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<SEC-DOCUMENT>0000950134-08-017976.txt : 20081015
<SEC-HEADER>0000950134-08-017976.hdr.sgml : 20081015
<ACCEPTANCE-DATETIME>20081014190033
ACCESSION NUMBER:		0000950134-08-017976
CONFORMED SUBMISSION TYPE:	DEF 14A
PUBLIC DOCUMENT COUNT:		1
CONFORMED PERIOD OF REPORT:	20081120
FILED AS OF DATE:		20081015
DATE AS OF CHANGE:		20081014
EFFECTIVENESS DATE:		20081015

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			INCOME OPPORTUNITY REALTY INVESTORS INC /TX/
		CENTRAL INDEX KEY:			0000949961
		STANDARD INDUSTRIAL CLASSIFICATION:	REAL ESTATE INVESTMENT TRUSTS [6798]
		IRS NUMBER:				752615944
		STATE OF INCORPORATION:			NV
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		DEF 14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-14784
		FILM NUMBER:		081123716

	BUSINESS ADDRESS:	
		STREET 1:		1800 VALLEY VIEW LANE
		STREET 2:		SUITE 300
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
		BUSINESS PHONE:		4685224200

	MAIL ADDRESS:	
		STREET 1:		1800 VALLEY VIEW LANE
		STREET 2:		SUITE 300
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75234
</SEC-HEADER>
<DOCUMENT>
<TYPE>DEF 14A
<SEQUENCE>1
<FILENAME>d64599ddef14a.htm
<DESCRIPTION>DEF 14A
<TEXT>
<HTML>
<HEAD>
<TITLE>def14a</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>WASHINGTON, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>SCHEDULE 14A</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Proxy Statement Pursuant to Section 14(a) of the Securities Exchange of 1934 (Amendment No. &#95;&#95;&#95;)
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Filed by the Registrant&nbsp;&nbsp;<FONT face="Wingdings">&#254;</FONT><BR>
Filed by a Party other than the Registrant <FONT face="Wingdings">&#111;</FONT><BR>
Check the appropriate box:

</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="96%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT face="Wingdings">&#111;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Preliminary Proxy Statement.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT face="Wingdings">&#111;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14a-6(e)(2)).</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT face="Wingdings">&#254;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Definitive Proxy Statement.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT face="Wingdings">&#111;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Definitive Additional Materials.</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px"><FONT face="Wingdings">&#111;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Soliciting Material Pursuant to Section&nbsp;140.14A-11(c) or Section&nbsp;240.14a-12.</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>INCOME OPPORTUNITY REALTY INVESTORS, INC.<BR>
<DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Name of Registrant as Specified In Its Charter)</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></DIV>

<DIV align="center" style="font-size: 10pt">(Name of Person(s) Filing Proxy Statement if other than the Registrant)</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 12pt">Payment of Filing Fee (Check the appropriate box):
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#254;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>No fee required.</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Fee computed on table below per Exchange Act Rules&nbsp;14a-6(i)(1) and 0-11.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Title of each class of securities to which transaction applies:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Aggregate number of securities to which transaction applies:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule&nbsp;0-11 (Set forth the amount on which the filing fee is calculated and
state how it was determined):</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Proposed maximum aggregate value of transaction:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">5)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Total fee paid:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Fee paid previously with preliminary materials.</TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left"><FONT face="Wingdings">&#111;</FONT></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Check box if any part of the fee is offset as provided by Exchange
Act Rule&nbsp;0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Amount Previously Paid:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Form, Schedule or Registration Statement No.:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Filing Party:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Date Filed:</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD><DIV style="width: 100%; border-bottom: 1px solid #000000; font-size: 1px">&nbsp;</DIV></TD>
</TR>

</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio --><!-- /Folio -->
</DIV>



<!-- PAGEBREAK -->
<P><HR noshade><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<!-- TOC -->
<A name="toc"><DIV align="CENTER" style="page-break-before:always"><U><B>TABLE OF CONTENTS</B></U></DIV></A>

<P><CENTER>
<TABLE border="0" width="90%" cellpadding="0" cellspacing="0">
<TR>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="3%"></TD>
	<TD width="76%"></TD>
</TR>
<TR><TD colspan="9"><A HREF="#000">NOTICE OF ANNUAL MEETING OF STOCKHOLDERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#001">PROXY STATEMENT</A></TD></TR>
<TR><TD colspan="9"><A HREF="#002">ELECTION OF DIRECTORS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#003">RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</A></TD></TR>
<TR><TD colspan="9"><A HREF="#004">OTHER MATTERS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#005">FINANCIAL STATEMENTS</A></TD></TR>
<TR><TD colspan="9"><A HREF="#006">SOLICITATION OF PROXIES</A></TD></TR>
<TR><TD colspan="9"><A HREF="#007">FUTURE PROPOSALS OF STOCKHOLDERS</A></TD></TR>
</TABLE>
</CENTER>
<!-- /TOC -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>




<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>INCOME OPPORTUNITY REALTY INVESTORS, INC.</B>
</DIV>


<!-- link1 "NOTICE OF ANNUAL MEETING OF STOCKHOLDERS" -->
<DIV align="left"><A NAME="000"></A></DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 0pt"><b>NOTICE OF ANNUAL MEETING OF STOCKHOLDERS<BR>
TO BE HELD ON NOVEMBER 20, 2008</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Income Opportunity Realty Investors, Inc. will hold its Annual Meeting of Stockholders on
Thursday, November&nbsp;20, 2008, at 2:00 p.m., local Dallas, Texas time, at 1800 Valley View Lane,
Suite&nbsp;300, Dallas, Texas 75234. The purpose of the meeting is to consider and act upon:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#149;</B> Election of a Board of five directors to serve until the next Annual Meeting
of Stockholders and until their successors are duly-elected and qualified.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#149;</B> Ratification of the selection of Swalm &#038; Associates, P.C. as the independent
registered public accounting firm.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>&#149;</B> Such other matters as may properly be presented at the Annual Meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Only Stockholders of record at the close of business on October&nbsp;13, 2008, will be entitled to
vote at the meeting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Your vote is important. Whether or not you plan to attend the meeting, please complete, sign,
date and return the enclosed proxy card in the accompanying envelope provided. Your completed
proxy will not prevent you from attending the meeting and voting in person should you choose.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dated: October&nbsp;15, 2008.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">By order of the Board of Directors,<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Louis J. Corna
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Louis J. Corna&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Executive Vice President, General Counsel,<BR>

Tax Counsel and Secretary&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INCOME OPPORTUNITY REALTY INVESTORS, INC.</B>
</DIV>

<!-- link1 "PROXY STATEMENT" -->
<DIV align="left"><A NAME="001"></A></DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>PROXY STATEMENT</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>FOR THE ANNUAL MEETING OF STOCKHOLDERS</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>TO BE HELD NOVEMBER 20, 2008</B>

