP,” and together with the Primary Offering, the “Public Offering”) at an initial price of $23.75 for each Class A share and $22.62 for each Class T share.

Commencing on July 25, 2016, the Company revised the terms of its Public Offering to include Class R shares. The Company is currently offering a maximum of $1,000,000,000 in shares of common stock for sale to the public at an initial price of $25.00 for each Class A share ($400,000,000 in Class A shares), $22.50 for each Class R share ($200,000,000 in Class R shares) and $23.81 for each Class T share ($400,000,000 in Class T shares), with discounts available for certain categories of purchasers. Up to $300,000,000 in shares is currently being offered pursuant to the DRP at an initial price of $23.75 for each Class A share, $22.50 for each Class R share and $22.62 for each Class T share. The Company’s board of directors may, from time to time, in its sole discretion, change the price at which the Company offers shares to the public in the Primary Offering or pursuant to the DRP to reflect changes in the Company’s estimated value per share and other factors that the Company’s board of directors deems relevant. The Company may reallocate shares of common stock registered in the Public Offering among classes of shares and between the Primary Offering and the DRP.

Pursuant to the terms of the Public Offering, offering proceeds were held in an escrow account until the Company raised the minimum offering amount of $2,000,000. On May 16, 2016, the Company raised the minimum offering amount and the offering proceeds held in escrow were released to the Company. As of June 30, 2018, the Company had sold 3,269,906 shares of Class A common stock, 413,144 shares of Class R common stock and 4,177,029 shares of Class T common stock in the Public Offering for gross proceeds of $80,491,059, $9,295,741 and $99,307,948, respectively, and $189,094,748 in the aggregate, including 98,499 shares of Class A common stock, 7,027 shares of Class R common stock and 123,636 shares of Class T common stock issued pursuant to the DRP for gross offering proceeds of $2,339,343, $158,093 and $2,796,632, respectively. Pursuant to the terms of the Public Offering, the Company may continue to offer shares of the Company’s common stock on a continuous basis until the Public Offering terminates on or before the earlier of February 5, 2019, unless

7

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

further extended as permitted under applicable law or earlier terminated by the Company’s board of directors. The Company’s board of directors determined to terminate the Public Offering effective on or about August 31, 2018.

The business of the Company is externally managed by the Advisor pursuant to the Amended and Restated Advisory Agreement dated July 25, 2016, by and among the Company, Steadfast Apartment REIT III Operating Partnership, L.P. (the “Operating Partnership”) and the Advisor (as amended, the “Advisory Agreement”). The Advisory Agreement is subject to annual renewal by the Company’s board of directors. The current term of the Advisory Agreement expires on February 5, 2019. Subject to certain restrictions and limitations, the Advisor manages the Company’s day-to-day operations, manages the Company’s portfolio of properties and real estate-related assets, sources and presents investment opportunities to the Company’s board of directors and provides investment management services on the Company’s behalf. The Advisor has also entered into an Advisory Services Agreement with Crossroads Capital Advisors, LLC (“Crossroads Capital Advisors”), whereby Crossroads Capital Advisors provides advisory services to the Company on behalf of the Advisor. The Company has retained Stira Capital Markets Group, LLC (formerly known as Steadfast Capital Markets Group, LLC) (the “Dealer Manager”), an affiliate of the Advisor, to serve as the dealer manager for the Public Offering. The Dealer Manager is responsible for marketing the Company’s shares of common stock being offered pursuant to the Public Offering. The Advisor, along with the Dealer Manager, also provides offering services, marketing, investor relations and other administrative services on the Company’s behalf.

Substantially all of the Company’s business is conducted through the Operating Partnership. The Company is the sole general partner of the Operating Partnership and owns a 99.99% partnership interest in the Operating Partnership. The Advisor is the sole limited partner of and owns the remaining 0.01% partnership interest in the Operating Partnership. The Company and the Advisor entered into an Amended and Restated Agreement of Limited Partnership on July 25, 2016 (as amended, the “Partnership Agreement”). As the Company accepts subscriptions for shares of its common stock, the Company transfers substantially all of the net offering proceeds from the Public Offering to the Operating Partnership as a contribution in exchange for partnership interests and the Company’s percentage ownership in the Operating Partnership increases proportionately.

The Partnership Agreement provides that the Operating Partnership is operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), which classification could result in the Operating Partnership being taxed as a corporation. In addition to the administrative and operating costs and expenses incurred by the Operating Partnership in acquiring and operating real properties, the Operating Partnership pays all of the Company’s administrative costs and expenses, and such expenses are treated as expenses of the Operating Partnership.

The Company commenced its real estate operations on May 19, 2016, upon acquiring a fee simple interest in Carriage House Apartment Homes, a multifamily property located in Gurnee, Illinois.

2.Summary of Significant Accounting Policies

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form 10-K for the year ended December 31, 2017, other than the adoption of Accounting Standards Update (“ASU”) 2016-18, as further described and defined below. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2017, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 16, 2018. 

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, the consolidated variable interest entity (“VIE”) that the Company controls and of which the Company is the primary beneficiary, and the Operating Partnership’s subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. The financial statements of the Company’s subsidiaries are prepared using accounting policies consistent with those of the Company. The Operating

8

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

Partnership is a VIE because the Advisor, as the limited partner, lacks substantive kick-out rights and substantive participating rights. The Company is the primary beneficiary of, and consolidates, the Operating Partnership.

The accompanying unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary for a fair and consistent presentation of the results of such periods. Operating results for the three and six months endedJune 30, 2018, are not necessarily indicative of the results that may be expected for the year ending December 31, 2018. The unaudited consolidated financial statements in this Quarterly Report on Form 10-Q (the “Quarterly Report”) should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Reclassifications

Certain amounts in the Company’s prior period consolidated financial statements were reclassified to conform to the current period presentation. These reclassifications did not change the results of operations of prior periods. On January 1, 2018, the Company adopted ASU 2016-18. As a result, the Company no longer presents transfers between cash and restricted cash in the consolidated statements of cash flows. Instead, restricted cash is included with cash and cash equivalents when reconciling the beginning of the period and end of the period total amounts shown on the consolidated statements of cash flows.

Fair Value Measurements

Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other assets and liabilities at fair value on a non-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

• Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

• Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations,

9

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

discounted cash flow analysis and quoted market prices) and will establish a fair value by assigning weights to the various valuation sources.

The following describes the valuation methodologies used by the Company to measure fair value, including an indication of the level in the fair value hierarchy in which each asset or liability is generally classified.

Interest rate cap agreements - The Company has entered into certain interest rate cap agreements. These derivatives are recorded at fair value. Fair value was based on a model-driven valuation using the associated variable rate curve and an implied market volatility, both of which were observable at commonly quoted intervals for the full term of the interest rate cap agreements. Therefore, the Company’s interest rate cap agreements were classified within Level 2 of the fair value hierarchy and are included in other assets in the accompanying consolidated balance sheets. Changes in the fair value of the interest rate cap agreements are recorded as interest expense in the accompanying consolidated statements of operations.

The following tables reflect the Company’s assets required to be measured at fair value on a recurring basis on the consolidated balance sheets:

	June 30, 2018
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	802,344	$	—

	December 31, 2017
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	257,619	$	—

Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

Fair Value of Financial Instruments

The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities, due to affiliates, distributions payable and mortgage notes payable, net.

The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities and distributions payable to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. The fair value of amounts due to affiliates is not determinable due to the related party nature of such amounts. The Company has determined that its mortgage notes payable, net are classified as Level 3 within the fair value hierarchy.

The fair value of the mortgage notes payable, net is estimated using a discounted cash flow analysis using borrowing rates available to the Company for debt instruments with similar terms and maturities. As of June 30, 2018 and December 31, 2017, the fair value of the mortgage notes payable, net was $280,858,805 and $262,048,883, respectively, compared to the carrying value of $279,965,461 and $258,470,441, respectively.

Distribution Policy

The Company elected to be taxed as, and currently qualifies as, a REIT commencing with the Company’s taxable year ended December 31, 2016. To maintain its qualification as a REIT, the Company intends to make distributions each taxable

10

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

year equal to at least 90% of its REIT taxable income (which is determined without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). The Company’s board of directors declared a distribution to the holders of Class A shares and Class T shares which began to accrue on May 19, 2016. The Company’s board of directors also declared a distribution to the holders of Class R shares which began to accrue on August 2, 2016.

Distributions declared during the period from January 1, 2017, to March 31, 2017, were based on daily record dates and calculated at a rate of $0.004110 per Class A share per day, $0.00394521 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.27%, and in some instances, $0.00369863 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.67% and $0.003376 per Class T share per day. Distributions declared during the period from April 1, 2017 to June 30, 2017, were based on daily record dates and calculated at a rate of $0.004110 per Class A share per day, $0.00394521 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.27%, and in some instances, $0.00369863 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.67% and $0.003376 per Class T share per day.

Distributions declared during the period from January 1, 2018 to June 30, 2018, were based on daily record dates and calculated at a rate of $0.004110 per Class A share per day, $0.00394521 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.27%, and in some instances, $0.00369863 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.67%, $0.003376 per Class T share per day subject to an annual distribution and shareholder servicing fee of 1.125%, and in some instances, $0.003457 per Class T share per day subject to an annual distribution and shareholder servicing fee of 1.0%. Each day during the period from May 19, 2016, to June 30, 2018, was a distribution record date with respect to Class A shares and Class T shares. Each day during the period from August 2, 2016 to June 30, 2018, was a distribution record date with respect to Class R shares.

Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code. During the three and six months endedJune 30, 2018, the Company declared distributions totaling $0.374 and $0.744 per Class A share of common stock, $0.357 and $0.709 per Class R share of common stock and $0.309 and $0.615 per Class T share of common stock, respectively. During the three and six months endedJune 30, 2017, the Company declared distributions totaling $0.374 and $0.744 per Class A share of common stock, $0.357 and $0.710 per Class R share of common stock and $0.307 and $0.611 per Class T share of common stock, respectively.

Per Share Data

Basic loss per share attributable to common stockholders for all periods presented are computed by dividing net loss by the weighted average number of shares of the Company’s common stock outstanding for each class of shares outstanding during the period. Diluted loss per share is computed based on the weighted average number of shares of the Company’s common stock and all potentially dilutive securities, if any. Distributions declared per common share assume each share was issued and outstanding each day during the period. Nonvested shares of the Company’s restricted common stock give rise to potentially dilutive shares of the Company’s common stock but such shares were excluded from the computation of diluted earnings per share because such shares were anti-dilutive during the period.

In accordance with FASB ASC Topic 260-10-45, Earnings Per Share, the Company uses the two-class method to calculate earnings per share. Basic earnings per share is calculated based on dividends declared and the rights of common shares and participating securities in any undistributed earnings, which represents net income remaining after deduction of dividends declared during the period. The undistributed earnings are allocated to all outstanding common shares based on the relative percentage of each class of shares to the total number of outstanding shares. The Company does not have any participating securities outstanding but does have multiple classes of common stock with different dividend rates and an unvested portion of restricted Class A common stock. Earnings attributable to the unvested restricted Class A common stock are deducted from earnings in the computation of per share amounts where applicable.

11

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

Segment Disclosure

The Company has determined that it has one reportable segment with activities related to investing in multifamily properties. The Company’s investments in real estate are in different geographic regions, and management evaluates operating performance on an individual asset level. However, as each of the Company’s assets has similar economic characteristics, tenants and products and services, its assets have been aggregated into one reportable segment.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”). ASU 2014-09 requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. ASU 2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification. ASU 2014-09 does not apply to lease contracts within the scope of Leases (Topic 840). In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606), which delayed the effective date of the new guidance by one year, which will result in the new guidance being effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and is to be applied retrospectively. Early adoption is permitted, but can be no earlier than the original public entity effective date of fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company selected the modified retrospective transition method with a cumulative effect recognized as of the date of adoption and adopted ASU 2014-09 effective January 1, 2018. The Company identified limited sources of revenues from non-lease components, and the Company did not experience a material impact on its revenue recognition in the consolidated financial statements upon adoption. Additionally, there was no impact to the Company’s recognition of rental revenue, as rental revenue from leasing arrangements is specifically excluded from ASU 2014-09.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”), amending the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 requires a modified retrospective transition approach. ASU 2016-02 will be effective in the first quarter of 2019 and allows for early adoption. The Company is evaluating the impact of ASU 2016-02 on its leases both as it relates to the Company acting as a lessor and as a lessee. Based on the preliminary results of its evaluation, as it relates to the former, the Company does not expect any material impact on the recognition of leases in the consolidated financial statements because under ASU 2016-02, lessors will continue to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases, and operating leases. As it relates to the latter, the Company does not expect a material impact on the recognition of leases in the consolidated financial statements because the quantity of leased equipment by the Company is limited. The Company is finalizing its evaluation of ASU 2016-02 and plans to adopt ASU 2016-02 on January 1, 2019.

In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash (“ASU 2016-18”), thatrequires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. ASU 2016-18 is effective for annual periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. The Company adopted ASU 2016-18 on January 1, 2018 and it was applied retrospectively. As a result of adopting ASU 2016-18, the Company began presenting restricted cash along with cash and cash equivalents in its consolidated statements of cash flows.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business (“ASU 2017-01”), that clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of businesses. ASU 2017-01 provides a screen to determine when a set is not a business. If the screen is not met, it (1) requires that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) removes the evaluation of whether a market participant could replace the missing elements. ASU 2017-01 is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. The Company adopted ASU 2017-01 as of January 1, 2017. The Company capitalized $7,069,053

12

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

of acquisition fees and expenses on the consolidated balance sheet as of June 30, 2018 related to its multifamily acquisitions in 2017. Acquisition fees and acquisition expenses were included in fees to affiliates and acquisition costs, respectively, on the consolidated statements of operations prior to the adoption of ASU 2017-01. Upon adoption of ASU 2017-01, all such costs are included in the purchase price that is allocated between land, buildings and improvements and tenant origination and absorption costs on the consolidated balance sheets.

In February 2017, the FASB issued ASU 2017-05, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets (“Subtopic 610-20”):Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU 2017-05”), that clarifies that a financial asset is within the scope of Subtopic 610-20 if it meets the definition of an in substance nonfinancial asset and defines the term in substance nonfinancial asset. ASU 2017-05 also clarifies that nonfinancial assets within the scope of Subtopic 610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. Subtopic 610-20, which was issued in May 2014 as part of ASU 2014-09 (discussed above), provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. An entity is required to apply amendments in ASU 2017-05 at the same time it applies the amendments in ASU 2014-09 (discussed above). ASU 2017-05 requires retrospective application and is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within those fiscal years. Early adoption is permitted. Upon adoption of ASU 2017-05 on January 1, 2018, the Company did not experience a material impact.

In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU 2017-09”). The FASB issued ASU 2017-09 to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation - Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in ASU 2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 requires prospective application and is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. Upon adoption of ASU 2017-09 January 1, 2018, the Company did not experience a material impact.

In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements (“ASU 2018-11”). The FASB issued ASU 2018-11 to clarify ASU 2016-02. The amendments in ASU 2018-11 provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies ASU 2016-02 at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU 2018-11 also provides lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both of the following are met: (1) the timing and pattern of transfer of the nonlease components and associated lease component are the same, and (2) the lease component, if accounted for separately, would be classified as an operating lease. If the nonlease components associated with the lease component are the predominant component of the combined component, an entity is required to account for the combined component in accordance with Topic 606. Otherwise, the entity must account for the combined component as an operating lease in accordance with Topic 842. For entities that have not adopted Topic 842 before the issuance of ASU 2018-11, the effective date and transition requirements for ASU 2018-11 related to separating components of a contract are the same as the effective date and transition requirements in ASU 2016-02.

13

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

3.Real Estate

As of June 30, 2018, the Company owned ten multifamily properties comprised of a total of 2,775 apartment homes. The total acquisition price of the Company’s real estate portfolio was $400,252,928. As of June 30, 2018 and December 31, 2017, the Company’s portfolio was approximately 93.3% and 92.6% occupied and the average monthly rent was $1,117 and $1,089, respectively.

Current Year Acquisitions

During the six months ended June 30, 2018, the Company acquired the following property:

				Purchase Price Allocation
Property Name	Location	Purchase Date	Units	Land		Buildings and Improvements		Tenant Origination and Absorption Costs		Total Purchase Price
Cottage Trails at Culpepper Landing	Chesapeake, VA	5/31/2018	183	$	3,848,274	$	26,813,993	$	456,431	$	31,118,698
			183	$	3,848,274	$	26,813,993	$	456,431	$	31,118,698

As of June 30, 2018 and December 31, 2017, accumulated depreciation and amortization related to the Company’s consolidated real estate properties and related intangibles were as follows:

	June 30, 2018
	Assets
	Land		Building and Improvements			Tenant Origination and Absorption Costs			Total Real Estate
Investments in real estate	$	45,908,171	$	352,724,601		$	456,431		$	399,089,203
Less: Accumulated depreciation and amortization	—		(14,069,776		)	(78,526		)	(14,148,302		)
Net investments in real estate and related lease intangibles	$	45,908,171	$	338,654,825		$	377,905		$	384,940,901

	December 31, 2017
	Assets
	Land		Building and Improvements			Tenant Origination and Absorption Costs			Total Real Estate
Investments in real estate	$	42,059,897	$	323,636,510		$	4,214,078		$	369,910,485
Less: Accumulated depreciation and amortization	—		(7,403,608		)	(2,021,402		)	(9,425,010		)
Net investments in real estate and related lease intangibles	$	42,059,897	$	316,232,902		$	2,192,676		$	360,485,475

Depreciation and amortization expense was $4,233,745 and $8,937,370 for the three and six months endedJune 30, 2018, and $2,555,319 and $4,916,266 for the three and six months endedJune 30, 2017, respectively.