</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors of Income Opportunity Realty Investors, Inc. (the &#147;Company&#147;or &#147;we&#148; or
&#147;us&#148;) is soliciting proxies to be used at the Annual Meeting of Stockholders following the fiscal
year ended December&nbsp;31, 2007 (the &#147;Annual Meeting&#148;). Distribution of this Proxy Statement and a
Proxy Form is scheduled to begin on October&nbsp;15, 2008. The mailing address of the Company&#146;s
principal executive offices is 1755 Wittington Place, Suite&nbsp;340, Dallas, Texas 75234.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>About the Meeting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Who Can Vote</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Record holders of Common Stock of the Company at the close of business on Monday, October&nbsp;13,
2008 (the &#147;Record Date&#148;) may vote at the Annual Meeting. On that date, 4,162,574 shares of Common
Stock were outstanding. Each share is entitled to cast one vote.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>How Can You Vote</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you return your signed proxy before the Annual Meeting, we will vote your shares as you
direct. You can specify whether your shares should be voted for all, some or none of the nominees
for director. You can also specify whether you approve, disapprove or abstain from the other
proposal to ratify the selection of auditors.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If a proxy is executed and returned but no instructions are given, the shares will be voted
according to the recommendations of the Board of Directors. The Board of Directors recommends a
vote <B>FOR </B>Proposals 1 and 2.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Revocation of Proxies</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You may revoke your proxy at any time before it is exercised by (a)&nbsp;delivering a written
notice of revocation to the Corporate Secretary, (b)&nbsp;delivering another proxy that is dated later
than the original proxy, or (c)&nbsp;casting your vote in person at the Annual Meeting. Your last vote
will be the vote that is counted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Vote Required</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The holders of a majority of the shares entitled to vote who are either present in
person or represented by a proxy at the Annual Meeting will constitute a quorum for the transaction
of business at the Annual Meeting. As of October&nbsp;13, 2008, there were 4,162,574 shares of Common
Stock issued and outstanding. The presence, in person or by proxy, of stockholders entitled to
cast at least 2,081,288 votes constitutes a quorum for adopting the proposals at the Annual
Meeting. If you have properly signed and returned your proxy card by mail, you will be considered
part of the quorum, and the persons
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-1-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">named on the proxy card will vote your shares as you have
instructed. If the broker holding your shares in &#147;street&#148; name indicates to us on a proxy card that the broker lacks
discretionary authority to vote your shares, we will not consider your shares as present or
entitled to vote for any purpose.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A plurality of the votes cast is required for the election of directors. This means that the
director nominee with the most votes for a particular slot is elected to that slot. A proxy that
has properly withheld authority with respect to the election of one or more directors will not be
voted with respect to the director or directors indicated, although it will be counted for purposes
of determining whether there is a quorum.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For the other proposal, the affirmative vote of the holders of a majority of the shares
represented in person or by proxy entitled to vote on the proposal will be required for approval.
An abstention with respect to such proposal will not be voted, although it will be counted for
purposes of determining whether there is a quorum. Accordingly, an abstention will have the effect
of a negative vote.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As of the Record Date, two affiliates held 3,556,118 shares representing approximately 85.43%
of the shares outstanding. These two affiliates have advised the Company that they currently
intend to vote all of their shares in favor of the approval of all proposals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you received multiple proxy cards, this indicates that your shares are held in more than
one account, such as two brokerage accounts, and are registered in different names. You should
vote each of the proxy cards to ensure that all your shares are voted.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Other Matters to be Acted Upon at the Annual Meeting</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We do not know of any other matters to be validly presented or acted upon at the Annual
Meeting. Under our Bylaws, no business besides that stated in the Annual Meeting Notice may be
transacted at any meeting of stockholders. If any other matter is presented at the Annual Meeting
on which a vote may be properly taken, the shares represented by proxies will be voted in
accordance with the judgment of the person or persons voting those shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Expenses of Solicitation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is making this solicitation and will pay the entire cost of preparing, assembling,
printing, mailing and distributing these proxy materials and soliciting votes. Some of our
directors, officers and employees may solicit proxies personally, without any additional
compensation, by telephone or mail. Proxy materials will also be furnished without cost to brokers
and other nominees to forward to the beneficial owners of shares held in their names.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Available Information</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our internet website address is <U><I>www.incomeopp-realty.com.</I></U> We make available
free of charge through our website our most recent Annual Report on Form 10-K, Quarterly Reports on
Form 10-Q, Current Reports on Form 8-K, and amendments to those reports as soon as reasonably
practicable after we electronically file or furnish such materials to the Securities and Exchange
Commission. In addition, we have posted the Charters of our Audit Committee, Compensation
Committee, and Governance and Nominating Committee, as well as our Code of Business Conduct and
Ethics, Code of Ethics for Senior Financial Officers, Corporate Governance Guidelines and Corporate
Governance Guidelines on Director Independence, all under separate headings. These charters and principles are not incorporated in this instrument by reference. We will also
provide a copy of these documents free of charge to stockholders
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">upon written request. The Company issues Annual Reports containing audited financial statements to its common stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Multiple Stockholders Sharing the Same Address</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Securities and Exchange Commission (the &#147;SEC&#148;) rules allow for the delivery of a single
copy of an annual report and proxy statement to any household at which two or more stockholders
reside, if it is believed the stockholders are members of the same family. Duplicate account
mailings will be eliminated by allowing stockholders to consent to such elimination, or through
implied consent if a stockholder does not request continuation of duplicate mailings. Depending
upon the practices of your broker, bank or other nominee, you may need to contact them directly to
continue duplicate mailings to your household. If you wish to revoke your consent to householding,
you must contact your broker, bank or other nominee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you hold shares of common stock in your own name as a holder of record, householding will
not apply to your shares.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you wish to request extra copies free of charge of any annual report, proxy statement or
information statement, please send your request to Income Opportunity Realty Investors, Inc.,
Attention: Investor Relations, 1800 Valley View Lane, Suite&nbsp;300, Dallas, Texas 75234 or call (800)
400-6407.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Questions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;You may call our Investor Relations Department at 800-400-6407 if you have any questions.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PLEASE
VOTE - YOUR VOTE IS IMPORTANT</B>
</DIV>



<P align="center" style="font-size: 10pt"><!-- Folio -->-3-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Corporate Governance and Board Matters</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The affairs of the Company are managed by the Board of Directors. The Directors are elected
at the annual meeting of stockholders each year or appointed by the incumbent Board of Directors
and serve until the next annual meeting of stockholders or until a successor has been elected or
approved.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;After December&nbsp;31, 2003, a number of changes occurred in the composition of the Board of
Directors of the Company, the creation of certain Board Committees, the adoption of Committee
charters, the adoption of a Code of Ethics for Senior Financial Officers and the adoption of
Guidelines for Director Independence. Also, the composition of the members of the Board of
Directors changed with the resignations of Henry A. Butler (July&nbsp;1, 2003), Earl D. Cecil (February
29, 2004), Martin L. White (March&nbsp;15, 2004), Ken L. Joines (July&nbsp;31, 2006), and the election of
independent Directors, David E. Allard and Peter L. Larsen on February&nbsp;20, 2004, and Robert A.
Jakuszewski on March&nbsp;16, 2004. Additionally, on June&nbsp;2, 2003, Syntek West, Inc. (&#147;SWI&#148;) acquired
approximately 54.3% of the outstanding Common Stock of the Company as a &#147;block.&#148; SWI also
purchased 12,600 shares of Common Stock of the Company in open market purchase transactions which
increased SWI&#146;s then ownership to approximately 57.17% of the outstanding shares. On June&nbsp;30,
2003, SWI replaced the former contractual advisor to the Company. On June&nbsp;10, 2005, the Company&#146;s
Common Stock was the subject of a 3-for-1 forward split of the stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On July&nbsp;31, 2006, Ken L. Joines, resigned as a director to pursue other opportunities. On
August&nbsp;1, 2006, the members of the Board elected R. Neil Crouch to fill the vacancy created by Ken
L. Joines&#146; resignation. On February&nbsp;22, 2007, Ted P. Stokely (a director since April&nbsp;1990 and
Chairman since January&nbsp;1995) resigned as a Director and Chairman of the Board. On the same date,
but effective February&nbsp;23, 2007, the Board elected R. Neil Crouch as Chairman of the Board and
Martha C. Stephens as a director to replace Mr.&nbsp;Stokely.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Current members of the Board</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The members of the Board of Directors (all of whom were elected by the stockholders at the
last Annual Meeting held on December&nbsp;11, 2007) on the date of this proxy statement, and the
committees of the Board on which they serve, are identified below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="7%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Governance and</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Compensation</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Nominating</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">

<TD nowrap align="left"><DIV style="margin-left:30px; text-indent:-0px"><B>Director</B></div></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Audit Committee</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Committee</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center"><B>Committee</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">David E. Allard
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chair
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-family: Wingdings">&#252;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-family: Wingdings">&#252;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">R. Neil Crouch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Robert A. Jakuszewski
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-family: Wingdings">&#252;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-family: Wingdings">&#252;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-family: Wingdings">&#252;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Peter L. Larsen
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><FONT style="font-family: Wingdings">&#252;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chair
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chair</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Martha C. Stephens</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Role of the Board&#146;s Committees</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors has standing Audit, Compensation and Governance and Nominating
Committees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Audit Committee</I></B>. The functions of the Audit Committee are described below under the heading
&#147;<I>Report of the Audit Committee.</I>&#148; The Audit Committee is an &#147;audit committee&#148; for purposes of
Section&nbsp;3(a)(58) of the Securities Exchange Act of 1934, as amended. The charter of the Audit
Committee was adopted on February&nbsp;20, 2004, and is available on the Company&#146;s Investor Relations
website <font style="white-space: nowrap">(<U><I>www.incomeopp-realty.com).</I></U></font> The Audit Committee was formed on February&nbsp;19, 2004,
and the Board selected the current members of the Audit Committee for 2004. The Board reappointed
the members of the Audit Committee on September&nbsp;16, 2004, December&nbsp;15, 2005, December&nbsp;14, 2006 and
December&nbsp;11, 2007. All of the members of the Audit Committee are independent within the meaning of
the Securities and Exchange Commission (the &#147;SEC&#148;) regulations, the listing standards of the
American Stock Exchange and the Company&#146;s <I>Corporate Governance Guidelines</I>. Mr.&nbsp;Allard, a member of
the Committee, is qualified as an &#147;audit committee financial expert&#148; within the meaning of SEC
regulations and the Board has determined that he has accounting and related financial management
expertise within the meaning of the listing standards of the American Stock Exchange. All of the
members of the Audit Committee meet the independence and experience requirements of the listing
standards of the American Stock Exchange. The Audit Committee met eight times in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Governance and Nominating Committee</I></B>. The Governance and Nominating Committee is responsible
for developing and implementing policies and practices relating to corporate governance, including
reviewing and monitoring implementation of the Company&#146;s <I>Corporate Governance Guidelines</I>. In
addition, the Committee develops and reviews background information on candidates for the Board and
makes recommendations to the Board regarding such candidates. The Committee also prepares and
supervises the Board&#146;s annual review of director independence and the Board&#146;s performance
self-evaluation. The charter of the Governance and Nominating Committee was adopted on March&nbsp;22,
2004, and is available on the Company&#146;s Investor Relations website (<I>www.incomeopp-realty.com</I>). On
March&nbsp;22, 2004, the Board selected the members of the Governance and Nominating Committee for 2004.
The Board reappointed the members of the Governance and Nominating Committee on September&nbsp;16,
2004, December&nbsp;15, 2005, December&nbsp;14, 2006 and December&nbsp;11, 2007. All of the members of the
Committee are independent within the meaning of the listing standards of the American Stock
Exchange and the Company&#146;s <I>Corporate Governance Guidelines. </I>The Governance and Nominating
Committee met two times in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Compensation Committee</I></B>. The Compensation Committee is responsible for overseeing the
policies of the Company relating to compensation to be paid by the Company to the Company&#146;s
principal executive officer and any other officers designated by the Board and make recommendations
to the Board with respect to such policies, produce necessary reports on executive compensation for
inclusion in the Company&#146;s proxy statement in accordance with applicable rules and regulations and
to monitor the development and implementation of succession plans for the principal executive
officer and other key executives and make recommendations to the Board with respect to such plans.
The charter of the Compensation Committee was adopted on March&nbsp;22, 2004, and is available on the
Company&#146;s Investor Relations website (<U><I>www.incomeopp-realty.com).</I></U> On March&nbsp;22, 2004, the
Board selected the members of the Compensation Committee for the coming year. The Board
reappointed the members of the Compensation Committee on September&nbsp;16, 2004, December&nbsp;15, 2005,
December&nbsp;14, 2006 and December&nbsp;11, 2007. All of the members of the Committee are independent
within the meaning of the listing standards of the American Stock Exchange and the Company&#146;s <I>Corporate Governance</I>
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><I>Guidelines</I>. The Compensation Committee is to
be comprised of at least two directors who are independent of management and the Company. The
Compensation Committee met two times in 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Presiding Director</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On June&nbsp;17, 2004, the Board created a new position of presiding director, whose primary
responsibility is to preside over periodic executive sessions of the Board in which management
directors and other members of management do not participate. The presiding director also advises
the Chairman of the Board and, as appropriate, Committee chairs with respect to agendas and
information needs relating to Board and Committee meetings, provides advice with respect to the
selection of Committee chairs and performs other duties that the Board may from time to time
delegate to assist the Board in the fulfillment of its responsibilities.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Director Peter L. Larsen has served in such position since June&nbsp;17, 2004. On December&nbsp;11,
2007, the non-management members of the Board designated him to serve in this position until the
Company&#146;s annual meeting of stockholders to be held following the fiscal year ended December&nbsp;31,
2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Selection of Nominees for the Board</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Governance and Nominating Committee will consider candidates for Board membership
suggested by its members and other Board members, as well as management and stockholders. The
Committee may also retain a third-party executive search firm to identify candidates upon request
of the Committee from time to time. A stockholder who wishes to recommend a prospective nominee for
the Board should notify the Company&#146;s Corporate Secretary or any member of the Governance and
Nominating Committee in writing with whatever supporting material the stockholder considers
appropriate. The Governance and Nominating Committee will also consider whether to nominate any
person nominated by a stockholder pursuant to the provisions of the Company&#146;s bylaws relating to
stockholder nominations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Once the Governance and Nominating Committee has identified a prospective nominee, the
Committee will make an initial determination as to whether to conduct a full evaluation of the
candidate. This initial determination will be based on whatever information is provided to the
Committee with the recommendation of the prospective candidate, as well as the Committee&#146;s own
knowledge of the prospective candidate, which may be supplemented by inquiries to the person making
the recommendation or others. The preliminary determination will be based primarily on the need for
additional Board members to fill vacancies or expand the size of the Board and the likelihood that
the prospective nominee can satisfy the evaluation factors described below. If the Committee
determines, in consultation with the Chairman of the Board and other Board members as appropriate,
that additional consideration is warranted, it may request the third-party search firm to gather
additional information about the prospective nominee&#146;s background and experience and to report its
findings to the Committee. The Committee will then evaluate the prospective nominee against the
standards and qualifications set out in the Company&#146;s <I>Corporate Governance Guidelines, </I>including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the ability of the prospective nominee to represent the interests of
the stockholders of the Company;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the prospective nominee&#146;s standards of integrity, commitment and
independence of thought and judgment;</TD>
</TR>

</TABLE>
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-6-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the prospective nominee&#146;s ability to dedicate sufficient time, energy
and, attention to the diligent performance of his or her duties, including the
prospective nominee&#146;s service on other public company boards, as specifically
set out in the Company&#146;s <I>Corporate Governance Guidelines</I>;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the extent to which the prospective nominee contributes to the range of
talent, skill and expertise appropriate for the Board;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the extent to which the prospective nominee helps the Board reflect the
diversity of the Company&#146;s stockholders, employees, customers, guests and
communities; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the willingness of the prospective nominee to meet any minimum equity
interest holding guideline.</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The Committee also considers such other relevant factors as it deems appropriate, including the
current composition of the Board, the balance of management and independent directors, the need for
Audit Committee expertise and the evaluations of other prospective nominees. In connection with
this evaluation, the Committee determines whether to interview the prospective nominee, and if
warranted, one or more members of the Committee, and others as appropriate, interview prospective
nominees in person or by telephone. After completing this evaluation and interview, the Committee
makes a recommendation to the full Board as to the persons who should be nominated by the Board,
and the Board determines the nominees after considering the recommendation and report of the
Committee.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Bylaws of the Company provide that any stockholder entitled to vote in the election of
directors generally may nominate one or more persons for election as directors at a meeting only if
written notice of such stockholders&#146; intention to make such nomination has been delivered
personally to, or has been mailed to and received by the Secretary at the principal office of the
Company not later than 35 nor more than 60&nbsp;days prior to the date of the meeting. If a stockholder
has a suggestion for candidates for election, the stockholder should follow this procedure. Each
notice from a stockholder must set forth (i)&nbsp;the name and address of the stockholder who intends to
make the nomination and the name of the person to be nominated, (ii)&nbsp;the class and number of shares
of stock held of record, owned beneficially and represented by proxy by such stockholder as of the
record date for the meeting and as of the date of such notice, (iii)&nbsp;a representation that the
stockholder intends to appear in person or by proxy at the meeting to nominate the person specified
in the notice, (iv)&nbsp;a description of all arrangements or understandings between such stockholder
and each nominee and any other person (naming those persons) pursuant to which the nomination is to
be made by such stockholder, (v)&nbsp;such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed pursuant to the proxy
rules, and (vi)&nbsp;the consent of each nominee to serve as a director of the Company if so elected.
The chairman of the Annual Meeting may refuse to acknowledge the nomination of any person not made
in compliance with this procedure.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Determinations of Director Independence</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In February&nbsp;2004, the Board enhanced its <I>Corporate Governance Guidelines. </I>The <I>Guidelines</I>
adopted by the Board meet or exceed the new listing standards adopted during the year by the
American Stock Exchange. The full text of the <I>Guidelines </I>can be found in the Investor Relations
section of the Company&#146;s website (<U><I>www.incomeopp-realty.com).</I></U> A copy may also be obtained
upon request from the Company&#146;s Corporate Secretary.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-7-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the <I>Guidelines, </I>the Board undertook its annual review of director independence in
March&nbsp;2008. During this review, the Board considered transactions and relationships between each
director or any member of his or her immediate family and the Company and its subsidiaries and
affiliates, including those reported under <I>&#147;Certain Relationships and Related Transactions&#148; </I>below.
The Board also examined transactions and relationships between directors or their affiliates and
members of the Company&#146;s senior management or their affiliates. As provided in the <I>Guidelines</I>, the
purpose of this review was to determine whether any such relationships or transactions were
inconsistent with a determination that the director is independent.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a result of this review, the Board affirmatively determined of the then directors, Messrs.
Allard, Jakuszewski and Larsen are each independent of the Company and its management under the
standards set forth in the <I>Corporate Governance Guidelines</I>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Board Meetings During Fiscal 2006</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board met nine times during fiscal 2007. Each director attended 75% or more of the
meetings of the Board and Committees on which he served. Under the Company&#146;s <I>Corporate Governance
Guidelines</I>, each Director is expected to dedicate sufficient time, energy an attention to ensure
the diligent performance of his or her duties, including by attending meetings of the stockholders
of the Company, the Board and Committees of which he is a member. In addition, the independent
directors met in executive session two times during fiscal 2007.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Directors&#146; Compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each non-employee director receives an annual retainer of $15,000 plus reimbursement for
expenses. The Chairman of the Board receives an additional fee of $1,500 per year. The members of
the Audit Committee receive a fee of $250 for each Committee meeting attended. In addition, each
independent director receives an additional fee of $1,000 per day for any special services rendered
by him to the Company outside of his or ordinary duties as a director plus reimbursement of
expenses. The Company also reimburses directors for travel expenses incurred in connection with
attending Board, committee and stockholder meetings and for other Company-business related
expenses. Directors who are also employees of the Company or its Advisor receive no additional
compensation for service as a director.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During 2007, $72,304 was paid to the non-employee directors in total directors&#146; fees for all
services, including the annual fee for service during the period from January&nbsp;1, 2007 through
December&nbsp;31, 2007. Those fees received by directors were Ted P. Stokely, who resigned February&nbsp;22,
2007 ($8,250), David E. Allard ($17,250), Robert A. Jakuszewski ($17,250), Peter L. Larsen
($16,750) and Martha C. Stephens ($12,804).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Stockholders Communication with the Board</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholders and other parties interested in communicating directly with the presiding
director or with the non-Management directors as a group may do so by writing to David E. Allard,
Director, 1525 N. Stemmons Freeway, Dallas, Texas 75207-3410. Effective March&nbsp;22, 2004, the
Governance and Nominating Committee of the Board also approved a process for handling letters
received by the Company and addressed to members of the Board but received at the Company. Under
that process, the Corporate Secretary of the Company reviews all such correspondence and regularly
forwards to the Board a summary of all such correspondence and copies of all correspondence that,
in the opinion of the Corporate Secretary, deals with the functions of the Board or committees
thereof or that he otherwise
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-8-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">determines requires their attention. Directors may at any time review
a log of all correspondence received by the Company that is addressed to members of the Board and
received by the Company and request copies of any such correspondence. Concerns relating to
accounting, internal controls or auditing matters are immediately brought to the attention of the
Chairman of the Audit Committee and handled in accordance with procedures established by the Audit
Committee with respect to such matters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Code of Ethics</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has adopted a Code of Business Conduct and Ethics, which applies to all directors,
officers and employees (including those of the contractual advisor). In addition, on February&nbsp;19,
2004, the Company adopted a code of ethics entitled &#147;Code of Ethics for Senior Financial Officers&#148;
that applies to the principal executive officer, president, principal financial officer, chief
financial officer, the principal accounting officer and controller. The text of both documents is
available on the Company&#146;s Investor Relations website <font style="white-space: nowrap">(<U><I>www.incomeopp-realty.com).</I></U></font> The
Company intends to post amendments to or waivers from its Code of Ethics for Senior Financial
Officers (to the extent applicable to the Company&#146;s chief executive officer, principal financial
officer or principal accounting officer) at this location on its website.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compliance With Section&nbsp;16(a) of Reporting Requirements</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;16(a) under the Securities Exchange Act of 1934 requires the Company&#146;s directors,
executive officers and any persons holding 10% or more of the Company&#146;s shares of Common Stock are
required to report their ownership of the Company&#146;s shares of Common Stock and any changes in that
ownership to the SEC on specified report forms. Specific due dates for these reports have been
established, and the Company is required to report any failure to file by these dates during each
fiscal year. All of these filing requirements were satisfied by the Company&#146;s directors and
executive officers and holders of more than 10% of the Company&#146;s Common Stock during the fiscal
year ended December&nbsp;31, 2007. In making these statements, the Company has relied upon the written
representations of its directors and executive officers and the holders of 10% or more of the
Company&#146;s Common Stock and copies of the reports that each has filed with the SEC.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Security Ownership of Certain Beneficial Owners and Management</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Security Ownership of Certain Beneficial Owners</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the ownership of the Company&#146;s Common Stock, both beneficially
and of record, both individually and in the aggregate, for those persons or entities known by the
Company to be the beneficial owners of more than 5% of its outstanding Common Stock as of the close
of business on October&nbsp;13, 2008.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-9-<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount and Nature of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Approximate</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name and Address of Beneficial Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Beneficial Ownership*</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent of Class**</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Syntek West, Inc. <br>
1755 Wittington Place, Suite&nbsp;340<br>
Dallas, Texas 75234</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">2,518,934</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right" valign="top">60.51</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:0px; text-indent:-0px">Transcontinental Realty
Investors, Inc.<br>
1800 Valley View Lane, Suite&nbsp;300<br>
Dallas, Texas 75234</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">1,037,184</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right" valign="top">24.92</TD>
    <TD nowrap valign="top">%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Security Ownership of Management</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the ownership of the Company&#146;s Common Stock, both beneficially
and of record, both individually and in the aggregate for the directors and executive officers of
the Company, and for certain deemed beneficial owners, as of the close of business on October&nbsp;13,
2008:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount and Nature of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Approximate </B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name and Address of Beneficial Owner</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Beneficial Ownership*</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Percent of Class*</B>*</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">David E. Allard</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gene S. Bertcher</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1,037,184</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">24.92</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Henry A. Butler</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1,037,184</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">24.92</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Louis J. Corna</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1,037,184</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">24.92</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">R. Neil Crouch</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2,518,934</TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">60.51</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Alfred Crozier</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1,037,184</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">24.92</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">David R. Fletcher</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1,037,184</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">24.92</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Sharon Hunt</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1,037,184</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">24.92</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Robert A. Jakuszewski</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1,037,184</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">24.92</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Peter L. Larsen</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Daniel J. Moos</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1,037,184</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">24.92</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Ted R. Munselle</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">1,037,184</TD>
    <TD nowrap>(1)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">24.92</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Gene E. Phillips</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">2,518,934</TD>
    <TD nowrap>(2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">60.51</TD>
    <TD nowrap>%</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Martha C. Stephens</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">-0-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">All directors and executive
officers as a group (ten people)</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">3,556,118</TD>
    <TD nowrap>(1)(2)</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">&nbsp;</TD>
    <TD align="right">85.43</TD>
    <TD nowrap>%</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>&#147;Beneficial Ownership&#148; means the sole or shared power to vote, or to direct
the voting of, a security or investment power with respect to a security, or
any combination thereof.</TD>
</TR> <TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>
<TR valign="top">
    <TD nowrap align="left">**</TD>
    <TD>&nbsp;</TD>
    <TD>Percentages are based upon 4,162,574 shares of Common Stock outstanding at
October&nbsp;13, 2008.</TD>
</TR>