Depreciation of the Company’s buildings and improvements was $3,409,586 and $6,666,168 for the three and six months endedJune 30, 2018, and $1,248,649 and $2,280,237 for the three and six months endedJune 30, 2017, respectively.

Amortization of the Company’s tenant origination and absorption costs was $824,159 and $2,271,202 for the three and six months endedJune 30, 2018, and $1,306,670 and $2,636,029 for the three and six months endedJune 30, 2017, respectively.

14

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

Tenant origination and absorption costs had a weighted-average amortization period as of the date of acquisition of less than one year.

Operating Leases

As of June 30, 2018, the Company’s real estate portfolio comprised 2,775 apartment homes and was approximately 95.7% leased by a diverse group of residents. The residential lease terms consist of lease durations equal to twelve months or less.

Some residential leases contain provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in accounts payables and accrued liabilities in the accompanying consolidated balance sheets and totaled $888,611 and $709,440 as of June 30, 2018 and December 31, 2017, respectively.

As of June 30, 2018 and 2017, no tenant represented over 10% of the Company’s annualized base rent.

4.Other Assets

As of June 30, 2018 and December 31, 2017, other assets consisted of:

	June 30, 2018		December 31, 2017
Prepaid expenses	$	59,916	$	287,958
Interest rate cap agreements	802,344		257,619
Other deposits	262,207		156,553
Other assets	$	1,124,467	$	702,130

15

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

5.Debt

Mortgage Notes Payable

The following is a summary of mortgage notes payable, net secured by real property as of June 30, 2018 and December 31, 2017.

	June 30, 2018
			Interest Rate Range				Weighted Average Interest Rate
Type	Number of Instruments	Maturity Date Range	Minimum		Maximum			Principal Outstanding
Variable rate(1)	6	6/1/2026 - 9/1/2027	1-Mo LIBOR + 2.195%		1-Mo LIBOR + 2.52%		4.43%	$	156,892,000
Fixed rate	4	8/1/2024 - 6/1/2028	3.82	%	4.66	%	4.02%	124,674,000
Mortgage notes payable, gross	10						4.25%	281,566,000
Deferred financing costs, net(2)								(1,600,539		)
Mortgage notes payable, net								$	279,965,461

	December 31, 2017
			Interest Rate Range				Weighted Average Interest Rate
Type	Number of Instruments	Maturity Date Range	Minimum		Maximum			Principal Outstanding
Variable rate(1)	6	6/1/2026 - 9/1/2027	1-Mo LIBOR + 2.195%		1-Mo LIBOR + 2.52%		3.90%	$	156,892,000
Fixed rate	3	8/1/2024 - 1/1/2025	3.82	%	3.92	%	3.89%	103,129,000
Mortgage notes payable, gross	9						3.90%	260,021,000
Deferred financing costs, net(2)								(1,550,559		)
Mortgage notes payable, net								$	258,470,441

_________

(1) See Note 10 (Derivative Financial Instruments) for a discussion of the interest rate cap agreements used to manage the exposure to interest rate movement on the Company’s variable rate loans.

(2) Accumulated amortization related to deferred financing costs, net as of June 30, 2018 and December 31, 2017, was $239,549 and $126,446, respectively.

Maturity and Interest

The following is a summary of the Company’s aggregate maturities as of June 30, 2018:

16

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

					Maturities During the Years Ending December 31,
Contractual Obligations	Total		Remainder of 2018		2019		2020		2021		2022		Thereafter
Principal payments on outstanding debt obligations(1)	$	281,566,000	$	—	$	53,989	$	374,945	$	1,835,900	$	3,552,437	$	275,748,729

_________

(1) Projected principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude the deferred financing costs, net associated with the notes payable.

The Company’s mortgage notes payable contain customary financial and non-financial debt covenants. As of June 30, 2018, the Company was in compliance with all debt covenants.

For the three and six months endedJune 30, 2018, the Company incurred interest expense of $2,684,924 and $4,910,295, respectively. Interest expense for the three and six months endedJune 30, 2018, includes amortization of deferred financing costs of $57,488 and $113,103 and net unrealized gains from the change in fair value of interest rate cap agreements of $165,411 and $544,725, respectively.

For the three and six months endedJune 30, 2017, the Company incurred interest expense of $1,145,526 and $2,124,012, respectively. Interest expense for the three and six months endedJune 30, 2017, includes amortization of deferred financing costs of $25,515 and $39,199 and net unrealized losses from the change in fair value of interest rate cap agreements of $192,670 and $414,364, respectively.

Interest expense of $985,067 and $660,068 was payable as of June 30, 2018 and December 31, 2017, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

6.Stockholders’ Equity

General

Under the Company’s Second Articles of Amendment and Restatement (the “Charter”), the total number of shares of capital stock authorized for issuance is 1,300,000,000, consisting of 1,200,000,000 shares of common stock, $0.01 par value per share, of which 480,000,000 shares are classified as Class A common stock, 240,000,000 shares are classified as Class R common stock and 480,000,000 shares are classified as Class T common stock, and 100,000,000 shares of preferred stock, $0.01 par value per share. The Company’s board of directors may amend the Charter from time to time to increase or decrease the aggregate number of shares of capital stock or the number of shares of capital stock of any class or series that it has authority to issue.

Common Stock

The shares of the Company’s common stock entitle the holders to one vote per share on all matters upon which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law. The common stock has no preferences or preemptive, conversion or exchange rights.

On August 24, 2015, the Company issued 8,000 shares of Class A common stock for $200,000 to the Advisor.

17

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

The following table reflects information regarding shares of common stock sold in the Public Offering from inception through June 30, 2018:

	June 30, 2018
	Class A		Class R		Class T		Total
Shares of common stock issued - Primary Offering	3,171,407		406,117		4,053,393		7,630,917
Shares of common stock issued - DRP	98,499		7,027		123,636		229,162
Total shares of common stock issued - Public Offering	3,269,906		413,144		4,177,029		7,860,079
Gross offering proceeds - Primary Offering	$	78,151,716	$	9,137,648	$	96,511,316	$	183,800,680
Gross offering proceeds - DRP	2,339,343		158,093		2,796,632		5,294,068
Total offering proceeds - Public Offering	$	80,491,059	$	9,295,741	$	99,307,948	$	189,094,748
Offering costs, before distribution and shareholder servicing fees							(22,972,069		)
Offering proceeds, net of offering costs							$	166,122,679

Offering proceeds include $63,517 and $61,875 of amounts due from the Company’s transfer agent as of June 30, 2018 and December 31, 2017, respectively, which are included in rents and other receivables in the accompanying consolidated balance sheets.

For the three months ended June 30, 2018 and 2017, the Company issued 275 shares of Class A common stock to its independent directors pursuant to the Company’s independent directors’ compensation plan at a value of $25.00 per share as base annual compensation. See Note 8 (Long Term Incentive Award Plan and Independent Director Compensation) for additional information. The shares of common stock vest and become non-forfeitable immediately upon the date of grant. Included in general and administrative expenses is $6,875 and $13,750 for the three and six months endedJune 30, 2018 and 2017, respectively, for compensation expense related to the issuance of common stock to the Company’s independent directors.

On August 9, 2017, the Company granted 1,000 shares of restricted Class A common stock to each of its three independent directors pursuant to the Company’s independent directors’ compensation plan at a fair value of $25.00 per share in connection with their re-election to the board of directors at the Company’s 2017 annual meeting of stockholders. The shares of restricted common stock vest and become non-forfeitable in four equal annual installments, beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the shares of restricted common stock will become fully vested on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company.

The issuance and vesting activity for the six months endedJune 30, 2018, and year ended December 31, 2017, for the restricted common stock issued to the Company’s independent directors as compensation for services in connection with the Company raising $2,000,000 in the Public Offering and the independent directors’ re-election to the board of directors at the Company’s 2017 annual meeting is as follows:

	Six Months Ended June 30, 2018		Year Ended December 31, 2017
Nonvested shares at the beginning of the period	5,250		4,500
Granted shares	—		3,000
Vested shares	(1,500	)	(2,250	)
Nonvested shares at the end of the period	3,750		5,250

Included in general and administrative expenses is $14,015 and $27,926 for the three and six months endedJune 30, 2018, and $9,327 and $18,549 for the three and six months endedJune 30, 2017, respectively, for compensation expense related to the issuance of restricted common stock. As of June 30, 2018, the compensation expense related to the issuance of the restricted

18

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

common stock not yet recognized was $72,417. The weighted average remaining term of the restricted common stock was 1.01 years as of June 30, 2018. As of June 30, 2018, no shares of restricted common stock issued to the independent directors have been forfeited.

Preferred Stock

The Charter also provides the Company’s board of directors with the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such shares of preferred stock, the board of directors shall have the power from time to time to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares of preferred stock. The Company’s board of directors is authorized to amend the Charter without the approval of the stockholders to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. As of June 30, 2018 and December 31, 2017, no shares of the Company’s preferred stock were issued and outstanding.

Distribution Reinvestment Plan

The Company’s board of directors has approved the DRP through which common stockholders may elect to reinvest an amount equal to the distributions declared on their shares of common stock in additional shares of the Company’s common stock in lieu of receiving cash distributions. The purchase price per Class A, Class R and Class T share of common stock under the DRP is $23.75, $22.50 and $22.62, respectively. The Company’s board of directors may, in its sole discretion, from time to time, change these prices based upon changes in the Company’s estimated value per share, the then current price of shares of the Company’s common stock offered in the Public Offering and other factors that the Company’s board of directors deems relevant.

No sales commissions or dealer manager fees are payable on shares sold through the DRP. The Company’s board of directors may amend, suspend or terminate the DRP at its discretion at any time upon ten days’ notice to the Company’s stockholders. Following any termination of the DRP, subsequent distributions to stockholders will be made in cash.

Share Repurchase Program and Redeemable Common Stock

The Company’s share repurchase program may provide an opportunity for stockholders to have their shares of common stock repurchased by the Company, subject to certain restrictions and limitations. No shares can be repurchased under the Company’s share repurchase program until after the first anniversary of the date of purchase of such shares; provided, however, that this holding period shall not apply to repurchases requested within 270 days after the death or disability of a stockholder.

Prior to the date the Company publishes an estimated value per share of its common stock, the purchase price for shares repurchased under the Company’s share repurchase program is as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of Purchase Price
2 years	95.0% of Purchase Price
3 years	97.5% of Purchase Price
4 years	100.0% of Purchase Price
In the event of a stockholder’s death or disability	Average Issue Price for Shares(2)

19

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

Following the date the Company publishes an estimated value per share of its common stock, the purchase price for shares repurchased under the Company’s share repurchase program will be as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)(3)(4)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of the Lesser of Purchase Price or Estimated Value per Share
2 years	95.0% of the Lesser of Purchase Price or Estimated Value per Share
3 years	97.5% of the Lesser of Purchase Price or Estimated Value per Share
4 years	100.0% of the Lesser of Purchase Price or Estimated Value per Share
In the event of a stockholder’s death or disability	Average Issue Price for Shares(2)

_______________

(1)As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock. Repurchase price includes the full amount paid for each share, including all sales commissions and dealer manager fees.

(2) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares. The required one-year holding period does not apply to repurchases requested within 270 days after the death or disability of a stockholder.

(3) For purposes of the share repurchase program, until the day the Company publicly discloses a new estimated value per share, the purchase price for shares purchased under the share repurchase program will equal, exclusively, the purchase price paid for the shares. Thereafter, the repurchase price will be a graduated percentage of the lesser of the purchase price or the estimated value per share in effect at the time of repurchase. The estimated value per share will be determined by the Company’s board of directors, based on periodic valuations by independent third-party appraisers or qualified independent valuation experts selected by the Advisor, and other factors the Company’s board of directors deems relevant.

(4) The Company’s board of directors will determine an estimated value per share of its common stock based on valuations by independent third-party appraisers or qualified valuation experts no later than 150 days following the second anniversary of breaking escrow in its Public Offering, or October 13, 2018, or such earlier time as required by any regulatory requirement regarding the timing of a valuation.

The purchase price per share for shares repurchased pursuant to the Company’s share repurchase program will be further reduced by the aggregate amount of net proceeds per share, if any, distributed to the Company’s stockholders prior to the repurchase date as a result of the sale of one or more of the Company’s assets that constitutes a return of capital distribution as a result of such sales.

Repurchases of shares of the Company’s common stock will be made quarterly upon written request to the Company at least 15 days prior to the end of the applicable quarter. Repurchase requests will be honored approximately 30 days following the end of the applicable quarter (the “Repurchase Date”). Stockholders may withdraw their repurchase request at any time up to three business days prior to the Repurchase Date.

The following table reflects repurchase activity for the three and six months endedJune 30, 2018 and 2017:

	Three Months Ended June 30, 2018								Six Months Ended June 30, 2018
	Class A		Class R		Class T		Total		Class A		Class R		Class T		Total
Repurchase requests (in shares)	2,039		—		—		2,039		13,595		3,608		1,317		18,520
Repurchase requests (value)	$	47,161	$	—	$	—	$	47,161	$	316,554	$	75,097	$	31,269	$	422,920
Repurchases fulfilled (in shares)	11,556		3,608		1,317		16,481		14,600		3,608		1,317		19,525
Repurchase requests fulfilled (value)	$	269,393	$	75,097	$	31,269	$	375,759	$	340,474	$	75,097	$	31,269	$	446,840

20

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

	Three Months Ended June 30, 2017								Six Months Ended June 30, 2017
	Class A		Class R		Class T		Total		Class A		Class R		Class T		Total
Repurchase requests (in shares)	—		—		874		874		—		—		874		874
Repurchase requests (value)	$	—	$	—	$	20,779	$	20,779	$	—	$	—	$	20,779	$	20,779
Repurchases fulfilled (in shares)	—		—		—		—		—		—		—		—
Repurchase requests fulfilled (value)	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

As of June 30, 2018 and 2017, the Company had outstanding and unfulfilled repurchase requests of 2,039 and 874 shares of common stock and recorded $47,161 and $20,779 in accounts payable and accrued liabilities on the accompanying consolidated balance sheets related to these unfulfilled repurchase requests, all of which were repurchased on the July 31, 2018 and October 30, 2017 repurchase dates, respectively.

The Company cannot guarantee that the funds set aside for the share repurchase program will be sufficient to accommodate all repurchase requests made in any quarter. In the event that the Company does not have sufficient funds available to repurchase all of the shares of the Company’s common stock for which repurchase requests have been submitted in any quarter, such outstanding repurchase requests will automatically roll over to the subsequent quarter and priority will be given to redemption requests in the case of the death or disability of a stockholder. If the Company repurchases less than all of the shares subject to a repurchase request in any quarter, with respect to any shares which have not been repurchased, a stockholder can (1) withdraw the stockholder’s request for repurchase or (2) ask that the Company honor the stockholder’s request in a future quarter, if any, when such repurchases can be made pursuant to the limitations of the share repurchase program and when sufficient funds are available. Such pending requests will be honored among all requests for redemptions in any given repurchase period as follows: first, pro rata as to repurchases sought upon a stockholder’s death or disability; and, next, pro rata as to other repurchase requests. Shares repurchased under the share repurchase program to satisfy the pro rata required minimum distribution of shares held in a qualified retirement account will be repurchased on or after the first anniversary of the date of purchase of such shares at 100% of the purchase price or at 100% of the estimated value per share, as applicable.

The Company is not obligated to repurchase shares of its common stock under the share repurchase program. The share repurchase program limits the number of shares to be repurchased in any calendar year to (1) 5% of the weighted average number of shares of common stock outstanding during the prior calendar year and (2) those that could be funded from the net proceeds from the sale of shares under the DRP in the prior calendar year, plus such additional funds as may be reserved for that purpose by the Company’s board of directors. Such sources of funds could include cash on hand, cash available from borrowings and cash from liquidations of securities investments as of the end of the applicable month, to the extent that such funds are not otherwise dedicated to a particular use, such as working capital, cash distributions to stockholders or purchases of real estate assets. There is no fee in connection with a repurchase of shares of the Company’s common stock pursuant to the Company’s share repurchase program.

The Company’s board of directors may, in its sole discretion, amend, suspend or terminate the share repurchase program at any time upon 30 days’ notice to its stockholders if it determines that the funds available to fund the share repurchase program are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase program is in the best interest of the Company’s stockholders. Therefore, a stockholder may not have the opportunity to make a repurchase request prior to any potential termination of the Company’s share repurchase program. The share repurchase program will terminate in the event that a secondary market develops for the Company’s shares of common stock.

Pursuant to the share repurchase plan, for the three and six months endedJune 30, 2018, the Company reclassified $830,463 and $1,563,270, net of $375,759 and $446,839 of fulfilled repurchase requests and for the three and six months endedJune 30, 2017, $589,433 and $985,244, net of $0 and $0 of fulfilled repurchase requests, respectively, from permanent equity to temporary equity, which are included as redeemable common stock on the accompanying consolidated balance sheets.

Distributions

The Company’s long-term policy is to pay distributions solely from cash flow from operations. However, the Company expects to have insufficient cash flow from operations available for distribution until it makes substantial investments. Further, because the Company may receive income from interest or rents at various times during the Company’s fiscal year and because

21

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

the Company may need cash flow from operations during a particular period to fund capital expenditures and other expenses, the Company expects that at least during the early stages of the Company’s development and from time to time during the Company’s operational stage, the Company will declare distributions in anticipation of cash flow that the Company expects to receive during a later period, and the Company expects to pay these distributions in advance of its actual receipt of these funds. In these instances, the Company’s board of directors has the authority under its organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or advances and the deferral of fees and expense reimbursements by the Advisor, in its sole discretion. The Company has not established a limit on the amount of proceeds it may use from the Public Offering to fund distributions. If the Company pays distributions from sources other than cash flow from operations, the Company will have fewer funds available for investments and stockholders’ overall return on their investment in the Company may be reduced.

The Company elected to be taxed as, and currently qualifies as, a REIT for federal income tax purposes commencing with the taxable year ended December 31, 2016. To qualify as a REIT, the Company must make aggregate annual distributions to its stockholders of at least 90% of the Company’s REIT taxable income (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If the Company meets the REIT qualification requirements, the Company generally will not be subject to federal income tax on the income that the Company distributes to its stockholders each year.

Distributions Declared and Paid

The following table reflects per share daily distribution rates and annualized distribution rates for the three and six months endedJune 30, 2018 and 2017 :

	2018(1)						2017(1)
	1st Quarter			2nd Quarter			1st Quarter			2nd Quarter
Daily Distribution per Class A share(2)	$	0.004110		$	0.004110		$	0.004110		$	0.004110
Daily Distribution per Class R share(2)(3)	$	0.00394521		$	0.00394521		$	0.00394521		$	0.00394521
Daily Distribution per Class T share(2)(4)	$	0.003376		$	0.003376		$	0.003376		$	0.003376
Annualized Rate Based on Purchase Price:
Per Class A share	6.00		%	6.00		%	6.00		%	6.00		%
Per Class R share	6.40		%	6.40		%	6.40		%	6.40		%
Per Class T share	5.17		%	5.17		%	5.17		%	5.17		%

_________________

(1) The Company’s board of directors approved a cash distribution that accrued at the above rates per day for each share of the Company’s Class A common stock, Class R common stock and Class T common stock, which if paid each day over a 365-day period is equivalent to the per share annualized rates reflected above based on a purchase price of $25.00 per share of Class A common stock, $22.50 per share of Class R common stock and $23.81 per share of Class T common stock.

(2) The distributions declared accrue daily to stockholders of record as of the close of business on each day and are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month. There is no guarantee that the Company will continue to pay distributions at these rates or at all.

(3) Distributions during the three and six months ended June 30, 2018 and 2017, were based on daily record dates and calculated at a rate of $0.00394521 per share of Class R common stock per day for Class R common stock subject to an annual distribution and shareholder servicing fee of 0.27%. In some instances during the three and six months ended June 30, 2018 and 2017, we paid distributions at a rate of $0.00369863 per share of Class R common stock per day for Class R common stock subject to an annual distribution and shareholder servicing fee of 0.67%.

22

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

(4) Distributions during the three and six months ended June 30, 2018, were based on daily record dates and calculated at a rate of $0.003457 per share of Class T common stock per day for Class T common stock subject to an annual distribution and shareholder servicing fee of 1.0%. In some instances during the three and six months ended June 30, 2018, we paid distributions at a rate of $0.003376 subject to an annual distribution and shareholder fee of 1.125%.

The following tables reflect distributions declared and paid to Class A common stockholders, Class R common stockholders and Class T common stockholders for the three and six months ended June 30, 2018 and 2017:

	Three Months Ended June 30, 2018								Six Months Ended June 30, 2018
	Class A		Class R		Class T		Total		Class A		Class R		Class T		Total
DRP distributions declared (in shares)	19,456		2,045		31,640		53,141		38,128		3,710		59,689		101,527
DRP distributions declared (value)	$	462,058	$	46,009	$	715,713	$	1,223,780	$	905,534	$	83,470	$	1,350,181	$	2,339,185
Cash distributions declared	724,077		94,896		524,696		1,343,669		1,385,369		175,027		992,921		2,553,317
Total distributions declared	$	1,186,135	$	140,905	$	1,240,409	$	2,567,449	$	2,290,903	$	258,497	$	2,343,102	$	4,892,502
DRP distributions paid (in shares)	19,474		1,961		30,928		52,363		37,794		3,519		57,695		99,008
DRP distributions paid (value)	$	462,532	$	44,145	$	699,546	$	1,206,223	$	897,622	$	79,193	$	1,305,052	$	2,281,867
Cash distributions paid	714,645		91,557		517,076		1,323,278		1,358,520		167,824		962,265		2,488,609
Total distributions paid	$	1,177,177	$	135,702	$	1,216,622	$	2,529,501	$	2,256,142	$	247,017	$	2,267,317	$	4,770,476

	Three Months Ended June 30, 2017								Six Months Ended June 30, 2017
	Class A		Class R		Class T		Total		Class A		Class R		Class T		Total
DRP distributions declared (in shares)	12,764		722		14,487		27,973		22,296		1,283		24,060		47,639
DRP distributions declared (value)	$	303,145	$	16,241	$	327,703	$	647,089	$	529,535	$	28,847	$	544,237	$	1,102,619
Cash distributions declared	464,155		46,183		204,707		715,045		787,558		81,314		343,275		1,212,147
Total distributions declared	$	767,300	$	62,424	$	532,410	$	1,362,134	$	1,317,093	$	110,161	$	887,512	$	2,314,766
DRP distributions paid (in shares)	11,806		675		12,991		25,472		20,456		1,160		20,925		42,541
DRP distributions paid (value)	$	280,397	$	15,189	$	293,847	$	589,433	$	485,835	$	26,094	$	473,315	$	985,244
Cash distributions paid	426,108		42,428		180,941		649,477		706,277		72,010		295,366		1,073,653
Total distributions paid	$	706,505	$	57,617	$	474,788	$	1,238,910	$	1,192,112	$	98,104	$	768,681	$	2,058,897

As of June 30, 2018, $868,386 of distributions declared were payable and are included in distributions payable in the accompanying consolidated balance sheets, which included $398,663, $47,885 and $421,838 of Class A common stock, Class R common stock and Class T common stock, respectively, of which, $154,187, $15,901 and $243,921, or 19,455, 2,045 and 31,640 shares of Class A common stock, Class R common stock and Class T common stock, are attributable to the DRP, respectively.

As of December 31, 2017, $746,360 of distributions declared were payable and included in distributions payable in the accompanying consolidated balance sheets, which included $363,900, $36,405 and $346,055 of Class A common stock, Class R common stock and Class T common stock, respectively, of which $146,273, $11,624 and $198,794, or 6,158, 517 and 8,788 shares of Class A common stock, Class R common stock and Class T common stock, are attributable to the DRP, respectively.

As reflected in the table above, for the three and six months ended June 30, 2018, the Company paid total distributions of $2,529,501 and $4,770,476, which related to distributions declared for each day in the period from March 1, 2018 through May 31, 2018 and December 1, 2017 through May 31, 2018, respectively.

23

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

For the three and six months endedJune 30, 2017, the Company paid total distributions of $1,238,910 and $2,058,897, which related to distributions declared for each day in the period from March 1, 2017 through May 31, 2017 and December 31, 2016 through May 31, 2017, respectively.

7.Related Party Arrangements

The Company has entered into the Advisory Agreement with the Advisor and a Dealer Manager Agreement with the Dealer Manager. Pursuant to the Advisory Agreement and Dealer Manager Agreement, the Company is obligated to pay the Advisor and the Dealer Manager specified fees upon the provision of certain services related to the Public Offering, the investment of funds in real estate and real estate-related investments and the management of the Company’s investments and for other services (including, but not limited to, the disposition of investments) as well as make certain distributions in connection with the Company’s liquidation or listing on a national stock exchange. Subject to the limitations described below, the Company is also obligated to reimburse the Advisor and its affiliates for organization and offering costs incurred by the Advisor and its affiliates on behalf of the Company, as well as acquisition and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company.

24

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

Amounts attributable to the Advisor and its affiliates incurred for the three and six months ended June 30, 2018 and 2017, and amounts outstanding to the Advisor and its affiliates as of June 30, 2018 and December 31, 2017, are as follows:

	Incurred For the				Incurred For the
	Three Months Ended June 30,				Six Months Ended June 30,				Payable (Prepaid) as of
	2018		2017		2018		2017		June 30, 2018		December 31, 2017
Consolidated Statements of Operations:
Expensed
Investment management fees(1)	$	1,022,265	$	204,660	$	2,013,825	$	378,639	$	371	$	53,409
Property management:
Fees(1)	291,302		134,292		557,909		221,192		131,094		94,469
Reimbursement of onsite personnel(2)	832,881		288,977		1,597,102		532,779		287,623		142,633
Other fees(1)	86,604		33,407		174,277		56,680		9,435		7,632
Other fees - property operations(2)	5,257		2,862		13,865		5,087		—		—
Other fees - G&A(3)	13,944		2,552		18,274		3,827		—		—
Other operating expenses(3)	261,231		268,888		576,371		502,560		141,146		102,609
Property insurance(4)	79,356		507		111,306		1,014		—		(16,062		)
Consolidated Balance Sheets:
Assets
Capitalized
Acquisition fees(5)	624,854		943,211		624,854		1,642,623		—		1,722,641
Acquisition expenses(5)	161,703		215,716		161,423		373,279		—		—
Construction management:
Fees(6)	39,021		25,558		66,711		43,297		6,302		6,767
Reimbursements of labor costs(6)	114,670		34,521		207,329		71,148		26,938		13,108
Capital expenditures(6)	—		15,272		21,538		23,823		—		—
Additional paid-in capital
Other offering costs reimbursement	296,266		1,756,782		1,404,887		3,316,143		—		405,774
Selling commissions:
Class A	287,918		652,396		594,253		1,383,750		—		—
Class T	217,638		435,566		534,625		833,617		—		—
Dealer manager fees:
Class A	136,198		364,143		272,671		745,212		—		—
Class T	181,363		362,972		445,519		694,681		—		—
Distribution and shareholder servicing fee:
Class R(7)	18,028		40,903		19,905		90,975		193,165		184,295
Class T(7)	236,316		636,282		533,915		1,233,358		2,835,580		2,753,843
	$	4,906,815	$	6,419,467	$	9,950,559	$	12,153,684	$	3,631,654	$	5,471,118

25

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

_____________________

(1) Included in fees to affiliates in the accompanying consolidated statements of operations.

(2) Included in operating, maintenance and management in the accompanying consolidated statements of operations.

(3) Included in general and administrative expenses in the accompanying consolidated statements of operations.

(4) Property related insurance expense and the amortization of the prepaid insurance deductible account are included in general and administrative expenses in the accompanying consolidated statements of operations. The amortization of the prepaid property insurance is included in operating, maintenance and management expenses in the accompanying consolidated statements of operations. The prepaid insurance is included in other assets in the accompanying consolidated balance sheets upon payment.

(5) Included in total real estate, cost in the accompanying consolidated balance sheets following the adoption of ASU 2017-01 as of January 1, 2017.

(6) Included in building and improvements in the accompanying consolidated balance sheets.

(7) Included in additional paid-in capital as commissions on sales of common stock and related dealer manager fees to affiliates in the accompanying consolidated statements of stockholders’ equity.

Organization and Offering Costs

Organization and offering expenses include all expenses (other than sales commissions, the dealer manager fee and the distribution and shareholder servicing fee) to be paid by the Company in connection with the Public Offering, including legal, accounting, tax, printing, mailing and filing fees, charges of the Company’s escrow holder and transfer agent, expenses of organizing the Company, data processing fees, advertising and sales literature costs, transfer agent costs, information technology costs, bona fide out-of-pocket due diligence costs and amounts to reimburse the Advisor or its affiliates for the salaries of its employees and other costs in connection with preparing sales materials and providing other administrative services in connection with the Public Offering. Any such reimbursement will not exceed actual expenses incurred by the Advisor. After the termination of the Public Offering, the Advisor will reimburse the Company to the extent total organization and offering expenses (including sales commissions, dealer manager fees and the distribution and shareholder servicing fees) borne by the Company exceed 15% of the gross proceeds raised in the Primary Offering.

The Company may also reimburse costs of bona fide training and education meetings held by the Company (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement of employees of the Company’s affiliates to attend seminars conducted by broker-dealers and, in certain cases, reimbursement to participating broker-dealers for technology costs associated with the offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of the Company’s shares and the ownership of the Company’s shares by such broker-dealers’ customers; provided, however, that the Company will not pay any of the foregoing costs to the extent that such payment would cause total underwriting compensation to exceed 10% of the gross offering proceeds of the Primary Offering, as required by the rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”).

Organization and offering costs include payments made to Crossroads Capital Advisors, whose parent company indirectly owns 25% of the Steadfast REIT Investments, LLC (the “Sponsor”) for certain specified services provided to the Company on behalf of the Advisor, including, without limitation, establishing operational and administrative processes; engaging and negotiating with vendors; providing recommendations and advice for the development of marketing materials and ongoing communications with investors; and assisting in public relations activities and the administration of the DRP and share repurchase program. From the commencement of the Public Offering through June 30, 2018 and December 31, 2017, the Advisor had incurred on the Company’s behalf $2,133,452 and $1,828,156, respectively, of costs attributable to Crossroads Capital Advisors for the services described above, all of which was recorded by the Company as offering costs during the applicable periods.

26

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

The amount of reimbursable organization and offering (“O&O”) costs that have been paid or recognized from inception through June 30, 2018, is as follows: 

	Amount			Percentage of Gross Offering Proceeds
Gross offering proceeds:	$	183,800,680		100.00	%
O&O limitation	15.00		%
Total O&O costs available to be paid/reimbursed	$	27,570,102		15.00	%
O&O expenses recorded:
Sales commissions	$	7,380,510		4.02	%
Broker Dealer fees(1)	4,689,529			2.55	%
Distribution and shareholder servicing fees(2)	4,004,336			2.18	%
Offering cost reimbursements	10,902,030			5.93	%
Organizational costs reimbursements	26,980			0.01	%
Total O&O cost reimbursements recorded by the Company	$	27,003,385		14.69	%

_____________________

(1) Includes $1,770,623 of marketing reallowance paid to participating broker dealers.

(2) Includes the distribution and shareholder servicing fees incurred from inception through June 30, 2018, for Class R shares of 0.27% and 0.67% and Class T shares of up to 1.125% of the purchase price per share sold in the Public Offering. The distribution and shareholder servicing fees are paid from sources other than Public Offering proceeds.     

When recognized, organization costs are expensed as incurred. From inception through June 30, 2018, the Advisor incurred $26,980 of organizational costs on the Company’s behalf, all of which was reimbursed to the Advisor.

Offering costs, including selling commissions and dealer manager fees and the distribution and shareholder servicing fees, are deferred and charged to stockholders’ equity. All such amounts are reimbursed to the Advisor, the Dealer Manager or their affiliates from gross offering proceeds, except for the distribution and shareholder servicing fees, which are paid from sources other than Public Offering proceeds. For the three and six months endedJune 30, 2018 and 2017, the Advisor incurred $1,738,660 and $2,723,804 of offering costs related to the Public Offering, respectively. The Advisor has incurred total offering costs related to the Public Offering of $25,115,784 from inception through June 30, 2018, of which $10,759,215 was deferred and may be reimbursable, subject to the limitations described above and the approval of the independent directors.

The Company accrued $0 and $405,774 for the reimbursement of offering costs in the accompanying consolidated balance sheets as of June 30, 2018 and December 31, 2017, respectively. The deferred offering costs of $10,759,215 were not included in the consolidated financial statements of the Company because these costs were not a Company liability as they exceeded the 15% limitation described above.

27

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

Investment Management Fee

The Company paid the Advisor a monthly investment management fee equal to one-twelfth of 0.50% of the value of the Company’s investments in properties and real estate-related assets until the aggregate value of the Company’s investments in properties and real estate-related assets equals $300,000,000, which occurred on August 31, 2017. Thereafter, the Company pays the Advisor a monthly investment management fee equal to one-twelfth of 1.0% of the value of the Company’s investments in properties and real estate-related assets. For the purposes of the investment management fee, the value of the Company’s investments in properties will equal their costs, until the investments are valued by an independent third-party appraiser or qualified independent valuation expert. “Costs” are calculated by including acquisition fees, acquisition expenses, renovations and upgrades, and any debt attributable to such investments, or the Company’s proportionate share thereof in the case of investments made through joint ventures.

Acquisition Fees and Expenses

The Company pays the Advisor an acquisition fee equal to 2.0% of the cost of the investment which includes the amount actually paid or budgeted to fund the acquisition, origination, development, construction or improvement (i.e. value-enhancement) of any real property or real estate-related asset acquired. In addition to acquisition fees, the Company reimburses the Advisor for amounts directly incurred by the Advisor and amounts the Advisor pays to third parties in connection with the selection, evaluation, acquisition and development of a property or acquisition of real estate-related assets, whether or not the Company ultimately acquires the property or the real estate-related assets.

The Charter limits the Company’s ability to pay acquisition fees if the total of all acquisition fees and expenses relating to the purchase would exceed 6.0% of the contract purchase price. Under the Charter, a majority of the Company’s board of directors, including a majority of the independent directors, is required to approve any acquisition fees (or portion thereof) that would cause the total of all acquisition fees and expenses relating to an acquisition to exceed 6.0% of the contract purchase price. In connection with the purchase of securities, the acquisition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the acquisition fee to a firm that is not a registered broker-dealer. 

Loan Coordination Fee

Subject to the determination by a majority of the independent directors that the Advisor provides a substantial amount of services in connection with the origination or refinancing of any debt financing obtained by the Company that is used to refinance properties or other permitted investments or financing in connection with a recapitalization of the Company, the Company pays the Advisor a loan coordination fee equal to 0.75% of the amount available under such financing.