</TABLE>



<P align="center" style="font-size: 10pt"><!-- Folio -->-10-<!-- /Folio -->
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 0px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 1,037,184 shares owned by Transcontinental Realty Investors, Inc. (&#147;TCI&#148;),
of which the directors and executive officers of TCI may be deemed to be the beneficial owners by
virtue of their positions as directors and executive officers. Each of the current directors
(Messrs.&nbsp;Butler, Jakuszewski, Munselle and Stokely and Ms.&nbsp;Hunt) and executive officers (Messrs.
Moos, Bertcher, Corna, Crozier and Fletcher) of TCI disclaim beneficial ownership of such shares.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Includes 2,382,669 shares owned by Syntek Acquisition Corp (&#147;SAC&#148;), a wholly owned
subsidiary of SWI, of which the directors and executive officers of SWI and SAC (Messrs.&nbsp;Crouch and
Phillips) may be deemed to be the beneficial owners by virtue of their positions as directors and
executive officers of SWI and SAC. SWI owns 136,265 shares.</TD>
</TR>

</TABLE>



<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>PROPOSAL 1</B>

</DIV>

<!-- link1 "ELECTION OF DIRECTORS" -->
<DIV align="left"><A NAME="002"></A></DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>ELECTION OF DIRECTORS</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Five directors are to be elected at the Annual Meeting. Each director elected will hold
office until the Annual Meeting following the fiscal year ending December&nbsp;31, 2008. All of the
nominees for director are now serving as directors. Each of the nominees has consented to being
named in this proxy statement as a nominee and has agreed to serve as a director if elected. The
persons named on the proxy card will vote for all of the nominees for director listed unless you
withhold authority to vote for one or more of the nominees. The nominees receiving a plurality of
votes cast at the Annual Meeting will be elected as directors. Abstentions and broker non-votes
will not be treated as a vote for or against any particular nominee and will not affect the outcome
of the election of directors. Cumulative voting for the election of directors is not permitted.
If any director is unable to stand for re-election, the Board will designate a substitute. If a
substitute nominee is named, the persons named on the proxy card will vote for the election of the
substitute director.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The nominees for directors are listed below, together with their ages, terms of service, all
positions and offices with the Company or the Company&#146;s contractual advisor, SWI, other principal
occupations, business experience and directorships with other companies during the last five years
or more. The designation &#147;affiliated&#148; when used below with respect to a director means that the
director is an officer, director or employee of the Company or the contractual advisor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>David E. Allard, 50</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Allard
has been employed (since May&nbsp;2008) by Wescott, LLC, a Dallas, Texas based
investment holding company. He was Chief Financial Officer (since February&nbsp;2005 to May&nbsp;2008) of
Digital Witness Surveillance, a Dallas, Texas-based development stage software provider; Executive
Vice President and Secretary (April&nbsp;2003 to February&nbsp;2, 2005) of Internet America, Inc. Mr.&nbsp;Allard
was Chief Operating Officer (2000-2002) of Primedia Workplace Learning, a workplace training
business; Executive Vice President and Chief Financial Officer (1999-2000) of E-Train, Inc., a
provider of online job training and seminars; Special Advisor (1998-1999) of Thayer Capital
Partners; Chief Operating Officer (1997-1998) of Career Track, Inc. (a TCI subsidiary); Senior Vice
President and Vice President &#151; Business Development (1992-1996) of Wescott Communications, Inc.;
Partner (1985-1992) of Farmer and Allard, P.C. (a CPA firm); Audit Manager/CPA (1983-1985) of Grant
Thornton LLP (a CPA firm). Mr.&nbsp;Allard has been a director of the Company since February&nbsp;20, 2004.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-11-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>R.&nbsp;Neil Crouch, 56 (Affiliated)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Chairman of the Board (since February&nbsp;23, 2007) and a Director (since August&nbsp;2006) of the
Company. President Eurgenergy Resources, Inc., a Nevada corporation (&#147;ERI&#148;) engaged in the
exploration and development of oil, gas and mineral interests since January&nbsp;2005, ERI is a
subsidiary of SWI, Mr.&nbsp;Crouch is also a director Vice President, Secretary and Treasurer of SWI
since August&nbsp;1, 2006. Mr.&nbsp;Crouch was elected as a director of the company on August, 2006. He was
Executive Vice President and Chief Financial Officer of the Company from September&nbsp;17, 2004 to
December&nbsp;16, 2005. Mr.&nbsp;Crouch was Corporate Controller (from September&nbsp;2002 to September&nbsp;15, 2004)
of Apptricity Corporation, a small Dallas, Texas-based software development company; prior thereto
(from January&nbsp;1999 to September&nbsp;2002) he was Corporate Controller of Attenza, Inc., a Dallas,
Texas web-based computer self-help company. Mr.&nbsp;Crouch has been a Certified Public Accountant
since 1981.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Robert A. Jakuszewski, 46</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Vice
President - Sales and Marketing (since September&nbsp;1998) of New Horizons Communications,
Inc. Mr.&nbsp;Jakuszewski was a Consultant (01/1998-09/1998) for New Horizon Communications, Inc.;
Regional Sales Manager (1996-1998) of Continental Funding; Territory Manager (1992-1996) of
Sigvaris, Inc.; Senior Sales Representative (1988-1992) of Mead Johnson Nutritional Division,
USPNG; Sales Representative (1986-1987) of Muro Pharmaceutical, Inc. Mr.&nbsp;Jakuszewski was elected a
director of the Company on March&nbsp;16, 2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Peter L. Larsen, 66</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mr.&nbsp;Larsen has been involved in the commercial real estate industry since 1972. From 1996
through 2002, he was Senior Vice President of Acquisitions of Tarragon Corporation (formerly
Tarragon Realty Investors, Inc.), and its predecessors, a publicly-held real estate entity, the
common stock of which is traded on the NASDAQ National Market. Since 1992, Mr.&nbsp;Larsen has also
been a director of four Texas non-profit corporations which own 545 apartment units and are
overseeing the development of a multi-million dollar retirement center in Coppell, Texas. Mr.
Larsen has been a director of the Company since February&nbsp;20, 2004, and the Presiding Director since
March&nbsp;2004.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Martha C. Stephens, 62 (Affiliated)</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ms.&nbsp;Stephens is retired. Until January&nbsp;2007 and for more than five years prior thereto, she
was employed in various administrative capacities by Prime Income Asset Management, LLC (&#147;Prime&#148;),
which is a contractual advisor to ARI and TCI. She was elected to the Board of Directors effective
February&nbsp;23, 2007 to fill the vacancy on the Board of Directors created by the resignation of Ted
P. Stokely.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>The Board of Directors unanimously recommends a vote FOR<BR>
the election of all of the Nominees named above.</B>
</DIV>