Property Management Fees and Expenses

The Company has entered into Property Management Agreements (each a “Property Management Agreement”) with Steadfast Management Company, Inc., an affiliate of the Sponsor (the “Property Manager”), in connection with the management of each of the Company’s properties. The property management fee payable with respect to each property under the Property Management Agreements at June 30, 2018, ranges from 2.75% to 3.0% of the gross revenue of the property (as defined in the Property Management Agreement). In addition, the Property Manager may also earn an incentive management fee equal to 1.0% of total collections based on performance metrics of the property. The Property Manager may subcontract with third-party property managers and will be responsible for supervising and compensating those third-party property managers and will be paid an oversight fee equal to 1.0% of the gross revenues of the property managed for providing such supervisory services. In no event will the Company pay its Property Manager or any affiliate both a property management fee and an oversight fee with respect to any particular property. Each Property Management Agreement has an initial one-year term and will continue thereafter on a month-to-month basis unless either party gives 60-days’ prior notice of its desire to terminate the Property Management Agreement, provided that the Company may terminate the Property Management Agreement at any time upon a determination of gross negligence, willful misconduct or bad acts of the Property Manager or its employees or upon an uncured breach of the Property Management Agreement upon 30 days’ prior written notice to the Property Manager. In the event of a termination of the Property Management Agreement by the Company without cause, the Company will pay a

28

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

termination fee to the Property Manager equal to three months of the monthly management fee based on the average gross collections for the three months preceding the date of termination.

In addition to the property management fee, the Property Management Agreements also specify certain other fees payable to the Property Manager or its affiliates, including fees for benefit administration, information technology infrastructure, licenses, support and training services and capital expenditures. The Company also reimburses the Property Manager for the salaries and related benefits of on-site property management employees.

Construction Management Fees

The Company has entered into Construction Management Agreements (each a “Construction Management Agreement”) with Pacific Coast Land & Construction, Inc., an affiliate of the Sponsor (the “Construction Manager”), in connection with capital improvements and renovation or value-enhancement projects for certain properties the Company acquires. The construction management fee payable with respect to each property under the Construction Management Agreements is equal to 6.0% of the costs of the improvements for which the Construction Manager has planning and oversight authority. Generally, each Construction Management Agreement can be terminated by either party with 30 days’ prior written notice to the other party. Construction management fees are capitalized to the respective real estate properties in the period in which they are incurred, as such costs relate to capital improvements and renovations for apartment homes taken out of service while they undergo the planned renovation.

The Company may also reimburse the Construction Manager for the salaries and related benefits of certain of its employees for time spent working on capital improvements and renovations.

Property Insurance

The Company deposits amounts with an affiliate of the Sponsor to fund a prepaid insurance deductible account to cover the cost of required insurance deductibles across all properties of the Company and other affiliated entities. Upon filing a major claim, proceeds from the insurance deductible account may be used by the Company or another affiliate of the Sponsor. In

addition, the Company deposits amounts with an affiliate of the Sponsor to cover the cost of property and property related insurance across certain properties of the Company.

Other Operating Expense Reimbursement

In addition to the various fees paid to the Advisor, the Company is obligated to pay directly or reimburse all expenses incurred by the Advisor in providing services to the Company, including the Company’s allocable share of the Advisor’s overhead, such as rent, employee costs, benefit administration costs, utilities and information technology costs. The Company will not reimburse the Advisor for employee costs in connection with services for which the Advisor or its affiliates receive acquisition fees, investment management fees, loan coordination fees and disposition fees or for the employee costs the Advisor pays to the Company’s executive officers.

The Charter limits the Company’s total operating expenses during any four fiscal quarters to the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income for the same period (the “2%/25% Limitation”). The Company may reimburse the Advisor, at the end of each fiscal quarter, for operating expenses incurred by the Advisor; provided, however, that the Company shall not reimburse the Advisor at the end of any fiscal quarter for operating expenses that exceed the 2%/25% Limitation unless the independent directors have determined that such excess expenses were justified based on unusual and non-recurring factors. The Advisor must reimburse the Company for the amount by which the Company’s operating expenses for the preceding four fiscal quarters then ended exceed the 2%/25% Limitation, unless approved by the independent directors. For purposes of determining the 2%/25% Limitation amount, “average invested assets” means the average monthly book value of the Company’s assets invested directly or indirectly in equity interests and loans secured by real estate during the 12-month period before deducting depreciation, reserves for bad debts or other non-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company, as determined by GAAP, that are in any way related to the Company’s operation, including investment management fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, listing and registration of shares of the Company’s common stock; (b) interest payments; (c) taxes; (d) non-cash expenditures such as

29

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of the Company’s assets; (f) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that the Company does not close); (g) real estate commissions on the resale of investments; and (h) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property).

As of June 30, 2018, the Company’s total operating expenses, as defined above, did not exceed the 2%/25% Limitation.

Disposition Fee

If the Advisor or its affiliates provide a substantial amount of services in connection with the sale of a property or real estate-related asset, including pursuant to a sale of the entire Company, as determined by a majority of the Company’s independent directors, the Advisor or its affiliates will earn a disposition fee equal to (1) 1.5% of the sales price of each property or real estate-related asset sold or (2) 1.0%, which may be increased to 1.5% in the sole discretion of the Company’s independent directors, of the total consideration paid in connection with the sale of the Company. In the event of a final liquidity event, this fee will be reduced by the amount of any previous disposition fee paid on properties previously exchanged under Section 1031 of the Internal Revenue Code.

To the extent the disposition fee is paid upon the sale of any assets other than real property, it will be included as an operating expense for purposes of the 2%/25% Limitation. In connection with the sale of securities, the disposition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the disposition fee to a firm that is not a registered broker-dealer. As of June 30, 2018, the Company had not sold or otherwise disposed of property or any real estate-related assets. Accordingly, the Company had not incurred any disposition fees as of June 30, 2018. 

Sales Commissions

The Company pays the Dealer Manager up to 7.0% of gross offering proceeds from the sale of Class A shares in the Primary Offering and up to 3.0% of gross offering proceeds from the sale of Class T shares in the Primary Offering (all of which will be reallowed to participating broker-dealers), subject to reductions based on volume and for certain categories of purchasers. No sales commissions are paid for sales of Class R shares or for sales pursuant to the DRP. The total amount of all items of compensation from any source payable to the Dealer Manager and the participating broker-dealers may not exceed 10.0% of the gross proceeds from the Primary Offering on a per class basis.

Dealer Manager Fees

The Company pays the Dealer Manager up to 3.0% of gross offering proceeds from the sale of Class A shares and up to 2.5% of gross offering proceeds from the sale of Class T shares (a portion of which will be reallowed to participating broker-dealers). No dealer manager fee will be paid for sales of Class R shares or for sales pursuant to the Company’s DRP.

Distribution and Shareholder Servicing Fees

The Company pays the Dealer Manager up to (1) 0.27%, annualized, of the purchase price per Class R share (or, once reported, the amount of the Company’s estimated value per share) for each Class R share purchased in the Primary Offering from a registered investment advisor that does not participate on an alternative investment platform; (2) 0.67%, annualized, of the purchase price per Class R share (or, once reported, the amount of the Company’s estimated value per share) for each Class R share purchased in the Primary Offering from a registered investment advisor that participates on an alternative investment platform; and (3) 1.125%, annualized, of the purchase price per Class T share (or, once reported, the amount of the Company’s estimated value per share) for each Class T share purchased in the Primary Offering. The distribution and shareholder servicing fee accrues daily and is paid monthly in arrears. The Company amended its Charter on August 8, 2017, to authorize and pay different distributions to different holders of Class T and/or Class R shares. Prior to amending the Charter to allow for distributions at different rates on the same class of shares, of the 0.67% distribution and shareholder servicing fee payable with respect to sales of Class R shares by registered investment advisors that participate on an alternative investment platform, 0.27% was paid from the current distribution and shareholder servicing fee on Class R shares, which was payable out of amounts that otherwise would have been distributed to holders of Class R shares, and 0.40% was an additional expense of the Company.

30

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

The Company will cease paying the distribution and shareholder servicing fee (and cease deducting this fee from amounts otherwise available for distribution to a Class R stockholder) with respect to a Class R share sold in the Primary Offering at the earlier of: (1) the date at which the aggregate underwriting compensation from all sources equals 10% of the gross proceeds from the sale of shares in the Primary Offering (i.e., excluding proceeds from sales pursuant to the DRP); (2) the end of the month in which the Company’s transfer agent, on behalf of the Company, determines that total underwriting compensation, including selling commissions, dealer manager fees, the distribution and shareholder servicing fee and other elements of underwriting compensation with respect to such Class R share would be in excess of 10% of the total gross investment amount at the time of purchase of such Class R share in the Primary Offering; (3) the date on which such Class R share is repurchased by the Company; and (4) the listing of the Company’s shares of common stock on a national securities exchange, the sale of the Company or the sale of all or substantially all of the Company’s assets.

The Company will cease paying the distribution and shareholder servicing fee (and cease deducting this fee from amounts otherwise available for distribution to a Class T stockholder) with respect to a Class T share sold in the Primary Offering at the earlier of: (1) the date at which the aggregate underwriting compensation from all sources equals 10% of the gross proceeds from the sale of shares in the Primary Offering (i.e., excluding proceeds from sales pursuant to the DRP); (2) the sixth anniversary of the last day of the fiscal quarter in which the Public Offering (excluding the DRP) terminates; (3) the end of the month in which the Company’s transfer agent, on behalf of the Company, determines that total underwriting compensation, including selling commissions, dealer manager fees, the distribution and shareholder servicing fee and other elements of underwriting compensation with respect to such Class T share, would be in excess of 10% of the total gross investment amount at the time of purchase of such Class T share in the Primary Offering; (4) the end of the month in which the Company’s transfer agent, on behalf of the Company, determines that the distribution and shareholder servicing fee with respect to such Class T share would be in excess of 4.5% (or a lower limit that is set forth in the applicable selling agreement) of the total gross investment amount at the time of purchase of such Class T share in the Primary Offering; (5) the date on which such Class T share is repurchased by the Company; (6) the date on which the holder of such Class T share or its agent notifies the Company or the Company’s agent that he or she is represented by a new participating broker-dealer; provided that the Company will continue paying the distribution and shareholder servicing fee, which shall be reallowed to the new participating broker-dealer, if the new participating broker-dealer enters into a participating dealer agreement or otherwise agrees to provide the ongoing services set forth in the dealer manager agreement; and (7) the listing of the Company’s shares of common stock on a national securities exchange, the sale of the Company or the sale of all or substantially all of the Company’s assets. The Company cannot predict if or when this will occur. The dealer manager may reallow all or a portion of the ongoing distribution and shareholder servicing fee to the participating dealer who provides the ongoing services with respect to the Class T share.

Subordinated Participation in Net Sale Proceeds (payable only if the Company’s shares are not listed on an exchange)

The Advisor (in its capacity as special limited partner of the Operating Partnership) would receive 15.0% of the remaining net sale proceeds after return of the total investment amount, which is the amount equal to the original issue price paid by the stockholders in the Public Offering multiplied by the number of shares issued in the Public Offering, reduced by the weighted average original issue price of the shares sold in the Primary Offering multiplied by the total number of shares repurchased by the Company, plus payment to investors of an amount equal to a 6.0% annual cumulative, non-compounded return of the total investment amount, less amounts previously distributed to stockholders, including distributions that may constitute a return of capital for federal income tax purposes.

“Net sale proceeds” means the net cash proceeds realized from the sale of the Company or all of the Company’s assets after deduction of all expenses incurred in connection with a sale or disposition of the Company or of the Company’s assets, including disposition fees paid to the Advisor, or from the prepayment, maturity, workout or other settlement of any loan or other investment. For purposes of calculating the 6.0% annual cumulative, non-compounded return of the total investment amount, the aggregate of all investors’ capital shall be deemed to have been invested collectively on one date—the aggregate average investment date, being a day of a month determined by the average weighted month of all shares sold on a monthly basis. In addition, the Advisor (in its capacity as special limited partner of the Operating Partnership) will receive a distribution similar to the subordinated participation in net sale proceeds in the event the Company undertakes an issuer tender offer that results in the tendering stockholders receiving a return of the total investment amount of the tendering stockholders plus payment to those investors of an amount equal to a 6.0% annual cumulative, non-compounded return of the total investment

31

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

amount of the tendering stockholders, less amounts previously distributed to stockholders, including distributions that may constitute a return of capital for federal income tax purposes.

Subordinated Incentive Listing Distribution (payable only if the Company’s shares are listed on an exchange)

Upon the listing of the Company’s shares on a national securities exchange, the Advisor (in its capacity as special limited partner of the Operating Partnership) would receive 15.0% of the amount by which the sum of the Company’s adjusted market value plus distributions paid by the Company to stockholders from inception until the date the adjusted market value is determined, including distributions that may constitute a return of capital for federal income tax purposes, exceeds the sum of the total investment amount plus an amount equal to a 6.0% annual cumulative, non-compounded return to investors of the total investment amount. For purposes of calculating the 6.0% annual cumulative, non-compounded return of the total investment amount, the aggregate of all investors’ capital shall be deemed to have been invested collectively on one date, the aggregate average investment date, being a day of a month determined by the average weighted month of all shares sold on a monthly basis.

The adjusted market value of the Company’s common stock will be calculated based on the average market value of the shares of common stock issued and outstanding at listing over the 30 trading days beginning 180 days after the shares are first listed or included for quotation. The Company has the option to pay the subordinated incentive listing distribution in the form of stock, cash, a promissory note or any combination thereof. Any previous payments of the subordinated participation in net sales proceeds will offset the amounts due pursuant to the subordinated listing distribution.

Subordinated Distribution Upon Termination of the Advisory Agreement

Upon termination or non-renewal of the Advisory Agreement with or without cause, the Advisor (in its capacity as special limited partner of the Operating Partnership), would be entitled to receive distributions from the Operating Partnership equal to 15.0% of the amount by which the sum of the Company’s appraised market value plus distributions exceeds the sum of the total investment amount plus an amount equal to a 6.0% annual cumulative, non-compounded return of the total investment amount to investors. For purposes of calculating the 6.0% annual cumulative, non-compounded return of the total investment amount, the aggregate of all investors’ capital shall be deemed to have been invested collectively on one date, the aggregate average investment date, being a day of a month determined by the average weighted month of all shares sold on a monthly basis. If the Company does not provide this return, the Advisor will not receive this distribution. In addition, the Advisor may elect to defer its right to receive a subordinated distribution upon termination until either shares of the Company’s common stock are listed and traded on a national securities exchange or another liquidity event occurs.

8.Long Term Incentive Award Plan and Independent Director Compensation

The Company adopted a long-term incentive plan (the “Incentive Award Plan”), which the Company uses to attract and retain qualified directors, officers, employees and consultants. The Incentive Award Plan authorizes the granting of restricted stock, stock options, restricted or deferred stock units, performance awards and other stock-based awards to the Company’s directors, officers, employees and consultants selected by its board of directors for participation in the Incentive Award Plan. Stock options granted under the Incentive Award Plan will not exceed an amount equal to 10% of the outstanding shares of the Company’s common stock allocated to the Incentive Award Plan on the date of grant of any such stock options. Any stock options granted under the Incentive Award Plan will have an exercise price or base price that is not less than fair market value of the Company’s common stock on the date of grant.

Under the Company’s independent directors’ compensation plan, which is a sub-plan of the Incentive Award Plan, each of the Company’s independent directors received 2,000 shares of restricted Class A common stock once the Company raised $2,000,000 in gross offering proceeds in the Public Offering. Each subsequent independent director that joins the Company’s board of directors would receive 2,000 shares of restricted Class A common stock upon election to the Company’s board of directors. In addition, on the date following an independent director’s re-election to the Company’s board of directors, he or she would receive 1,000 shares of restricted Class A common stock. The shares of restricted Class A common stock generally vest in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted common stock will become fully vested and become non-forfeitable on the earlier to

32

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

occur of (1) the termination of the independent director’s service as a director due to his or her death or disability or (2) a change in control of the Company. These awards entitle the holders to participate in distributions.

The Company recorded stock-based compensation expense of $14,015 and $27,926 for the three and six months endedJune 30, 2018 and $9,327 and $18,549 for the three and six months endedJune 30, 2017, related to the independent directors’ restricted common stock, respectively.

In addition to the stock awards, the Company pays each of its independent directors annual compensation of $55,000, prorated for any partial term (the audit committee chairperson receives an additional $10,000 annually, prorated for any partial term). In addition, the independent directors are paid for attending meetings as follows: (1) $2,500 for each board meeting attended in person, (2) $1,500 for each committee meeting attended in person in such director’s capacity as a committee member and (3) $1,000 for each board meeting attended via teleconference (not to exceed $4,000 for any one set of meetings attended within a 48-hour period). The Company’s independent directors may elect to receive the meeting fees and annual compensation to which they are entitled in shares of the Company’s common stock with an equivalent value. Such election shall be made by delivering a valid election form as prescribed in the independent directors’ compensation plan. Such election shall be irrevocable for the plan year. All directors also receive reimbursement of reasonable out of pocket expenses incurred in connection with attendance at meetings of the board of directors. Director compensation is an operating expense of the Company that is subject to the operating expense reimbursement obligation of the Advisor discussed in Note 7 (Related Party Arrangements). The Company recorded stock-based compensation expense of $55,750 and $119,000 for the three and six months endedJune 30, 2018 and $58,750 and $112,500 for the three and six months endedJune 30, 2017, related to the independent directors’ restricted common stock, respectively, related to the independent directors’ annual compensation and the value of shares issued for annual compensation, which is included in general and administrative expenses in the accompanying consolidated statements of operations. As of June 30, 2018 and December 31, 2017, $48,875 and $51,875 is included in accounts payable and accrued liabilities, respectively, and $90,375 and $83,500 is included in additional paid-in capital on the consolidated balance sheets, respectively.

9.Commitments and Contingencies

Economic Dependency

The Company is dependent on the Advisor and the Dealer Manager for certain services that are essential to the Company, including the sale of the Company’s shares of common and preferred stock available for issue; the identification, evaluation, negotiation, purchase, and disposition of real estate and real estate-related investments; management of the daily operations of the Company’s real estate and real estate-related investment portfolio; and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other sources.

33

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

Concentration of Credit Risk

The geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the Atlanta, Georgia, Austin, Texas, Dallas, Texas, Denver, Colorado and Indianapolis, Indiana, apartment markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition from other apartment communities, decrease in demand for apartments or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.

Legal Matters

From time to time, the Company is subject, or party, to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on the Company’s results of operations or financial condition nor is the Company aware of any such legal proceedings contemplated by government agencies.

10.Derivative Financial Instruments

The Company uses interest rate derivatives with the objective of managing exposure to interest rate movements thereby minimizing the effect of interest rate changes and the effect they could have on future cash flows. Interest rate cap agreements are used to accomplish this objective. The following tables provide the terms of the Company’s interest rate derivative instruments that were in effect at June 30, 2018 and December 31, 2017:

June 30, 2018
Type	Maturity Date Range	Based on	Number of Instruments	Notional Amount		Variable Rate	Weighted Average Rate Cap	Fair Value
Interest Rate Cap	6/1/2019 - 12/1/2020	One-Month LIBOR	6	$	156,892,000	2.09%	2.59%	$	802,344

December 31, 2017
Type	Maturity Date Range	Based on	Number of Instruments	Notional Amount		Variable Rate	Weighted Average Rate Cap	Fair Value
Interest Rate Cap	6/1/2019 - 12/1/2020	One-Month LIBOR	6	$	156,892,000	1.56%	2.59%	$	257,619

The interest rate cap agreements are not designated as effective cash flow hedges. Accordingly, the Company records any changes in the fair value of the interest rate cap agreements as interest expense. The change in the fair value of the interest rate cap agreements for the three and six months endedJune 30, 2018, resulted in an unrealized gain of $165,411 and $544,725, respectively, and three and six months endedJune 30, 2017, resulted in an unrealized loss of $192,670 and $414,364, respectively, which is included in interest expense in the accompanying consolidated statements of operations. During the six months endedJune 30, 2018 and 2017, the Company acquired interest rate cap agreements of $0 and $222,790, respectively. The fair value of the interest rate cap agreements of $802,344 and $257,619 as of June 30, 2018 and December 31, 2017, respectively, is included in other assets on the accompanying consolidated balance sheets.

34

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

11.Subsequent Events

Status of Our Offering

As of August 3, 2018, the Company had sold 3,362,752, 430,123 and 4,339,882 shares of Class A common stock, Class R common stock and Class T common stock in the Public Offering, respectively, for gross proceeds of $82,795,276, $9,677,772 and $103,159,061, or an aggregate amount of $195,632,109, including 111,917, 8,450 and 145,837 shares of Class A common stock, Class R common stock and Class T common stock issued pursuant to the DRP for gross offering proceeds of $2,658,034, $190,124 and $3,298,845, respectively.

Distributions Paid

Class A

On July 2, 2018, the Company paid distributions of $398,663, which related to distributions declared for each day in the period from June 1, 2018 through June 30, 2018 and consisted of cash distributions paid in the amount of $244,476 and $154,187 in Class A shares issued pursuant to the DRP, respectively.

On August 1, 2018, the Company paid distributions of $421,361, which related to distributions declared for each day in the period from July 1, 2018 through July 31, 2018 and consisted of cash distributions paid in the amount of $256,856 and $164,505 in Class A shares issued pursuant to the DRP.

Class R

On July 2, 2018, the Company paid distributions of $47,885, which related to distributions declared for each day in the period from June 1, 2018 through June 30, 2018 and consisted of cash distributions paid in the amount of $31,984 and $15,901 in Class R shares issued pursuant to the DRP, respectively.

On August 1, 2018, the Company paid distributions of $50,744, which related to distributions declared for each day in the period from July 1, 2018 through July 31, 2018 and consisted of cash distributions paid in the amount of $34,614 and $16,130 in Class R shares issued pursuant to the DRP.

Class T

On July 2, 2018, the Company paid distributions of $421,838, which related to distributions declared for each day in the period from June 1, 2018 through June 30, 2018 and consisted of cash distributions paid in the amount of $177,917 and $243,921 in Class T shares issued pursuant to the DRP.

On August 1, 2018, the Company paid distributions of $446,038, which related to distributions declared for each day in the period from July 1, 2018 through July 31, 2018 and consisted of cash distributions paid in the amount of $187,823 and $258,215 in Class T shares issued pursuant to the DRP.

Declaration of Distributions

On August 8, 2018, the board of directors of the Company declared cash distributions to the holders of Class A, Class R and Class T shares of common stock, such distributions to (1) accrue daily to the stockholders of record as of the close of business on each day during the period commencing on October 1, 2018 and ending on December 31, 2018; (2) be payable in cumulative amounts on or before the 3rd day of each calendar month with respect to the prior month; and (3) be calculated at a rate of $0.004110 per Class A share per day, $0.00369863 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.67%, and in some instances $0.00394521 per Class R share of common stock per day subject to an annual distribution and shareholder servicing fee of 0.27%, $0.003376 per Class T share per day subject to an annual distribution and shareholder servicing fee of 1.125% and in some instances $0.003457 per Class T share per day subject to an annual distribution and shareholder servicing fee of 1.0%.

35

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2018

(unaudited)

Restricted Stock Grant

On August 9, 2018, the Company granted 1,000 shares of restricted common stock to each of its three independent directors upon their re-election to the Company’s board of directors at the 2018 annual meeting of stockholders.

36

PART I — FINANCIAL INFORMATION (continued)

Item2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements of Steadfast Apartment REIT III, Inc. and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Steadfast Apartment REIT III, Inc., a Maryland corporation, and, as required by context, Steadfast Apartment REIT III Operating Partnership, L.P., a Delaware limited partnership, which we refer to as our “Operating Partnership,” and to their subsidiaries. Capitalized terms not defined shall have the meaning given to such terms in Item 1 of this quarterly report.

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

• the fact that we have a limited operating history and commenced operations on May 19, 2016;

• the fact that we have had a net loss for each quarterly and annual period since inception;

• our ability to raise proceeds in our Public Offering; 

• our ability to effectively deploy the proceeds raised in our Public Offering; 

• changes in economic conditions generally and the real estate and debt markets specifically; 

• our ability to successfully identify and acquire multifamily properties and senior-living properties on terms that are favorable to us; 

• our ability to secure resident leases for our multifamily properties and independent senior-living properties at favorable rental rates; 

• risks inherent in the real estate business, including resident defaults, potential liability relating to environmental matters and the lack of liquidity of real estate investments; 

• the fact that we pay fees and expenses to our Advisor and its affiliates that were not negotiated on an arm’s length basis and the fact that the payment of these fees and expenses increases the risk that our stockholders will not earn a profit on their investment in us; 

• our ability to retain our executive officers and other key personnel of our Advisor, our Property Manager and other affiliates of our Advisor; 

• our ability to generate sufficient cash flows to pay distributions for our stockholders;

• legislative or regulatory changes (including changes to the laws governing the taxation of REITs); 

• the availability of capital; 

• changes in interest rates; and 

• changes to U.S. GAAP.

37

PART I — FINANCIAL INFORMATION (continued)

Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this quarterly report. All forward-looking statements are made as of the date of this quarterly report and the risk that actual results will differ materially from the expectations expressed in this quarterly report will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this quarterly report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this quarterly report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this quarterly report will be achieved.

All forward looking statements included herein should be read in light of the factors identified in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 16, 2018.

Overview

We were formed on July 29, 2015, as a Maryland corporation that elected to be taxed as, and currently qualifies as, a REIT. We intend to use substantially all of the net proceeds from our ongoing Public Offering to invest in and manage a diverse portfolio of multifamily properties and senior-living properties located in targeted markets throughout the United States. In addition to our focus on multifamily properties and independent senior-living properties, we may also make selective strategic acquisitions of other types of commercial properties. We may also selectively acquire debt collateralized by multifamily properties and senior-living properties and securities of other companies owning multifamily properties and senior-living properties. As of June 30, 2018, we owned ten multifamily properties comprising a total of 2,775 apartment homes.

On February 5, 2016, we commenced our Public Offering to offer a maximum of $1,000,000,000 in shares of common stock for sale to the public at an initial price of $25.00 for each Class A share (up to $500,000,000 in Class A shares) and $23.81 for each Class T share (up to $500,000,000 in Class T shares), with discounts available for certain categories of purchasers. We also offered up to $300,000,000 in shares of common stock pursuant to our DRP at an initial price of $23.75 for each Class A share and $22.62 for each Class T share. Commencing on July 25, 2016, we revised the terms of the Public Offering to include Class R shares. We are offering a maximum of $1,000,000,000 in shares of common stock for sale to the public at an initial price of $25.00 for each Class A share ($400,000,000 in Class A shares), $22.50 for each Class R share ($200,000,000 in Class R shares) and $23.81 for each Class T share ($400,000,000 in Class T shares), with discounts available for certain categories of purchasers. We are also offering up to $300,000,000 in shares pursuant to our DRP at an initial price of $23.75 for each Class A share, $22.50 for each Class R share and $22.62 for each Class T share. Our board of directors may, in its sole discretion and from time to time, change the price at which we offer shares to the public in the primary offering or pursuant to our DRP to reflect changes in our estimated value per share and other factors that our board of directors deems relevant. If we revise the price at which we offer our shares of common stock based upon changes in our estimated value per share, we do not anticipate that we will do so more frequently than quarterly. Our estimated value per share will be approved by our board of directors and calculated by the Advisor based upon current available information which may include valuations of our assets obtained by independent third party appraisers or qualified independent valuation experts.

Pursuant to the terms of our Public Offering, offering proceeds were held in an escrow account until we met the minimum offering amount of $2,000,000. On May 16, 2016, we raised the minimum offering amount and the offering proceeds held in escrow were released to us. As of August 3, 2018, we had sold 3,362,752 shares of Class A common stock, 430,123 shares of Class R common stock and 4,339,882 shares of Class T common stock in our Public Offering for gross proceeds of $82,795,276, $9,677,772 and $103,159,061, respectively, and $195,632,109 in the aggregate, including 111,917 shares of Class A common stock, 8,450 shares of Class R common stock and 145,837 shares of Class T common stock issued pursuant to our DRP for gross offering proceeds of $2,658,034, $190,124 and $3,298,845, respectively. Pursuant to the terms of the Public Offering, we may continue to offer shares of our common stock on a continuous basis until February 5, 2019, unless further extended as permitted under applicable law or earlier terminated by our board of directors. Our board of directors determined to terminate the Public Offering effective on or about August 31, 2018.

Steadfast Apartment Advisor III, LLC is our advisor. Subject to certain restrictions and limitations, our Advisor manages our day-to-day operations and our portfolio of properties and real estate-related assets. The Advisor sources and presents investment opportunities to our board of directors. The Advisor also provides investment management, marketing, investor relations and other administrative services on our behalf.

Substantially all of our business is conducted through our Operating Partnership. We are the sole general partner of our Operating Partnership and the Advisor is the only limited partner of our Operating Partnership. As we accept subscriptions for

38

PART I — FINANCIAL INFORMATION (continued)

shares of common stock, we transfer substantially all of the net proceeds of the Public Offering to our Operating Partnership as a capital contribution. The Partnership Agreement of our Operating Partnership provides that our Operating Partnership will be operated in a manner that will enable us to (1) satisfy the requirements for being classified as a REIT for federal income tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that our Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code, which classification could result in our Operating Partnership being taxed as a corporation, rather than as a disregarded entity. In addition to the administrative and operating costs and expenses incurred by our Operating Partnership in acquiring and operating our investments, our Operating Partnership will pay all of our administrative costs and expenses, and such expenses will be treated as expenses of our Operating Partnership. We will experience a relative increase in liquidity as additional subscriptions for shares of our common stock are received and a relative decrease in liquidity as offering proceeds are used to acquire and operate our assets.

We elected to be taxed as, and currently qualify as, a REIT under the Internal Revenue Code commencing with our taxable year ended December 31, 2016. As a REIT, we generally will not be subject to federal income tax to the extent that we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT, we would be subject to federal income tax on our taxable income at regular corporate rates and would not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Failing to qualify as a REIT could materially and adversely affect our net income and results of operations.

Market Outlook

The economy in the United States has improved since the last recession; however, there is no assurance that economic conditions will continue to improve or will not worsen in the future. We believe economic and demographic trends will benefit our existing portfolio and we have unique future investment opportunities, particularly in the multifamily sector. Home ownership rates are near all-time lows. Demographic and economic factors favor the flexibility of rental housing and discourage the potential financial burden associated with home ownership. Additionally, Millennials and Baby Boomers, the two largest demographic groups comprising roughly half of the total population in the United States, are increasingly choosing rental housing over home ownership. Demographic studies suggest that Baby Boomers are downsizing their suburban homes and relocating to multifamily apartments. Millennials are renting multifamily apartments due to high levels of student debt and increased credit standards in order to qualify for a home mortgage. According to the Federal Reserve Bank of New York, aggregate student debt has surpassed automotive, home equity lines of credit and credit card debt. Millennials are also getting married and having children later and are choosing to live in apartment communities until their mid-30s. Today, 30% of Millennials are still living with their parents or are still in school. When they get a job, Millennials will likely rent moderate income apartments based upon an average income of $45,000 to $65,000. Our plan is to provide rental housing for these generational groups as they age. We believe these factors will continue to contribute to the demand for multifamily housing.

39

PART I — FINANCIAL INFORMATION (continued)

Our Real Estate Portfolio

As of June 30, 2018, we owned the ten multifamily apartment communities listed below:

									Average Monthly Occupancy(2)				Average Monthly Rent(3)
	Property Name	Location	Purchase Date	Number of Units	Total Purchase Price		Mortgage Debt Outstanding(1)		Jun 30, 2018		Dec 31, 2017		Jun 30, 2018		Dec 31, 2017
1	Carriage House Apartment Homes	Gurnee, IL	5/19/2016	136	$	7,525,000	$	5,657,268	86.9	%	89.7	%	$	722	$	699
2	Bristol Village Apartments	Aurora, CO	11/17/2016	240	47,400,000		34,873,583		93.5	%	95.0	%	1,340		1,319
3	Canyon Resort at Great Hills Apartments	Austin, TX	12/29/2016	256	44,500,000		31,558,101		97.1	%	91.0	%	1,286		1,254
4	Reflections on Sweetwater Apartments	Lawrenceville, GA	1/12/2017	280	33,288,337		22,809,110		93.8	%	92.9	%	996		1,024
5	The Pointe at Vista Ridge Apartments	Lewisville, TX	5/25/2017	300	45,188,223		28,954,587		94.4	%	91.7	%	1,240		1,223
6	Belmar Villas	Lakewood, CO	7/21/2017	318	64,503,255		46,869,540		91.1	%	91.2	%	1,334		1,310
7	Ansley at Princeton Lakes	Atlanta, GA	8/31/2017	306	44,594,087		32,193,366		90.9	%	91.2	%	1,179		1,168
8	Sugar Mill Apartments	Lawrenceville, GA	12/7/2017	244	36,305,492		24,621,046		93.0	%	97.1	%	1,094		1,094
9	Avery Point Apartments	Indianapolis, IN	12/15/2017	512	45,829,836		31,045,181		95.7	%	93.2	%	797		776
10	Cottage Trails at Culpepper Landing	Chesapeake, VA	5/31/2018	183	31,118,698		21,383,679		90.0	%	—		1,320		—
				2,775	$	400,252,928	$	279,965,461	93.3	%	92.6	%	$	1,117	$	1,089

______________

(1) Mortgage debt outstanding is net of deferred financing costs associated with the loans for the properties listed above.

(2) At June 30, 2018, our portfolio was approximately 95.7% leased, calculated using the number of occupied and contractually leased units divided by total units.

(3) Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs.

Critical Accounting Policies

The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. A discussion of the accounting policies that management considers critical in that they involve significant management judgments, assumptions and estimates is included in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 16, 2018. There have been no significant changes to our accounting policies during the period covered by this report other than described in Note 2 to our unaudited consolidated financial statements in this quarterly report in the discussion of our significant accounting policies.

40

PART I — FINANCIAL INFORMATION (continued)

Organization and Offering Costs

Organization and offering expenses include all expenses (other than sales commissions, the dealer manager fee and the distribution and shareholder servicing fee) to be paid by us in connection with our Public Offering, including legal, accounting, tax, printing, mailing and filing fees, charges of our escrow holder and transfer agent, expenses of organizing our Company, data processing fees, advertising and sales literature costs, transfer agent costs, information technology costs, bona fide out-of-pocket due diligence costs and amounts to reimburse the Advisor or its affiliates for the salaries of its employees and other costs in connection with preparing sales materials and providing other administrative services in connection with our Public Offering. Any such reimbursement will not exceed actual expenses incurred by the Advisor. After the termination of our Public Offering, the Advisor will reimburse us to the extent total organization and offering expenses (including sales commissions, dealer manager fees and the distribution and shareholder servicing fees) borne by us exceed 15% of the gross proceeds raised in our Public Offering.