<P align="center" style="font-size: 10pt"><!-- Folio -->-12-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">




<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PROPOSAL 2</B>
</DIV>

<!-- link1 "RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM" -->
<DIV align="left"><A NAME="003"></A></DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>RATIFICATION OF APPOINTMENT OF<BR>
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee has appointed Swalm &#038; Associates, P.C. as the independent registered
public accounting firm for Income Opportunity Realty Investors, Inc. for the 2008 fiscal year and
to conduct quarterly reviews through September&nbsp;30, 2008. The Company&#146;s Bylaws do not require that
stockholders ratify the appointment of Swalm &#038; Associates, P.C. as the Company&#146;s independent
registered public accounting firm. Swalm &#038; Associates, P.C. has served as the Company&#146;s
independent registered public accounting firm for each of the three fiscal years ended December&nbsp;31,
2004, 2005, 2006 and 2007. The Audit Committee will consider the outcome of this vote in its
decision to appoint an independent registered public accounting firm next year, however, it is not
bound by the stockholders&#146; decision. Even if the selection is ratified, the Audit Committee, in
its sole discretion, may change the appointment at any time during the year if it determines that
such a change would be in the best interest of the Company and its stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A representative of Swalm &#038; Associates, P.C. will attend the Annual Meeting. The
representative will have an opportunity to make a statement if he or she desires to do so and will
be available to respond to appropriate questions from the stockholders.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>The Board of Directors recommends a vote FOR the ratification of the<BR>
appointment of Swalm &#038; Associates, P.C. as the Company&#146;s<BR>
independent registered public accounting firm.</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Fiscal Years 2007 and 2006 Audit Firm Fee Summary</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the aggregate fees for professional services rendered to the
Company for the years 2007 and 2006 by the Company&#146;s principal accounting firm, Swalm &#038; Associates,
P.C.:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="76%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">

<TD nowrap align="left"><DIV style="margin-left:30px; text-indent:-0px"><B>Type
of Fees</B></div></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2007</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="2"><B>2006</B></TD>
    <TD>&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">59,278</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">55,755</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Audit-Related Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">0</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Tax Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3,268</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">2,500</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px">All Other Fees</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">&#151;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap colspan="2" align="right" style="border-top: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:30px; text-indent:-15px">Total Fees:</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">62,546</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left">$</TD>
    <TD align="right">58,255</TD>
    <TD>&nbsp;</TD>
</TR>
<TR style="font-size: 1px">
    <TD><DIV style="margin-left:15px; text-indent:-15px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
        <TD nowrap colspan="2" align="right" style="border-top: 3px double #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All services rendered by the principal auditors are permissible under applicable laws and
regulations and were pre-approved by either the Board of Directors or the Audit Committee, as
required by law. The fees paid the principal auditors for services as described in the above table
fall under the categories listed below:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Audit Fees</I>. These are fees for professional services performed by the
principal auditor for the audit of the Company&#146;s annual financial statements and
review of financial statements included in the Company&#146;s 10-Q filings and services
that are normally provided in connection with statutory and regulatory filing
or engagements.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-13-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Audit-Related Fees</I>. These are fees for assurance and related services
performed by the principal auditor that are reasonably related to the performance of
the audit or review of the Company&#146;s financial statements. These services include
attestations by the principal auditor that are not required by statute or regulation
and consulting on financial accounting/reporting standards.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Tax Fees</I>. These are fees for professional services performed by the principal
auditor with respect to tax compliance, tax planning, tax consultation, returns
preparation and review of returns. The review of tax returns includes the Company
and its consolidated subsidiaries.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt; margin-left: 2%">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>All Other Fees</I>. These are fees for other permissible work performed by the
principal auditor that do not meet the above category descriptions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;These services are actively monitored (as to both spending level and work content) by the
Audit Committee to maintain the appropriate objectivity and independence in the principal auditor&#146;s
core work, which is the audit of the Company&#146;s consolidated financial statements.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Report of the Audit Committee<BR>
Of the Board of Directors</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee of the Board of Directors is composed of three directors, each of whom
satisfies the requirements of independence, experience and financial literacy under the
requirements of the American Stock Exchange and the SEC. The Audit Committee has directed the
preparation of this report and has approved its content and submission to the stockholders.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee is responsible for, among other things:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>retaining and overseeing the independent registered public accounting firm that
serves as our independent auditor and evaluating their performance and independence;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reviewing the annual audit plan with management and the independent registered
public accounting firm;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>pre-approving any permitted non-audit services provided by our independent
registered public accounting firm;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approving the fees to be paid to our independent registered public accounting
firm;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reviewing the adequacy and effectiveness of our internal controls with
management, internal auditors and the independent registered public accounting firm;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reviewing and discussing the annual audited financial statements and the
interim unaudited financial statements with management and the registered public
accounting firm; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>approving our internal audit plan and reviewing reports of our internal
auditors.
</TD>
</TR>
</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->-14-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee operates under a written charter adopted by the Board of Directors. The
Committee&#146;s responsibilities are set forth in this charter which is available on our website at
<U><I>www.incomeopprealty-invest.com</I></U>.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Audit Committee assists the Board in fulfilling its responsibilities for general oversight
of the integrity of the Company&#146;s financial statements, the adequacy of the Company&#146;s system of
internal controls, the Company&#146;s risk management, the Company&#146;s compliance with legal and
regulatory requirements, the independent auditors&#146; qualifications and independence, and the
performance of the Company&#146;s independent auditors. The Committee has sole authority over the
selection of the Company&#146;s independent auditors and manages the Company&#146;s relationship with its
independent auditors. The Committee has the authority to obtain advice and assistance from outside
legal, accounting or other advisors as the Committee deems necessary to carry out its duties and
receive appropriate funding, as determined by the Committee, from the Company for such advice and
assistance.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Committee met eight times during 2007. The Committee schedules its meetings with a view
to ensuring that it devotes appropriate attention to all of its tasks. The Committee&#146;s meetings
include private sessions with the Company&#146;s independent auditors without the presence of the
Company&#146;s management, as well as executive sessions consisting of only Committee members. The
Committee also meets senior management from time to time.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Management has the primary responsibility for the Company&#146;s financial reporting process,
including its system of internal control over financial reporting and for the preparation of
consolidated financial statements in accordance with accounting principles generally accepted in
the United States of America. The Company&#146;s independent auditors are responsible for auditing
those financial statements in accordance with professional standards and expressing an opinion as
to their material conformity with U.S. generally accepted accounting principles and for auditing
management&#146;s assessment of, and the effective operation of, internal control over financial
reporting. The Committee&#146;s responsibility is to monitor and review the Company&#146;s financial
reporting process and discuss management&#146;s report on the Company&#146;s internal control over financial
reporting. It is not the Committee&#146;s duty or responsibility to conduct audits or accounting
reviews or procedures. The Committee has relied, without independent verification, on management&#146;s
representation that the financial statements have been prepared with integrity and objectivity and
in conformity with accounting principles generally accepted in the United States of America and on
the opinion of the independent registered public accountants included in their report on the
Committee&#146;s financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As part of its oversight of the Company&#146;s financial statements, the Committee reviews
and discusses with both management and the Company&#146;s independent registered public accountants all
annual and quarterly financial statements prior to their issuance. During 2007, management advised
the Committee that each set of financial statements reviewed had been prepared in accordance with
accounting principles generally accepted in the United States of America, and reviewed significant
accounting and disclosure issues with the Committee. These reviews include discussions with the
independent accountants of the matters required to be discussed pursuant to <I>Statement on Auditing
Standards No.&nbsp;61 (Codification of Statements on Auditing Standards), </I>including the quality (not
merely the acceptability) of the Company&#146;s accounting principles, the reasonableness of significant
judgments, the clarity of disclosures in the financial statements and disclosures related to
critical accounting practices. The Committee has also discussed with Swalm &#038; Associates, P.C.
matters relating to its independence, including a review of audit and non-audit fees, and written
disclosures from Swalm &#038; Associates, P.C. to the Company pursuant to <I>Independence Standards Board
Standard No.&nbsp;1 (Independence Discussions with Audit Committees)</I>. The Committee also considered
whether non-audit
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-15-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">services, provided by the independent accountants are compatible with the
independent accountant&#146;s independence. The Company also received regular updates on the amount of
fees and scope of audit, audit-related and tax services provided.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, the Committee reviewed key initiatives and programs aimed at strengthening the
effectiveness of the Company&#146;s internal and disclosure control structure. As part of this process,
the Committee continued to monitor the scope and adequacy of the Company&#146;s internal controls,
reviewed staffing levels and steps taken to implement recommended improvements in any internal
procedures and controls.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Based on the Committee&#146;s discussion with management and the independent accountants and the
Committee&#146;s review of the representation of management and the report of the independent
accountants to the Board of Directors, the Audit Committee recommended to the Board of Directors,
and the Board of Directors has approved, that the audited consolidated financial statements be
included in the Company&#146;s Annual Report on Form 10-K for the year ended December&nbsp;31, 2007, filed
with the SEC. The Audit Committee and the Board of Directors have also selected Swalm &#038;
Associates, P.C. as the Company&#146;s independent registered public accountants and auditors for the
fiscal year ending December&nbsp;31, 2008.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">AUDIT COMMITTEE
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">Peter L. Larsen
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">David E. Allard
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Robert A. Jakuszewski</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Pre-Approval Policy for Audit and Non-Audit Services</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Sarbanes-Oxley Act of 2002 (the &#147;SO Act&#148;), and the rules of the SEC, the
Audit Committee of the Board of Directors is responsible for the appointment, compensation and
oversight of the work of the independent auditor. The purpose of the provisions of the SO Act and
the SEC rules for the Audit Committee role in retaining the independent auditor is two-fold.
First, the authority and responsibility for the appointment, compensation and oversight of the
auditors should be with directors who are independent of management. Second, any non-audit work
performed by the auditors should be reviewed and approved by these same independent directors to
ensure that any non-audit services performed by the auditor do not impair the independence of the
independent auditor. To implement the provisions of the SO Act, the SEC issued rules specifying
the types of services that an independent auditor may not provide to its audit client, and
governing the Audit Committee&#146;s administration of the engagement of the independent auditor. As
part of this responsibility, the Audit Committee is required to pre-approve the audit and non-audit
services performed by the independent auditor in order to assure that they do not impair the
auditor&#146;s independence. Accordingly, the Audit Committee adopted on March&nbsp;22, 2004 a written
pre-approval policy of audit and non-audit services (the &#147;Policy&#148;), which sets forth the procedures
and conditions pursuant to which services to be performed by the independent auditor are to be
pre-approved. Consistent with the SEC rules establishing two different approaches to approving
non-prohibited services, the policy of the Audit Committee covers pre-approval of audit services,
audit-related services, international administration tax services, non-U.S. income tax compliance
services, pension and benefit plan consulting and compliance services, and U.S. tax compliance and
planning. At the beginning of each fiscal year, the Audit Committee will evaluate other known
potential engagements of the independent auditor, including the scope of work proposed to be
performed and the proposed fees, and approve or reject each service, taking into account whether services are permissible
under applicable law and the possible impact of each non-audit service on the independent auditor&#146;s
independence from management. Typically, in addition to the generally pre-
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">approved services, other services would include due diligence for an acquisition that may or may not have been known at the
beginning of the year. The Audit Committee has also delegated to any member of the Audit Committee
designated by the Board or the financial expert member of the Audit Committee responsibilities to