To the extent we do not pay the full sales commissions or dealer manager fee for shares sold in our Public Offering, we may also reimburse costs of bona fide training and education meetings held by us (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement of employees of our affiliates to attend seminars conducted by broker-dealers and, in certain cases, reimbursement to participating broker-dealers for technology costs associated with our Public Offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of our shares and the ownership of our shares by such broker-dealers’ customers; provided, however, that we will not pay any of the foregoing costs to the extent that such payment would cause total underwriting compensation to exceed 10% of the gross offering proceeds of our Primary Offering, as required by the rules of the FINRA.

When recognized, organization costs are expensed as incurred. Offering costs, including selling commissions, dealer manager fees and the distribution and shareholder servicing fee, are deferred and charged to stockholders’ equity. All such amounts are reimbursed to the Advisor, the Dealer Manager or their affiliates from gross offering proceeds, except for the distribution and shareholder servicing fees, which are paid from sources other than Public Offering proceeds.

Income Taxes

We elected to be taxed as, and currently qualify as, a REIT under the Internal Revenue Code and have operated as such commencing with the taxable year ended December 31, 2016. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to our stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders. However, we are, and intend to continue to be, organized and operated in such a manner as to qualify for treatment as a REIT.

We follow the income tax guidance under GAAP to recognize, measure, present and disclose in our consolidated financial statements uncertain tax positions that we have taken or expect to take on a tax return. As of June 30, 2018 and December 31, 2017, we did not have any liabilities for uncertain tax positions that we believe should be recognized in our consolidated financial statements. We have not been assessed interest or penalties by any major tax jurisdictions. Our evaluation was performed for the tax years ended December 31, 2017, 2016, and 2015.

Distributions

Our board of directors has declared daily distributions that are paid on a monthly basis. We expect to continue paying monthly distributions unless our results of operations, our general financial condition, general economic conditions or other factors prohibit us from doing so. We may declare distributions in excess of our cash flow from operations. As a result, our distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for tax purposes, we must make distributions equal to at least 90% of our “REIT taxable income” each year. For information on distribution rates paid

41

PART I — FINANCIAL INFORMATION (continued)

during the three and six months ended June 30, 2018 and 2017, refer to Note 6 (Stockholders’ Equity) to our unaudited consolidated financial statements included in this quarterly report.

The distributions declared and paid during the first and second fiscal quarters of 2018, along with the amount of distributions reinvested pursuant to the DRP were as follows:

									Distributions Paid(2)						Sources of Distributions Paid
Period	Distributions Declared(1)		Distributions Declared Per Class A Share(1)		Distributions Declared Per Class R Share(1)		Distributions Declared Per Class T Share(1)		Cash		Reinvested		Total		Cash Flow From Operations		Offering Proceeds		Net Cash (Used in) Provided by Operating Activities
First Quarter 2018	$	2,325,053	$	0.370	$	0.352	$	0.306	$	1,165,331	$	1,075,644	$	2,240,975	$	—	$	2,240,975	$	(1,383,549	)
Second Quarter 2018	2,567,449		0.374		0.357		0.309		1,323,278		1,206,223		2,529,501		1,125,229		1,404,272		1,125,229
	$	4,892,502	$	0.744	$	0.709	$	0.615	$	2,488,609	$	2,281,867	$	4,770,476	$	1,125,229	$	3,645,247	$	(258,320	)

____________________

(1) Assumes each share was issued and outstanding each day during the periods presented.

(2) Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately three days following month end.

For the three and six months endedJune 30, 2018, we paid aggregate distributions of $2,529,501 and $4,770,476, including $1,323,278 and $2,488,609 of distributions paid in cash and 52,363 and 99,008 shares of our common stock issued pursuant to our DRP for $1,206,223 and $2,281,867, respectively. For the three and six months endedJune 30, 2018, our net loss was $3,526,366 and $7,451,200, we had funds from operations, or FFO, of $707,379 and $1,486,170 and net cash provided by (used in) operations of $1,125,229 and $(258,320), respectively. For the three and six months endedJune 30, 2018, we funded $1,125,229 or 44% and 24% and $1,404,272 and $3,645,247 or 56% and 76% of total distributions paid, including shares issued pursuant to our DRP, from cash flow from operations and with proceeds from our Public Offering, respectively. Since inception, of the $11,034,069 in total distributions paid through June 30, 2018, including shares issued pursuant to our DRP, 3% of such amounts were funded from cash flow from operations and 97% were funded from offering proceeds. For information on how we calculate FFO and the reconciliation of FFO to net loss, see “—Funds from Operations and Modified Funds from Operations.”

Our long-term policy is to pay distributions solely from cash flow from operations. However, we expect to have insufficient cash flow from operations available for distribution until we make substantial investments. Further, because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that at least during the early stages of our development and from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period, and we expect to pay these distributions in advance of our actual receipt of these funds. In these instances, our board of directors has the authority under our organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or advances and the deferral of fees and expense reimbursements by the Advisor, in its sole discretion. We have not established a limit on the amount of proceeds we may use from our Public Offering to fund distributions. If we pay distributions from sources other than cash flow from operations, we will have fewer funds available for investments and stockholders’ overall returns on their investment in us may be reduced.

We elected to be taxed as, and currently qualify as, a REIT for federal income tax purposes commencing with the taxable year ended December 31, 2016. To qualify as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If we meet the REIT qualification requirements, we generally will not be subject to federal income tax on the income that we distribute to our stockholders each year. We have not established a minimum distribution level and our Charter does not require that we make distributions to our stockholders.

42

PART I — FINANCIAL INFORMATION (continued)

Inflation

Substantially all of our multifamily property leases with residents are for a term of one year or less. In an inflationary environment, this may allow us to realize increased rents upon renewal of existing leases or the beginning of new leases. Short-term leases generally will minimize our risk from the adverse effects of inflation, although these leases generally permit residents to leave at the end of the lease term and therefore will expose us to the effect of a decline in market rents. In a deflationary rent environment, we may be exposed to declining rents more quickly under these shorter term leases.

As of June 30, 2018, we had not entered into any material leases as a lessee.

REIT Compliance

To continue to qualify as a REIT for tax purposes, we are required to distribute at least 90% of our REIT taxable income (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP) to our stockholders. We must also meet certain asset and income tests, as well as other requirements. We monitor the operations and transactions that may potentially impact our REIT status. If we fail to qualify as a REIT, we would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates.

Critical Accounting Policies

The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. A discussion of the accounting policies that management considers critical in that they involve significant management judgments, assumptions and estimates is included in our Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 16, 2018. There have been no significant changes to our accounting policies during the period covered by this report other than described in Note 2 to our unaudited consolidated financial statements in this quarterly report in the discussion of our significant accounting policies.

43

PART I — FINANCIAL INFORMATION (continued)

Organization and Offering Costs

Organization and offering expenses include all expenses (other than sales commissions, the dealer manager fee and the distribution and shareholder servicing fee) to be paid by us in connection with our Public Offering, including legal, accounting, tax, printing, mailing and filing fees, charges of our escrow holder and transfer agent, expenses of organizing our Company, data processing fees, advertising and sales literature costs, transfer agent costs, information technology costs, bona fide out-of-pocket due diligence costs and amounts to reimburse the Advisor or its affiliates for the salaries of its employees and other costs in connection with preparing sales materials and providing other administrative services in connection with our Public Offering. Any such reimbursement will not exceed actual expenses incurred by the Advisor. After the termination of our Public Offering, the Advisor will reimburse us to the extent total organization and offering expenses (including sales commissions, dealer manager fees and the distribution and shareholder servicing fees) borne by us exceed 15% of the gross proceeds raised in our Public Offering.

To the extent we do not pay the full sales commissions or dealer manager fee for shares sold in our Public Offering, we may also reimburse costs of bona fide training and education meetings held by us (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement of employees of our affiliates to attend seminars conducted by broker-dealers and, in certain cases, reimbursement to participating broker-dealers for technology costs associated with our Public Offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of our shares and the ownership of our shares by such broker-dealers’ customers; provided, however, that we will not pay any of the foregoing costs to the extent that such payment would cause total underwriting compensation to exceed 10% of the gross offering proceeds of our Primary Offering, as required by the rules of the FINRA.

When recognized, organization costs are expensed as incurred. Offering costs, including selling commissions, dealer manager fees and the distribution and shareholder servicing fee, are deferred and charged to stockholders’ equity. All such amounts are reimbursed to the Advisor, the Dealer Manager or their affiliates from gross offering proceeds, except for the distribution and shareholder servicing fees, which are paid from sources other than Public Offering proceeds.

Income Taxes

We elected to be taxed as, and currently qualify as, a REIT under the Internal Revenue Code and have operated as such commencing with the taxable year ended December 31, 2016. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to our stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders. However, we are, and intend to continue to be, organized and operated in such a manner as to qualify for treatment as a REIT.

We follow the income tax guidance under GAAP to recognize, measure, present and disclose in our consolidated financial statements uncertain tax positions that we have taken or expect to take on a tax return. As of June 30, 2018 and December 31, 2017, we did not have any liabilities for uncertain tax positions that we believe should be recognized in our consolidated financial statements. We have not been assessed interest or penalties by any major tax jurisdictions. Our evaluation was performed for the tax years ended December 31, 2017, 2016, and 2015.

Distributions

Our board of directors has declared daily distributions that are paid on a monthly basis. We expect to continue paying monthly distributions unless our results of operations, our general financial condition, general economic conditions or other factors prohibit us from doing so. We may declare distributions in excess of our cash flow from operations. As a result, our distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for tax purposes, we must make distributions equal to at least 90% of our “REIT taxable income” each year. For information on distribution rates paid

44

PART I — FINANCIAL INFORMATION (continued)

during the three and six months ended June 30, 2018 and 2017, refer to Note 6 (Stockholders’ Equity) to our unaudited consolidated financial statements included in this quarterly report.

The distributions declared and paid during the first and second fiscal quarters of 2018, along with the amount of distributions reinvested pursuant to the DRP were as follows:

									Distributions Paid(2)						Sources of Distributions Paid
Period	Distributions Declared(1)		Distributions Declared Per Class A Share(1)		Distributions Declared Per Class R Share(1)		Distributions Declared Per Class T Share(1)		Cash		Reinvested		Total		Cash Flow From Operations		Offering Proceeds		Net Cash (Used in) Provided by Operating Activities
First Quarter 2018	$	2,325,053	$	0.370	$	0.352	$	0.306	$	1,165,331	$	1,075,644	$	2,240,975	$	—	$	2,240,975	$	(1,383,549	)
Second Quarter 2018	2,567,449		0.374		0.357		0.309		1,323,278		1,206,223		2,529,501		1,125,229		1,404,272		1,125,229
	$	4,892,502	$	0.744	$	0.709	$	0.615	$	2,488,609	$	2,281,867	$	4,770,476	$	1,125,229	$	3,645,247	$	(258,320	)

____________________

(1) Assumes each share was issued and outstanding each day during the periods presented.

(2) Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately three days following month end.

For the three and six months endedJune 30, 2018, we paid aggregate distributions of $2,529,501 and $4,770,476, including $1,323,278 and $2,488,609 of distributions paid in cash and 52,363 and 99,008 shares of our common stock issued pursuant to our DRP for $1,206,223 and $2,281,867, respectively. For the three and six months endedJune 30, 2018, our net loss was $3,526,366 and $7,451,200, we had funds from operations, or FFO, of $707,379 and $1,486,170 and net cash provided by (used in) operations of $1,125,229 and $(258,320), respectively. For the three and six months endedJune 30, 2018, we funded $1,125,229 or 44% and 24% and $1,404,272 and $3,645,247 or 56% and 76% of total distributions paid, including shares issued pursuant to our DRP, from cash flow from operations and with proceeds from our Public Offering, respectively. Since inception, of the $11,034,069 in total distributions paid through June 30, 2018, including shares issued pursuant to our DRP, 3% of such amounts were funded from cash flow from operations and 97% were funded from offering proceeds. For information on how we calculate FFO and the reconciliation of FFO to net loss, see “—Funds from Operations and Modified Funds from Operations.”

Our long-term policy is to pay distributions solely from cash flow from operations. However, we expect to have insufficient cash flow from operations available for distribution until we make substantial investments. Further, because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that at least during the early stages of our development and from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period, and we expect to pay these distributions in advance of our actual receipt of these funds. In these instances, our board of directors has the authority under our organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or advances and the deferral of fees and expense reimbursements by the Advisor, in its sole discretion. We have not established a limit on the amount of proceeds we may use from our Public Offering to fund distributions. If we pay distributions from sources other than cash flow from operations, we will have fewer funds available for investments and stockholders’ overall returns on their investment in us may be reduced.

We elected to be taxed as, and currently qualify as, a REIT for federal income tax purposes commencing with the taxable year ended December 31, 2016. To qualify as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If we meet the REIT qualification requirements, we generally will not be subject to federal income tax on the income that we distribute to our stockholders each year. We have not established a minimum distribution level and our Charter does not require that we make distributions to our stockholders.

45

PART I — FINANCIAL INFORMATION (continued)

Inflation

Substantially all of our multifamily property leases with residents are for a term of one year or less. In an inflationary environment, this may allow us to realize increased rents upon renewal of existing leases or the beginning of new leases. Short-term leases generally will minimize our risk from the adverse effects of inflation, although these leases generally permit residents to leave at the end of the lease term and therefore will expose us to the effect of a decline in market rents. In a deflationary rent environment, we may be exposed to declining rents more quickly under these shorter term leases.

As of June 30, 2018, we had not entered into any material leases as a lessee.

REIT Compliance

To continue to qualify as a REIT for tax purposes, we are required to distribute at least 90% of our REIT taxable income (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP) to our stockholders. We must also meet certain asset and income tests, as well as other requirements. We monitor the operations and transactions that may potentially impact our REIT status. If we fail to qualify as a REIT, we would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates.

Results of Operations

Overview

The discussion that follows is based on our consolidated results of operations for the three and six months endedJune 30, 2018 and 2017. The ability to compare one period to another is significantly affected by acquisitions completed during those periods. We commenced real estate operations on May 19, 2016, in connection with the acquisition of our first investment, Carriage House Apartment Homes. We owned five multifamily properties as of June 30, 2017, and ten multifamily properties as of June 30, 2018. The increase in the number of properties in our portfolio is the primary cause of the increases in operating income and expenses, as further discussed below.

Our results of operations for the three and six months endedJune 30, 2018 and 2017, are not indicative of those expected in future periods. We have not yet invested all of the proceeds from our Public Offering received to date and expect to continue to raise additional capital, increase our borrowings and make possible future acquisitions, all of which will have a significant impact on our future results of operations. In general, we expect that our income and expenses related to our portfolio will increase in future periods as a result of anticipated future acquisitions of real estate and real estate-related investments.

To provide additional insight into our operating results, we are also providing a detailed analysis of same-store versus non-same-store net operating income, or NOI. For more information on NOI and a reconciliation of NOI (a non-GAAP financial measure) to net loss, see “—Net Operating Income.”

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PART I — FINANCIAL INFORMATION (continued)

Consolidated Results of Operations for the Three Months Ended June 30, 2018, Compared to the Three Months Ended June 30,2017

The following table summarizes the consolidated results of operations for the three months ended June 30, 2018 and 2017:

	For the Three Months Ended June 30,
	2018			2017			Change $			Change %
Total revenues	$	9,229,616		$	3,601,807		$	5,627,809		156	%
Operating, maintenance and management	(2,554,111		)	(908,380		)	(1,645,731		)	181	%
Real estate taxes and insurance	(1,240,072		)	(557,570		)	(682,502		)	122	%
Fees to affiliates	(1,400,171		)	(372,359		)	(1,027,812		)	276	%
Depreciation and amortization	(4,233,745		)	(2,555,319		)	(1,678,426		)	66	%
Interest expense	(2,684,924		)	(1,145,526		)	(1,539,398		)	134	%
General and administrative expenses	(642,959		)	(710,291		)	67,332			(9	)%
Net loss	$	(3,526,366	)	$	(2,647,638	)	$	(878,728	)	33	%
NOI(1)	$	5,057,527		$	1,968,158		$	3,089,369		157	%
FFO(2)	$	707,379		$	(92,319	)	$	799,698		866	%
MFFO(2)	$	543,009		$	173,684		$	369,325		213	%

______________

(1) NOI is a non-GAAP financial measure used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings. However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs, certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of our properties and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs, all of which are significant economic costs. For additional information on how we calculate NOI and a reconciliation of NOI to net loss, see “—Net Operating Income.”

(2) GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”) established the measurement tool of FFO. Since its introduction, FFO has become a widely used non-GAAP financial measure among REITs. Additionally, we use modified funds from operations (“MFFO”) as defined by the Institute for Portfolio Alternatives (formerly known as the Investment Program Association) (“IPA”) as a supplemental measure to evaluate our operating performance. MFFO is based on FFO but includes certain adjustments we believe are necessary due to changes in accounting and reporting under GAAP since the establishment of FFO. Neither FFO nor MFFO should be considered as alternatives to net loss or other measurements under GAAP as indicators of our operating performance, nor should they be considered as alternatives to cash flow from operating activities or other measurements under GAAP as indicators of liquidity. For additional information on how we calculate FFO and MFFO and a reconciliation of FFO and MFFO to net loss, see “—Funds From Operations and Modified Funds From Operations.”