pre-approve services to be performed by the independent auditor not exceeding $25,000 in value or
cost per engagement of audit and non-audit services, and such authority may only be exercised when
the Audit Committee is not in session.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Executive Compensation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has no employees, payroll or benefit plans and pays no compensation to its
executive officers. The executive officers of the Company who are also officers or employees of
Prime are compensated by Prime. Prime has an arrangement with SWI to provide certain services to
the Company on behalf of, and as a sub-advisor to, SWI. Such executive officers perform a variety
of services for Prime and the amount of their compensation is determined solely by Prime. Prime
does not allocate the cash compensation of its officers among the various entities for which it
serves as advisor. See &#147;The Advisor&#148; for a discussion of the compensation payable to SWI under the
Advisory Agreement.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>Compensation Committee Report</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Compensation Committee of the Board of Directors is comprised of at least two directors
who are independent of management and the Company. Each member of the Compensation Committee must
be determined to be independent by the Board under the Corporate Governance Guidelines on Director
Independence adopted by the Board and under the American Stock Exchange LLC (the &#147;AMEX&#148;) standards
for non-employee directors and Rule&nbsp;16b-3(b)(3)(i) of the rules and regulations promulgated under
the Securities Exchange Act of 1934 and the requirements for &#147;outside directors&#148; set forth in
Treasury Regulations, Section&nbsp;27(e)(3). Each member of the Committee is to be free of any
relationship that in the judgment of the Board from time to time may interfere with the exercise of
his or her independent judgment. Each Committee member is appointed annually subject to removal at
any time by the Board and serves until his or her Committee appointment is terminated by the Board.
The Compensation Committee is composed of three directors, each of whom meets the standards
described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The purposes of the Compensation Committee are to oversee the policies of the Company relating
to compensation to be paid by the Company to the Company&#146;s principal executive officer (&#147;CEO&#148;) and
any other officers designated by the Board and make recommendations to the Board with respect to
such policies, produce necessary reports and executive compensation for inclusion in the Company&#146;s
proxy statement, in accordance with applicable rules and regulations, and monitor the development
and implementation of succession plans for the CEO and other key executives and make
recommendations to the Board with respect to such plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company has no employees, payroll or benefit plans and pays no compensation to its
executive officers. The executive officers of the Company, who are also officers or employees of
Prime Income Asset Management LLC (&#147;Prime&#148;), are compensated by Prime. Such executive officers
perform a variety of services for Prime, and the amount of their compensation is determined solely
by Prime. Prime does not allocate the cash compensation of its officers among the various entities
for which it may serve as advisor or sub-advisor.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The only remuneration paid by the Company is to directors who are not officers or directors of
Prime or the Advisor. These independent directors (i)&nbsp;review the business plan of the Company to
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">determine that it is the best interest of the stockholders, (ii)&nbsp;review the advisory contract and
recommend any appropriate changes thereto, (iii)&nbsp;supervise the performance of the Company&#146;s
contractual advisor, and review the reasonableness of the compensation paid to the contractual
advisor in terms of the nature and quality of services performed, (iv)&nbsp;review the reasonableness of
the total fees and expenses of the Company, and (v)&nbsp;select, when necessary, a qualified,
independent real estate appraiser to appraise properties acquired. See the sub caption &#147;Directors&#146;
Compensation&#148; in the Proxy Statement for a description of the compensation paid.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The charter of the Compensation Committee was adopted on March&nbsp;22, 2004, and the members of
the Compensation Committee, all of whom are independent within the meaning of the listing standards
of the AMEX and the Company&#146;s Corporate Governance Guidelines, are listed below. Since its
formation on March&nbsp;22, 2004, the Compensation Committee has annually reviewed its existing charter
and regularly performed the tasks described above relating to the business plan, advisory contract,
reasonableness of compensation paid to the advisor, and the reasonableness of the total fees and
expenses of the Company.
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt">COMPENSATION COMMITTEE
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
    <TD width="5%"></TD>
    <TD width="30%"></TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="left" valign="top">David E. Allard
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Peter L. Larsen
</TD>
    <TD>&nbsp;</TD>
    <TD align="right" valign="top">Robert A. Jakuszewski</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Compensation Committee Interlocks and Insider Participation</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company&#146;s Compensation Committee is made up of non-employee directors who have never
served as officers of, or been employed by the Company. None of the Company&#146;s executive officers
serve on a board of directors of any entity that has a director or officer serving on this
Committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Executive Officers</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive officers of the Company are Daniel J. Moos, President and Chief Operating Officer,
David R. Fletcher, Executive Vice President and Chief Financial Officer, Gene S. Bertcher,
Executive Vice President and Chief Accounting Officer, Louis J. Corna, Executive Vice President -
General Counsel/Tax Counsel and Secretary and Alfred Crozier, Executive Vice President-Residential
Construction. Messrs.&nbsp;Moos, Fletcher, Bertcher, Corna and Crozier are employed by Prime. None of
the executive officers receive any direct remuneration from the Company, nor do any hold any
options granted by the Company. Their positions with the Company are not subject to a vote of
stockholders. The ages, terms of service and all positions and offices with the Company, Prime,
SWI, other affiliated entities, other principal occupations, business experience and directorships
with other publicly-held companies during the last five years or more are set forth below.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Daniel J. Moos, 57</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;President and Chief Operating Officer (effective April&nbsp;5, 2007) of the Company, American
Realty Investors, Inc. (&#147;ARL&#148;) and TCI and (effective March&nbsp;2007) of Prime; Senior Vice President
and Business Line Manager for U.S. Bancorp (NYSE;USB) working out of their officers in Houston,
Texas from 2003 to April&nbsp;2007; Executive Vice President and Chief Financial Officer, Fleetcor
Technologies a privately held transaction processing company that was headquartered in New Orleans,
Louisiana from 1998 to 2003; Senior Vice President and Chief Financial Officer, ICSA a privately
held internet security and information company headquartered in Carlilse, Pennsylvania from 1996 to
1998; and for more than ten years prior thereto was employed in various financial and operating
roles for PhoneTel Technologies, Inc. which was a publicly traded telecommunication company on the
American Stock Exchange headquartered in Cleveland, Ohio (1992-1996) and LDI Corporation which was
a publicly traded computer equipment sales/service and asset leasing company listed on the NASDAQ
and headquartered in Cleveland, Ohio.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>David R. Fletcher, 48</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Vice President and Chief Financial Officer (since May&nbsp;2008) of the Company, ARI and
TCI. Previously, from April&nbsp;2007 to March&nbsp;2008, Mr.&nbsp;Fletcher was Executive Vice President and
Chief Financial Officer of a wholly-owned subsidiary of Tarragon Corporation, a leading mixed-use
developer of real estate with a focus on for rent and for sale multi-family housing, which has its
common stock listed and traded on the NASDAQ. Prior thereto from November&nbsp;2005 to June&nbsp;2006, Mr.
Fletcher was Senior Vice President and Chief Financial Officer of Focus Property Group, a privately
held developer of residential master-plan communities; from March&nbsp;2003 to November&nbsp;2005, Mr.
Fletcher was Chief Executive Officer of Hawk Eye Capital, LLC, a privately held management
consulting firm; from March&nbsp;2000 to February&nbsp;2003, he was Chief Financial Officer of Fuel Links,
Inc., a privately held software development company and for more than five years prior thereto he
was employed as a senior manager with Deloitte &#038; Touche LLP and as a commercial real estate loan
officer with Bank of America. Mr.&nbsp;Fletcher holds a Masters in Business Administration in Finance
from the McCombs Graduate School of Business at the University of Texas at Austin, graduating as a
Sord Scholar.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Gene S. Bertcher, 59</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Vice President and Chief Accounting Officer (since May&nbsp;2008) of the Company, ARI
and TCI. Prior thereto (from February&nbsp;2008 to March&nbsp;2008) he was Executive Vice President and
Interim Chief Financial Officer of the Company, ARI and TCI. Mr.&nbsp;Bertcher is (and will continue to
be) President and Chief Financial Officer of New Concept Energy, Inc. (formerly CabelTel
International Corporation), a Nevada corporation (&#147;GBR&#148;) which has its common stock listed on the
American Stock Exchange LLC, a position he has occupied since November&nbsp;1, 2004. From January&nbsp;3,
2003 until November&nbsp;1, 2004, Mr.&nbsp;Bertcher was also Chief Executive Officer of GBR. He has been a
certified public accountant since 1973; Mr.&nbsp;Bertcher has been a director since June&nbsp;1999 (and was
from November&nbsp;1989 to September&nbsp;1996) of GBR. Until November&nbsp;1989, Mr.&nbsp;Bertcher was a partner in
Grant Thornton, LLP having served as the Chairman of its National Real Estate and Construction
Committee.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Louis J. Corna, 60</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Vice President, General Counsel/Tax Counsel and Secretary (since February&nbsp;2004),
Executive Vice President (October&nbsp;2001 to February&nbsp;2004), Executive Vice President and Chief
Financial Officer (June&nbsp;2001 to October&nbsp;2001) and Senior Vice President-Tax (December&nbsp;2000 to June
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">2001) of the Company, TCI, ARL and BCM; Executive Vice President, General Counsel/Tax Counsel and
Secretary (since February&nbsp;2004), Executive Vice President-Tax (July&nbsp;2003 to February&nbsp;2004) of Prime
and PIAMI; Private Attorney (January&nbsp;2000 to December&nbsp;2000); Vice President-Taxes and Assistant
Treasurer (March&nbsp;1998 to January&nbsp;2000) of IMC Global, Inc.; Vice President-Taxes (July&nbsp;1991 to
February&nbsp;1998) of Whitman Corporation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Alfred Crozier, 55</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Executive Vice President-Residential Construction (since November&nbsp;15, 2006) of the Company and
of ARL and TCI. Prior to his selection as an officer of the Company, Mr.&nbsp;Crozier was Managing
Director of Development (November&nbsp;2005 to November&nbsp;2006) for Woodmont Investment Company GP, LLC, a
Dallas, Texas based developer of commercial properties and residential units. Prior thereto (from
October&nbsp;2003 to November&nbsp;2005) he was President of Sterling Builders, Inc., a Spring, Texas
construction and consulting company. Prior thereto (from August&nbsp;2001 through September&nbsp;2003) he
was Vice President of Westchase Construction, LTD, a Houston, Texas based construction firm and for
more than five years prior thereto, he was employed by various firms engaged in the construction
industry including Trammel Crow Residential (February&nbsp;1995 through February&nbsp;2000) and The Finger
Companies (August&nbsp;1991 through February&nbsp;1995). Mr.&nbsp;Crozier is also an architect.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>The Advisor</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although the Board of Directors is directly responsible for managing the affairs of the
Company and for setting the policies which guide it, day-to-day operations are performed by a
contractual advisor under the supervision of the Board of Directors. The duties of the advisor
include, among other things, locating, investigating, evaluating and recommending real estate and
mortgage note investment and sales opportunities, as well as financing and refinancing sources.
The advisor also serves as a consultant to the Board of Directors in connection with the business
plan and investment decisions made by the Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SWI has served as the Company&#146;s advisor since June&nbsp;30, 2003. Prior to June&nbsp;30, 2003, from
1989, BCM served as the advisor to the Company and its predecessors. SWI is 100% owned by Gene E.
Phillips. Mr.&nbsp;Phillips is chairman, president, chief executive officer and a director of SWI, is
involved in daily consultation with the officers of SWI and has significant influence over the
conduct of SWI&#146;s business, including the rendering of advisory services and the making of
investment decisions for itself and the Company. Mr.&nbsp;Crouch, a director of the Company (since
August&nbsp;2006) and Chairman of the Board since February&nbsp;23, 2007, is an officer and a director of
SWI.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Advisory Agreement, SWI is required to annually formulate and submit for Board
approval a budget and business plan containing a twelve-month forecast of operations and cash flow,
a general plan for asset sales and purchases, borrowing activity and other investments. SWI is