Net loss

For the three months ended June 30, 2018, we had a net loss of $3,526,366, compared to a net loss of $2,647,638 for the three months ended June 30,2017. The increase in net loss of $878,728 over the comparable prior year period was primarily due to the increase in operating, maintenance and management expenses of $1,645,731, the increase in real estate taxes and insurance of $682,502, the increase in fees to affiliates of $1,027,812, the increase in depreciation and amortization expense of $1,678,426 and the increase in interest expense of $1,539,398, partially offset by the increase in total revenues of $5,627,809 and the decrease in general and administrative expenses of $67,332. The increase in these expenses was due primarily to the increase in our property portfolio from five multifamily properties at June 30, 2017, to ten multifamily properties at June 30, 2018.

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PART I — FINANCIAL INFORMATION (continued)

Total revenues

Total revenues were $9,229,616 for the three months ended June 30, 2018, compared to $3,601,807 for the three months ended June 30,2017. The increase of $5,627,809, was primarily due to owning ten multifamily properties at June 30, 2018, compared to five multifamily properties at June 30, 2017. Our total units increased by 1,563 from 1,212 at June 30, 2017, to 2,775 at June 30, 2018. Average occupancy increased from 92.8% at June 30, 2017, to 93.3% at June 30, 2018, partially offset by a reduction in average monthly rents per unit from $1,132 as of June 30, 2017, to $1,117 as of June 30, 2018. We expect rental income and tenant reimbursements to increase in future periods as a result of ordinary monthly rent increases, improved occupancy and the implementation of our value-enhancement strategy.

Operating, maintenance and management expenses

Operating, maintenance and management expenses for the three months ended June 30, 2018, were $2,554,111, compared to $908,380 for the three months ended June 30,2017. The increase of $1,645,731, was primarily due to operating ten multifamily properties as of June 30, 2018, compared to five multifamily properties as of June 30, 2017. We expect these amounts to decrease as a percentage of total revenues as we implement operational efficiencies at our multifamily properties.

Real estate taxes and insurance

Real estate taxes and insurance expenses were $1,240,072 for the three months ended June 30, 2018, compared to $557,570 for the three months ended June 30,2017. The increase of $682,502, was due to the acquisition of five multifamily properties since June 30, 2017. We expect these amounts may increase in future periods as a result of increases in municipal property tax rates as well as increases in the assessed value of our property portfolio.

Fees to affiliates

Fees to affiliates were $1,400,171 for the three months ended June 30, 2018, compared to $372,359 for the three months ended June 30,2017. The increase of $1,027,812 was primarily due to the increase in investment management fees and property management fees as a result of the growth in our portfolio. We expect fees to affiliates related to the on-going management of our real estate portfolio to increase in future periods as a result of increased investment management fees from anticipated increases in the cost of investments and increased property management fees from anticipated increases in future rental income.

Depreciation and amortization

Depreciation and amortization expenses were $4,233,745 for the three months ended June 30, 2018, compared to $2,555,319 for the three months ended June 30,2017. The increase of $1,678,426, was primarily due to the net increase in depreciable and amortizable assets of $197,558,398 since June 30, 2017. We expect these amounts to increase slightly in future periods as a result of anticipated future enhancements to our real estate portfolio.

Interest expense

Interest expense for the three months ended June 30, 2018, was $2,684,924, compared to $1,145,526 for the three months ended June 30,2017. The increase of $1,539,398 was primarily due to additional mortgage notes payable, net of $156,206,981 since June 30, 2017, in connection with the acquisition of five multifamily properties since June 30, 2017, coupled with increases in the London Interbank Offered Rate (“LIBOR”) from the prior year period that impact our variable rate loans. Included in interest expense is the amortization of deferred financing costs of $57,488 and $25,515 for the three months ended June 30, 2018 and 2017, respectively. Interest expense included unrealized gains on derivative instruments of $165,411 for the three months ended June 30, 2018 compared to an unrealized loss of $192,670 for the three months ended June 30,2017. Our interest expense in future periods will vary based on the changes to LIBOR and its impact on our variable rate debt and our level of future borrowings, which will depend on the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.

General and administrative expenses

General and administrative expenses for the three months ended June 30, 2018, were $642,959, compared to $710,291 for the three months ended June 30,2017. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees and independent directors’ compensation. The decrease of $67,332 was primarily due to the reductions in wages and salaries, legal and travel expenses. We expect general and administrative expenses to decrease as a percentage of total revenue.

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PART I — FINANCIAL INFORMATION (continued)

Consolidated Results of Operations for the Six Months Ended June 30, 2018, Compared to the Six Months Ended June 30,2017

The following table summarizes the consolidated results of operations for the six months ended June 30, 2017 and 2016:

	For the Six Months Ended June 30,
	2018			2017			Change $			Change %
Total revenues	$	18,061,792		$	6,717,522		$	11,344,270		169	%
Operating, maintenance and management	(4,878,029		)	(1,613,585		)	(3,264,444		)	202	%
Real estate taxes and insurance	(2,643,426		)	(1,039,025		)	(1,604,401		)	154	%
Fees to affiliates	(2,746,011		)	(656,511		)	(2,089,500		)	318	%
Depreciation and amortization	(8,937,370		)	(4,916,266		)	(4,021,104		)	82	%
Interest expense	(4,910,295		)	(2,124,012		)	(2,786,283		)	131	%
General and administrative expenses	(1,397,861		)	(1,338,152		)	(59,709		)	4	%
Net loss	$	(7,451,200	)	$	(4,970,029	)	$	(2,481,171	)	50	%
NOI(1)	$	9,808,151		$	3,787,040		$	6,021,111		159	%
FFO(2)	$	1,486,170		$	(53,763	)	$	1,539,933		2,864	%
MFFO(2)	$	944,232		$	451,568		$	492,664		109	%

______________

(1) See “—Net Operating Income” below for a reconciliation of NOI to net loss.

(2) See “—Funds From Operations and Modified Funds From Operations” below for a reconciliation of FFO and MFFO to net loss.

Net loss

For the six months ended June 30, 2018, we had a net loss of $7,451,200, compared to $4,970,029 for the six months ended June 30,2017. The increase in net loss of $2,481,171 over the comparable prior year period was primarily due to the increase in operating, maintenance and management expenses of $3,264,444, the increase in real estate taxes and insurance of $1,604,401, the increase in fees to affiliates of $2,089,500, the increase in depreciation and amortization expense of $4,021,104, the increase in interest expense of $2,786,283 and the increase in general and administrative expenses of $59,709, partially offset by the increase in total revenues of $11,344,270. The increase in these expenses was due primarily to the increase in our property portfolio from five multifamily properties at June 30, 2017 to ten multifamily properties at June 30, 2018.

Total revenues

Total revenues were $18,061,792 for the six months ended June 30, 2018, compared to $6,717,522 for the six months ended June 30,2017. The increase of $11,344,270 was primarily due to owning ten multifamily properties at June 30, 2018, compared to five multifamily properties at June 30, 2017. Our total units increased by 1,563 from 1,212 at June 30, 2017 to 2,775 at June 30, 2018. Average occupancy increased from 92.8% at June 30, 2017, to 93.3% at June 30, 2018. Average monthly rents per unit decreased from $1,132 as of June 30, 2017 to $1,117 as of June 30, 2018. We expect rental income and tenant reimbursements to increase in future periods as a result of ordinary monthly rent increases, improved occupancy and the implementation of our value-enhancement strategy.

Operating, maintenance and management expenses

Operating, maintenance and management expenses were $4,878,029 for the six months ended June 30, 2018, compared to $1,613,585 for the six months ended June 30,2017. The increase of $3,264,444 was primarily due to operating ten multifamily properties as of June 30, 2018, compared to five multifamily property as of June 30, 2017. We expect that these amounts will decrease as a percentage of total revenues as we implement operational efficiencies at our multifamily properties.

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PART I — FINANCIAL INFORMATION (continued)

Real estate taxes and insurance

Real estate taxes and insurance expenses were $2,643,426 for the six months ended June 30, 2018, compared to $1,039,025 for the six months ended June 30,2017. The increase of $1,604,401 was due to the acquisition of five multifamily properties since June 30, 2017, and real estate taxes and insurance expenses for a full reporting period on the two properties acquired during the six months ended June 30, 2017. We expect these amounts may increase in future periods as a result of increases in municipal property tax rates as well as increases in the assessed value of our property portfolio.

Fees to affiliates

Fees to affiliates were $2,746,011 for the six months ended June 30, 2018, compared to $656,511 for the six months ended June 30,2017. The increase of $2,089,500 was primarily due to the increase in investment management fees and property management fees as a result of the growth in our portfolio. We expect fees to affiliates related to the on-going management of our real estate portfolio to increase in future periods as a result of increased investment management fees from anticipated increases in the cost of investments and increased property management fees from anticipated increases in future rental income.

Depreciation and amortization

Depreciation and amortization expenses were $8,937,370 for the six months ended June 30, 2018, compared to $4,916,266 for the six months ended June 30,2017. The increase of $4,021,104 was primarily due to the net increase in depreciable and amortizable assets of $197,558,398 since June 30, 2017. We expect these amounts to increase slightly in future periods as a result of anticipated future enhancements to our real estate portfolio.

Interest expense

Interest expense for the six months ended June 30, 2018 was $4,910,295, compared to $2,124,012 for the six months ended June 30,2017. The increase of $2,786,283 was primarily due to the increase in mortgage notes payable, net of $156,206,981 since June 30, 2017, due to financing incurred in connection with the acquisition of five multifamily properties since June 30, 2017, coupled with increases in the London Interbank Offered Rate (“LIBOR”) from the prior year period that impact our variable rate loans. Included in interest expense is the amortization of deferred financing costs of $113,103 and $39,199, respectively, and the unrealized gains on derivative instruments of $544,725 for the six months ended June 30, 2018 and a loss on derivative instruments of $414,364 for the six months ended June 30,2017. Our interest expense in future periods will vary based on the changes to LIBOR and its impact on our variable rate debt and our level of future borrowings, which will depend on the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.

General and administrative expenses

General and administrative expenses for the six months ended June 30, 2018 were $1,397,861 compared to $1,338,152 for the six months ended June 30,2017. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees and independent directors’ compensation. The increase of $59,709 was primarily due to the acquisition of five multifamily properties since June 30, 2017 and the continuing operation of the properties owned as of June 30, 2017. We expect general and administrative expenses to decrease as a percentage of total revenues.

Property Operations for the Three Months Ended June 30, 2018, Compared to the Three Months Ended June 30,2017

For purposes of evaluating comparative operating performance, we categorize our properties as “same-store” or “non-same-store.” A “same-store” property is a property that was owned at April 1, 2017. A “non-same-store” property is a property that was acquired, placed into service or disposed of after April 1, 2017. As of June 30, 2018, four properties were categorized as a same-store property.

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PART I — FINANCIAL INFORMATION (continued)

The following table presents the same-store and non-same-store results from operations for the three months ended June 30, 2018 and 2017:

	For the Three Months Ended June 30,
	2018		2017		Change $		Change %
Same-store property:
Revenues	$	3,307,173	$	3,171,341	$	135,832	4	%
Operating expenses	1,534,885		1,435,961		98,924		7	%
NOI	1,772,288		1,735,380		36,908		2	%
Non-same-store properties:
NOI	3,285,239		232,778		3,052,461
Total NOI(1)	$	5,057,527	$	1,968,158	$	3,089,369

________________

(1) See “—Net Operating Income” below for a reconciliation of NOI to net loss.

Net Operating Income

Same-store NOI for the three months ended June 30, 2018, was $1,772,288, compared to $1,735,380 for the three months ended June 30,2017. The 2% increase in same-store net operating income was primarily a result of a 4% increase in same-store revenues, partially offset by a 7% increase in same-store operating expenses.

Revenues

Same-store revenues for the three months ended June 30, 2018, were $3,307,173, compared to $3,171,341 for the three months ended June 30,2017. The increase of 4% in same-store revenues was primarily due to an increases in same-store average monthly occupancy from 92.8% as of June 30, 2017, to 93.8% as of June 30, 2018, and by the increase in average rent at the same-store properties from $1,104 as of June 30, 2017, to $1,132 as of June 30, 2018, as a result of ordinary monthly rent increases and the completion of value-enhancement projects.

Operating Expenses

Same-store operating expenses for the three months ended June 30, 2018, were $1,534,885, compared to $1,435,961 for the three months ended June 30,2017. The increase of 7% in same-store operating expenses was primarily attributable to increase in salaries and benefits, advertising, and repairs and maintenance.

Net Operating Income

NOI is a non-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties, to determine trends in earnings and to compute the fair value of our properties as it is not affected by (1) the cost of funds, (2) acquisition costs, (3) non-operating fees to affiliates, (4) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP or (5) general and administrative expenses and other gains and losses that are specific to us. The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future. Acquisition costs and non-operating fees to affiliates are eliminated because they do not reflect continuing operating costs of the property owner.

Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our multifamily properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of

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PART I — FINANCIAL INFORMATION (continued)

time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed purchases or sales. We believe that eliminating these costs from net income is useful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.

However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs, certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income which further limits its usefulness.

NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income (loss) as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income (loss) computed in accordance with GAAP and discussions elsewhere in “—Results of Operations” regarding the components of net income (loss) that are eliminated in the calculation of NOI. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.

The following is a reconciliation of our NOI to net loss for the three and six months endedJune 30, 2018 and 2017, computed in accordance with GAAP:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Net loss	$	(3,526,366	)	$	(2,647,638	)	$	(7,451,200	)	$	(4,970,029	)
Fees to affiliates(1)	1,022,265			204,660			2,013,825			378,639
Depreciation and amortization	4,233,745			2,555,319			8,937,370			4,916,266
Interest expense	2,684,924			1,145,526			4,910,295			2,124,012
General and administrative expenses	642,959			710,291			1,397,861			1,338,152
NOI	$	5,057,527		$	1,968,158		$	9,808,151		$	3,787,040

____________________

(1) Fees to affiliates for the three and six months ended June 30, 2018, exclude property management fees of $291,302 and $557,909 and other fees of $86,604 and $174,277, respectively, that are included in NOI. Fees to affiliates for the three and six months ended June 30, 2017, exclude property management fees of $134,292 and $221,192 and other fees of $33,407 and $56,680, respectively, that are included in NOI.

Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, NAREIT, an industry trade group, has promulgated the measure FFO, which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income (loss) as determined under GAAP.

We define FFO, a non-GAAP financial measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004 (“White Paper”). The White Paper defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of property and non-cash impairment charges of real estate related investments, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In particular, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a

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PART I — FINANCIAL INFORMATION (continued)

property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO, and modified funds from operations (“MFFO”), as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than the non-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to an expensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered, non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While other start-up entities may also experience significant acquisition activity during their initial years, we believe that public, non-listed REITs, like us, are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after acquisition activity ceases. Our board of directors will determine to pursue a liquidity event when it believes that the then-current market conditions are favorable. However, our board of directors does not anticipate evaluating a liquidity event (i.e., listing of our common stock on a national exchange, a merger or sale of our company or another similar transaction) until five years after the completion of our offering stage. Thus, as a limited life REIT, we will not continuously purchase assets and will have a limited life.

Due to the above factors and other unique features of publicly registered, non-listed REITs, the IPA, an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registered non-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a public, non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income or loss as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate with a limited life and targeted exit strategy, as currently intended. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and other non-operating items included in FFO and also excludes acquisition fees and expenses that are not capitalized, as discussed below, and affect our operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is in place. By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our offering has been completed and our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by the non-listed REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our offering and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on our operating performance during the periods in which properties are acquired.

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PART I — FINANCIAL INFORMATION (continued)

We define MFFO, a non-GAAP financial measure, consistent with the IPA’s Guideline 2010-01, Supplemental Performance Measure for Publicly Registered, Non-Listed REITs: Modified Funds from Operations (the “Practice Guideline”), issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments; mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized. While we rely on the Advisor for managing interest rate, hedge and foreign exchange risk, we do not retain an outside consultant to review all our hedging agreements. Inasmuch as interest rate hedges are not a fundamental part of our operations, we believe it is appropriate to exclude such non-recurring gains and losses in calculating MFFO, as such gains and losses are not reflective of on-going operations.

Our MFFO calculation complies with the IPA’s Practice Guideline described above, except with respect to certain acquisition fees and expenses as discussed below. In calculating MFFO, we exclude acquisition related expenses that are not capitalized, amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Historically under GAAP, acquisition fees and expenses were characterized as operating expenses in determining operating net income. However, following the recent publication of ASU 2017-01, acquisition fees and expenses are capitalized and depreciated under certain conditions. We elected to early adopt ASU 2017-01 resulting in a substantial part of our acquisition fees and expenses being capitalized and therefore not excluded from the calculation of MFFO but captured as depreciation in calculating FFO. However, these expenses are paid in cash by us. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. In the event that proceeds from our initial Public Offering are not available to fund our reimbursement of acquisition fees and expenses incurred by the Advisor, such fees and expenses will need to be reimbursed to the Advisor from other sources, including debt, operational earnings or cash flow, net proceeds from the sale of properties, or from ancillary cash flows. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to our stockholders. Further, under GAAP, certain contemplated non-cash fair value and other non-cash adjustments are considered operating non-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives and gains and losses from dispositions of assets as non-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective of on-going operations and are therefore typically adjusted for when assessing operating performance.

Our management uses MFFO and the adjustments used to calculate MFFO in order to evaluate our performance against other public, non-listed REITs which have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate MFFO allow us to present our performance in a manner that reflects certain characteristics that are unique to public, non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors. By excluding expensed acquisition costs that are not capitalized, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance to that of other public, non-listed REITs, although it should be noted that not all public, non-listed REITs calculate FFO and MFFO the same way, so comparisons with other public, non-listed REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an

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PART I — FINANCIAL INFORMATION (continued)

alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO has limitations as a performance measure in an offering such as ours where the price of a share of common stock is a stated value and there is no regular net asset value determination during the early stage of the offering. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. MFFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining MFFO.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across the non-listed REIT industry and in response to such standardization we may have to adjust our calculation and characterization of FFO or MFFO accordingly.

Our calculation of FFO and MFFO is presented in the following table for the three and six months endedJune 30, 2018 and 2017:

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2018			2017			2018			2017
Reconciliation of net loss to MFFO:
Net loss	$	(3,526,366	)	$	(2,647,638	)	$	(7,451,200	)	$	(4,970,029	)
Depreciation of real estate assets	3,409,586			1,248,649			6,666,168			2,280,237
Amortization of lease-related costs	824,159			1,306,670			2,271,202			2,636,029
FFO	707,379			(92,319		)	1,486,170			(53,763		)
Acquisition fees and expenses(1)(2)	1,041			73,333			2,787			90,967
Unrealized (gain) loss on derivative instruments	(165,411		)	192,670			(544,725		)	414,364
MFFO	$	543,009		$	173,684		$	944,232		$	451,568

________________

(1) By excluding expensed acquisition costs that are not capitalized, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to the Advisor or third parties. Acquisition fees and expenses under GAAP were historically considered operating expenses and as expenses included in the determination of net income (loss) and income (loss) from continuing operations, both of which are performance measures under GAAP. Following the recent publication of ASU 2017-01, acquisition fees and expenses are capitalized and depreciated under certain conditions. We elected to early adopt ASU 2017-01 resulting in a substantial part of our acquisition fees and expenses being capitalized and therefore not excluded from the calculation of MFFO but are captured as depreciation in calculating FFO. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property. In the event that proceeds from our Public Offering are not available to fund our reimbursement of acquisition fees and expenses incurred by the Advisor, such fees and expenses will need to be reimbursed to the Advisor from other sources, including debt, operational earnings or cash flow, net proceeds from the sale of properties, or from ancillary cash flows. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to its stockholders.

(2) Acquisition expenses for the three and six months endedJune 30, 2018 and 2017, of $1,041 and $2,787 and $73,333 and $90,967, respectively, did not meet the criteria for capitalization under ASU 2017-01 and are recorded in general and administrative expenses in the accompanying consolidated statements of operations. No acquisition fees were incurred that did not meet the criteria for capitalization under ASU 2017-01 for the three and six months endedJune 30, 2018 and 2017.

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PART I — FINANCIAL INFORMATION (continued)

FFO and MFFO may be used to fund all or a portion of certain capitalizable items that are excluded from FFO and MFFO, such as tenant improvements, building improvements and deferred leasing costs.

Off-Balance Sheet Arrangements

As of June 30, 2018, we had no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Related-Party Transactions and Agreements

We have entered into agreements with the Advisor and its affiliates, including the Dealer Manager, whereby we pay certain fees to, or reimburse certain expenses of, the Advisor or its affiliates for acquisition and advisory fees and expenses, financing coordination fees, organization and offering costs, sales commissions, dealer manager fees, distribution and shareholder servicing fees, asset and property management fees and expenses, leasing fees and reimbursement of certain operating costs as well as make certain distributions in connection with our liquidation or listing on a national stock exchange. Refer to Note 7 (Related Party Arrangements) to our unaudited consolidated financial statements included in this Quarterly Report for a discussion of the various related-party transactions, agreements and fees.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We may be exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the acquisition, expansion and refinancing of our real estate investment portfolio and operations. We may be also exposed to the effects of changes in interest rates as a result of the acquisition and origination of mortgage, mezzanine, bridge and other loans. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We intend to manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept to an acceptable level. In addition, we may utilize a variety of financial instruments, including interest rate caps, collars, floors and swap agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for payments to holders of our common stock and that the losses may exceed the amount we invested in the instruments.

We borrow funds and make investments at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. At June 30, 2018, the fair value of our fixed rate debt was $120,194,635 and the carrying value of our fixed rate debt was $123,919,448. The fair value estimate of our fixed rate debt was estimated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loan was originated at June 30, 2018. As we expect to hold our fixed rate instrument to maturity and the amounts due under such instrument would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instrument, would have a significant impact on our operations.

Conversely, movements in interest rates on our variable rate debt will change our future earnings and cash flows, but not significantly affect the fair value of those instruments. Changes in required risk premiums will result in changes in the fair value of floating rate instruments. At June 30, 2018, the fair value of our variable rate debt was $160,664,170 and the carrying value of our variable rate debt was $156,046,013. At June 30, 2018, we were exposed to market risks related to fluctuations in interest rates on $156,046,013 of our outstanding variable rate debt. Based on interest rates as of June 30, 2018, if interest rates are 100 basis points higher during the 12 months ending June 30, 2019, interest expense on our variable rate debt would increase by $1,590,711 and if interest rates are 100 basis points lower during the 12 months ending June 30, 2019, interest expense on our variable rate debt would decrease by $1,590,711.

At June 30, 2018, the weighted-average interest rate of our fixed rate debt and variable rate debt was 4.02% and 4.43%, respectively. The weighted-average interest rate of our blended fixed and variable rates was 4.25% at June 30, 2018. The weighted-average interest rate represents the actual interest rate in effect at June 30, 2018 (consisting of the contractual interest rate), using interest rate indices as of June 30, 2018, where applicable.

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PART I — FINANCIAL INFORMATION (continued)

We will also be exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have credit risk. We will seek to minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties. As of June 30, 2018, we did not have counterparty risk on our interest rate cap agreements as the underlying variable rates for our interest rate cap agreements as of June 30, 2018, were not in excess of the capped rates. See also Note 10 of our unaudited consolidated financial statements included in this quarterly report.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As required by Rules 13a-15(b) and 15d-15(b) of the Exchange Act, management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange Act) as of June 30, 2018. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily were required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs. Based upon, and as of the date of, the evaluation, our principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended June 30, 2018, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

PART II

Item 1. Legal Proceedings

From time to time we are party to legal proceedings that arise in the ordinary course of our business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government agencies.

Item 1A. Risk Factors

Except as set forth below, there have been no material changes to the risk factors contained in Part 1, Item 1A set forth in our Annual Report on Form 10-K filed with the SEC on March 16, 2018.

Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our stockholders.

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for

Baltimore City, Maryland, or, if that Court does not have jurisdiction, the U.S. District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of our company, (ii) any action asserting a claim of breach of any duty owed by any of our directors or officers or employees to us or to our stockholders, (iii) any action asserting a claim against us or any of our directors or officers or employees arising pursuant to any provision of the Maryland General Corporation Law, or the MGCL, or our charter or bylaws or (iv) any action asserting a claim against us or any of our directors or officers or employees that is governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in our shares shall be deemed to have notice of and to have consented to these provisions of our bylaws, as they may be amended from time to time. Our board of directors, without stockholder approval, adopted this provision of the bylaws so that we can respond to such litigation more efficiently and reduce the costs associated with our responses to such litigation, particularly litigation that might otherwise be brought in multiple forums. This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder believes is favorable for disputes with us or our directors, officers, agents or employees, if any, and may discourage lawsuits against us and our directors, officers, agents or employees, if any. Alternatively, if a court were to find this provision of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings notwithstanding that the MGCL expressly provides that the charter or bylaws of a Maryland corporation may require that any internal corporate claim be brought only in courts sitting in one or more specified jurisdictions, we may incur additional costs that we do not currently anticipate associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition and results of operations.

The proposed SEC standard of conduct for investment professionals could impact our ability to raise capital.

On April 18, 2018, the SEC proposed “Regulation Best Interest,” a new standard of conduct for broker-dealers under the Exchange Act that includes: (i) the requirement that broker-dealers refrain from putting the financial or other interests of the broker-dealer ahead of the retail customer, (ii) a new disclosure document, the consumer or client relationship summary, or Form CRS, which would require both investment advisers and broker-dealers to provide disclosure highlighting details about their services and fee structures and (iii) proposed interpretative guidance that would establish a federal fiduciary standard for investment advisers. The public comment period on Regulation Best Interest ends in August 2018.

Proposed Regulation Best Interest is complex and may be subject to revision or withdrawal. Plan fiduciaries and the beneficial owners of IRAs are urged to consult with their own advisors regarding the impact that proposed Regulation Best Interest may have on purchasing and holding interests in our company.  Proposed Regulation Best Interest or any other legislation or regulations that may be introduced or become law in the future could have negative implications on our ability to raise capital from potential investors, including those investing through IRAs.

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PART II — OTHER INFORMATION (continued)

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On August 9, 2017, we granted 1,000 shares of restricted common stock to each of our three independent directors pursuant to our independent directors’ compensation plan as compensation for services in connection with their re-election to the board of directors at our annual meeting of stockholders. On each of March 29, 2018 and June 29, 2018, we issued 275 shares of Class A common stock to one of our independent directors pursuant to our independent directors’ compensation plan at a value of $25.00 per share as base annual compensation. The above shares issued pursuant to our independent directors’ compensation plan were issued in transactions exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

Our Registration Statement on Form S-11 (File No. 333-207952), registering a Public Offering of up to $1,300,000,000 in shares of our common stock, was declared effective under the Securities Act and we commenced our Public Offering on February 5, 2016. We initially offered a maximum of $1,000,000,000 in shares of our common stock to the public in our Primary Offering at $25.00 for each Class A share ($500,000,000 in Class A shares) and $23.81 for each Class T share ($500,000,000 in Class T shares), and $300,000,000 in shares of our common stock pursuant to our DRP at $23.75 for each Class A share and $22.62 for each Class T share. On June 21, 2016, we filed an amended Registration Statement to include Class R shares in our Public Offering, which was declared effective by the SEC on July 25, 2016, to offer a maximum of $1,000,000,000 in shares of common stock for sale to the public at an initial price of $25.00 for each Class A share ($400,000,000 in Class A shares), $22.50 for each Class R share ($200,000,000 in Class R shares) and $23.81 for each Class T share ($400,000,000 in Class T shares). We are also offering up to $300,000,000 in shares pursuant to our DRP at an initial price of $23.75 for each Class A share, $22.50 for each Class R share and $22.62 for each Class T share.

As of June 30, 2018, we had sold 3,269,906, 413,144 and 4,177,029 shares of our Class A, Class R and Class T common stock in our Public Offering, respectively, for gross offering proceeds of $80,491,059, $9,295,741 and $99,307,948, respectively, or $189,094,748 in the aggregate, including 98,499 shares of Class A common stock, 7,027 shares of Class R common stock and 123,636 shares of Class T common stock issued pursuant to our DRP for gross offering proceeds of $2,339,343, $158,093 and $2,796,632, respectively, or $5,294,068 in the aggregate.

From inception through June 30, 2018, we had recognized selling commissions, dealer manager fees, distribution and shareholder servicing fees and organization and other offering costs in our Public Offering in the amounts set forth below. The Dealer Manager for our Public Offering may reallow all of the selling commissions, a portion of the dealer manager fees and distribution and shareholder servicing fees to participating broker-dealers.

Type of Expense Amount	Amount			Estimated/Actual	Percentage of Offering Proceeds
Selling commissions and dealer manager fees	$	12,070,039		Actual	6.57	%
Other organization and offering costs	10,929,010			Actual	5.95	%
Total expenses	$	22,999,049		Actual	12.51	%
Total public offering proceeds (excluding DRP proceeds)	$	183,800,680		Actual	100.00	%
Percentage of public offering proceeds used to pay for organization and offering costs	12.51		%	Actual	12.51	%
Distribution and shareholder servicing fees(1)	$	4,004,336		Actual
Total expenses including the distribution and shareholder servicing fees	$	27,003,385		Actual
Organization and offering costs incurred since inception as a percentage of public offering proceeds	14.69		%	Actual

_____________________

(1) Includes the distribution and shareholder servicing fees incurred from inception through June 30, 2018 for Class R shares of up to 0.27% and 0.67%, as applicable, and Class T shares of up to 1.125% of the purchase price per share sold in our Public Offering. The distribution and shareholder servicing fees are paid from sources other than Public Offering proceeds.

From the commencement of our Public Offering through June 30, 2018, the net offering proceeds to us, after deducting the total expenses incurred as described above, were $166,095,699, including net offering proceeds from our DRP of $5,294,068. For the period from inception through June 30, 2018, the ratio of the cost of raising equity capital to the gross amount of equity capital raised was approximately 12.51%.

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PART II — OTHER INFORMATION (continued)

We intend to use substantially all of the net proceeds from our Public Offering to invest in and manage a diverse portfolio of multifamily properties and independent senior-living properties located in targeted markets throughout the United States. In addition to our focus on multifamily properties and independent senior-living properties, we may also make selective strategic acquisitions of other types of commercial properties. We may also selectively acquire debt collateralized by multifamily properties and independent senior-living properties and securities of other companies owning multifamily properties and independent senior-living properties. As of June 30, 2018, we had invested in ten multifamily properties for a total purchase price of $400,252,928. These property acquisitions were funded from proceeds of our Public Offering and $281,566,000 in secured financings.

During the three months ended June 30, 2018, we fulfilled repurchase requests and repurchased shares of our common stock pursuant to our share repurchase program as follows:

	Total Number of Shares Requested to be Repurchased(1)	Total Number of Shares Repurchased	Average Price Paid per Share(2)(3)		Approximate Dollar Value of Shares Available That May Yet Be Repurchased Under the Program
April 2018	1,270	—	$	—	(4)
May 2018	769	16,481	22.80		(4)
June 2018	—	—	—		(4)
	2,039	16,481

____________________

(1) We generally repurchase shares approximately 30 days following the end of the applicable quarter in which requests were received. At June 30, 2018, we had 2,039 shares, representing outstanding and unfulfilled repurchase requests of 2,039 Class A shares, all of which were fulfilled on July 31, 2018.

(2) We currently repurchase shares at prices determined as follows:

• 92.5% of the purchase price for stockholders who have held their shares for at least one year;

• 95.0% of the purchase price for stockholders who have held their shares for at least two years;

• 97.5% of the purchase price for stockholders who have held their shares for at least three years; and

• 100% of the purchase price for stockholders who have held their shares for at least four years.

Notwithstanding the above, the repurchase price for repurchases sought upon a stockholder’s death or disability will be equal to the average issue price per share for all of the stockholder’s shares. The required one-year holding period does not apply to repurchases requested within 270 days after the death or disability of a stockholder.

(3) For the three months ended June 30, 2018, the source of the cash used to redeem shares were 100% from the sale of shares under our distribution reinvestment plan.

(4) The number of shares that may be repurchased pursuant to the share repurchase program during any calendar year is limited to: (1) 5% of the weighted-average number of shares of our common stock outstanding during the prior calendar year and (2) those that can be funded from the net proceeds we received from the sale of shares under the distribution reinvestment plan during the prior calendar year, plus such additional funds as may be reserved for that purpose by our board of directors.

Item 3. Defaults Upon Senior Securities

None.

Item4.  Mine Safety Disclosures

Not applicable.

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PART II — OTHER INFORMATION (continued)

Item5.  Other Information

None.

Item 6.Exhibits

The following exhibits are included, or incorporated by reference, in this Quarterly Report for the three months ended June 30, 2018 (and are numbered in accordance with Item 601 of Regulation S-K).

Exhibit	Description
3.1	Second Articles of Amendment and Restatement of Steadfast Apartment REIT III, Inc., filed May 16, 2016 (included as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 333-207952), filed May 17, 2016 and incorporated herein by reference).
3.2	Articles of Amendment of Steadfast Apartment REIT III, Inc., filed August 8, 2017 (included as Exhibit 3.1 to the Company’s Post-Effective Amendment No. 9 to Form S-11 (File No. 333-207952), filed August 10, 2017 and incorporated herein by reference).
3.3	Bylaws of Steadfast Apartment REIT III, Inc. (included as Exhibit 3.3 to Company’s Registration Statement on Form S-11 (File No. 333-207952), filed November 12, 2015 and incorporated herein by reference).
4.1	Form of Subscription Agreement (included as Exhibit A to Supplement No. 4 to the Company’s prospectus, incorporated by reference to the Company’s Post-Effective Amendment No. 13 to Form S-11 (File No. 333-207952), filed on July 11, 2018 and incorporated herein by reference).
4.2	Form of Distribution Reinvestment Plan (included as Exhibit 4.2 to the Company’s Post-Effective Amendment No. 13 to Form S-11 (File No. 333-207952), filed April 11, 2018 and incorporated herein by reference).
4.3	Form of Redemption Request Form (included as Exhibit 4.3 to the Company’s Post-Effective Amendment No. 13 to Form S-11 (File No. 333-207952), filed April 11, 2018 and incorporated herein by reference).
4.4	Form of Application for Transfer (included as Exhibit B to Supplement No. 4 to the Company’s prospectus, incorporated by reference to the Company’s Post-Effective Amendment No. 13 to Form S-11 (File No. 333-207952) filed on July 11, 2018 and incorporated herein by reference).
31.1*	Certification of the Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.

________________________ 

*

Filed herewith.

**

In accordance with Item 601(b)(32) of Regulation S-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

61

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		Steadfast Apartment REIT III, Inc.
Date:	August 10, 2018	By:	/s/ Rodney F. Emery
			Rodney F. Emery
			Chief Executive Officer and Chairman of the Board
			(Principal Executive Officer)
Date:	August 10, 2018	By:	/s/ Kevin J. Keating
			Kevin J. Keating
			Chief Financial Officer and Treasurer
			(Principal Financial Officer and Accounting Officer)

62