required to report quarterly to the Board on the Company&#146;s performance against the business plan.
In addition, all transactions require prior Board approval, unless they are explicitly provided for
in the approved plan or are made pursuant to authority expressly delegated to SWI by the Board.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Advisory Agreement also requires prior approval of the Board for the retention of all
consultants and third party professionals, other than legal counsel. The Advisory Agreement
provides that SWI shall be deemed to be in a fiduciary relationship to the stockholders; contains a
broad standard governing SWI&#146;s liability for losses by the Company; and contains guidelines for
SWI&#146;s allocation of investment opportunities as among itself, the Company and other entities it
advises.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-20-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Advisory Agreement provides for SWI to be responsible for the day-to-day operations of the
Company and to receive an advisory fee comprised of a gross asset fee of 0.0625% per month (0.75%
per annum) of the average of the gross asset value (total assets less allowance for amortization,
depreciation or depletion and valuation reserves) and an annual net income fee equal to 7.5% of the
Company&#146;s net income.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Advisory Agreement also provides for SWI to receive an annual incentive sales fee equal to
10% of the amount, if any, by which the aggregate sales consideration for all real estate sold by
the Company during the fiscal year exceeds the sum of (1)&nbsp;the cost of each property as originally
recorded in the Company&#146;s books for tax purposes (without deduction for depreciation, amortization
or reserve for losses), (2)&nbsp;capital improvements made to such assets during the period owned, and
(3)&nbsp;all closing costs (including real estate commissions) incurred in the sale of such real estate.
However, no incentive fee shall be paid unless (a)&nbsp;such real estate sold in such fiscal year, in
the aggregate, has produced an 8% simple annual return on the net investment, including capital
improvements, calculated over the holding period before depreciation and inclusive of operating
income and sales consideration, and (b)&nbsp;the aggregate net operating income from all real estate
owned for each of the prior and current fiscal years shall be at least 5% higher in the current
fiscal year than in the prior fiscal year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, pursuant to the Advisory Agreement, SWI or an affiliate of SWI is to receive an
acquisition commission for supervising the acquisition, purchase or long-term lease of real estate
equal to the lesser of (i)&nbsp;up to 1% of the cost of acquisition, inclusive of commissions, if any,
paid to non-affiliated brokers, or (ii)&nbsp;the compensation customarily charged in arm&#146;s-length
transactions by others rendering similar property acquisition services as an ongoing public
activity in the same geographical location and for comparable property, provided that the aggregate
purchase price of each property (including acquisition fees and real estate brokerage commissions)
may not exceed such property&#146;s appraised value at acquisition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Advisory Agreement requires SWI or any affiliate of SWI to pay the Company one-half of any
compensation received from third parties with respect to the origination, placement or brokerage of
any loan made by the Company. However, the compensation retained by SWI or any affiliate of SWI
shall not exceed the lesser of (i)&nbsp;2% of the amount of the loan commitment, or (ii)&nbsp;a loan
brokerage and commitment fee which is reasonable and fair under the circumstances.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Advisory Agreement also provides that SWI or an affiliate of SWI is to receive a mortgage
or loan acquisition fee with respect to the purchase of any existing mortgage loan equal to the
lesser of (i)&nbsp;1% of the amount of the loan purchased, or (ii)&nbsp;a brokerage or commitment fee which
is reasonable and fair under the circumstances. Such fee will not be paid in connection with the
origination or funding of any mortgage loan by the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Advisory Agreement, SWI or an affiliate of SWI also is to receive a mortgage
brokerage and equity refinancing fee for obtaining loans or refinancing on properties equal to the
lesser of (i)&nbsp;1% of the amount of the loan or the amount refinanced, or (ii)&nbsp;a brokerage or
refinancing fee which is reasonable and fair under the circumstances. However, no such fee shall be paid
on loans from SWI or an affiliate of SWI without the approval of the Board of Directors. No fee
shall be paid on loan extensions.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Advisory Agreement also provides for all activities in connection with or related to
construction for the Company and its subsidiaries, SWI shall receive a fee equal to 6% of the
so-called &#147;hard costs&#148; only of any costs of construction on a completed basis, based upon amounts
set forth as
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-21-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">approved on any architect certificate issued in connection with such construction,
which fee is payable at such time as the applicable architect certifies other costs for payment to
third parties. The phrase &#147;hard costs&#148; means all actual costs of construction paid to contractors,
subcontractors and third parties for materials or labor performed as a part of the construction but
does not include items generally regarded as &#147;soft costs&#148; which are consulting fees, attorneys&#146;
fees, architectural fees, permit fees and fees of other professionals.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Advisory Agreement, SWI is to receive reimbursement of certain expenses incurred by
it in the performance of advisory services to the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Under the Advisory Agreement, all or a portion of the annual advisory fee must be refunded by
SWI if the Operating Expenses of the Company (as defined in the Advisory Agreement) exceed certain
limits specified in the Advisory Agreement based on the book value, net asset value and net income
of the Company during the fiscal year.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Additionally, if management were to request that SWI render services other than those required
by the Advisory Agreement, SWI or an affiliate of SWI is to be separately compensated for such
additional services on terms to be agreed upon from time to time. As discussed below, under
Property Management, the Company hired Triad Realty Services LP (&#147;Triad&#148;), an affiliate of Prime,
to provide management for the Company&#146;s properties and, as discussed below, under &#147;Real Estate
Brokerage,&#148; the Company has engaged Regis Realty I LLC (&#147;Regis I&#148;), a related party, on a
non-exclusive basis to provide brokerage services for the Company. SWI may assign the Advisory
Agreement only with the prior consent of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective July&nbsp;1, 2005, the Company and SWI entered into a Cash Management Agreement to
further define the administration of the Company&#146;s day-to-day investment operations, relationship
contracts, flow of funds and deposit and borrowing of funds. Under the Cash Management Agreement,
all funds of the Company are delivered to SWI which has a deposit liability to the Company and is
responsible for payment of all payables and investment of all excess funds which earn interest at
the <I>Wall Street Journal </I>Prime Rate plus 1% per annum, as set quarterly on the first day of each
calendar quarter. Borrowings for the benefit of the Company bear the same interest rate. The term
of the Cash Management Agreement is coterminous with the Advisory Agreement, and it is
automatically renewed each year unless terminated with the Advisory Agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SWI may assign the Advisory Agreement only with the prior consent of the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The directors and principal executive officers of SWI are set forth below:
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="21%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="74%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left"><B>Name</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="left"><B>Office(s)</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Gene E. Phillips
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, Chairman, President and Chief Executive Officer</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">R. Neil Crouch
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Director, Vice President, Treasurer and Secretary</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Property Management</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Triad, an affiliate of Prime, provides property management services to the Company for a fee
of 6% or less of the monthly gross rents collected on residential properties and 3% or less of the
monthly gross rents collected on commercial properties under its management. Triad subcontracts
with other entities for the provision of the property-level management services to the Company at
various rates. The general partner of Triad is Prime Income Asset Management, Inc., a Nevada
corporation (&#147;PIAMI&#148;)
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-22-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">which is the sole member of Prime. The limited partner of Triad is HRS
Holdings LLC (&#147;HRSHLLC&#148;), a related party. Triad subcontracts the property-level management and
leasing of five of the Company&#146;s commercial properties to Regis I, a related party, which is a
company owned by HRSHLLC. Regis I also received property and construction management fees and
leasing commissions in accordance with its property-level management agreement with Triad.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Real Estate Brokerage</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Since January&nbsp;1, 2003, Regis I provided real estate brokerage services to the Company (on a
non-exclusive basis). Regis I is entitled to receive a real estate commission for property
purchases and sales in accordance with a sliding scale of total fees to be paid (i)&nbsp;maximum fee of
4.5% on the first $2&nbsp;million of any purchase or sale transaction of which no more than 3.5% would
be paid to Regis I or affiliates; (ii)&nbsp;maximum fee of 3.5% on transaction amounts between $2
million and $5&nbsp;million, of which no more than 3% would be paid to Regis I or affiliates;
(iii)&nbsp;maximum fee of 2.5% on transaction amounts between $5&nbsp;million and $10&nbsp;million, of which no
more than 2% would be paid to Regis I; and (iv)&nbsp;maximum fee of 2% on transaction amounts in excess
of $10&nbsp;million, of which no more than 1.5% would be paid to Regis I or affiliates.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Certain Relationships and Related Transactions</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Certain Business Relationships</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SWI has served as the Company&#146;s advisor since July&nbsp;1, 2003. SWI is owned by Gene E. Phillips.
Mr.&nbsp;Phillips is Chairman, President, Chief Executive Officer and a director, is involved in daily
consultation with the officers of SWI and has significant influence over the conduct of SWI&#146;s
business, including the rendering of advisory services and the making of investment decisions for
itself and for the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Triad provides property management services. The general partner of Triad is PIAMI, which 20%
is owned by SWI. The limited partner is HRSHLLC. Triad subcontracts the property-level management
and leasing of five of the Company&#146;s commercial properties to Regis I, a limited liability company,
the sole member of which is HRSHLLC.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Regis I also provides brokerage services, on a non-exclusive basis, for the Company and
received brokerage commissions in accordance with a brokerage agreement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Messrs.&nbsp;Daniel J. Moos, David R. Fletcher, Gene S. Bertcher, Louis J. Corna and Alfred Crozier
are employed by Prime, the sole member of which is PIAMI, which is owned by Realty Advisors, LLC, a
Nevada limited liability company (80%) and SWI (20%). The sole member of Realty Advisors LLC is Realty Advisors, Inc., a Nevada corporation. Messrs.&nbsp;Moos, Fletcher,
Bertcher, Corna and Crozier, executive officers of the Company, also serve as executive officers of
ARL and TCI, and accordingly owe fiduciary duties to those entities as well as the Company. Mr.
Bertcher is also an officer, director and employee of NCE and as such also owes fiduciary duties to
NCE as well as the Company. Mr.&nbsp;Crouch is an officer and director of SWI and owes fiduciary duties
to SWI. Mr.&nbsp;Stokely (Chairman of the Board and a director of the Company until February&nbsp;22, 2007)
is the General Manager of Unified Housing Foundation, Inc. (&#147;UHF&#148;), and owes duties to this entity
as well as to the Company. Messrs.&nbsp;Jakuszewski and Stokely, serve as directors of ARL and TCI and
owe fiduciary duties to TCI and ARL, as well as the Company under applicable law.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-23-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Related Party Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Historically, the Company has engaged in and may continue to engage in business transactions,
including real estate partnerships, with related parties. Management believes that all of the
related party transactions represented the best investments available at the time and were at least
as advantageous to the Company as could have been obtained from unrelated third parties.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In connection with the resolution in April&nbsp;2005 of certain litigation filed August&nbsp;10, 2004 by
the Company, ARI and TCI, the Company owns 19.9% of Midland Odessa Properties, Inc. (formerly
Innovo Realty, Inc.) (&#147;MOPI&#148;), the balance of which is owned by ARI and TCI. MOPI in turn is a 30%
limited partner in several &#147;Metra&#148; partnerships formed in 2002 when the Company sold all of its
then residential properties to partnerships controlled by Metra Capital LLC. The original sale
transactions were accounted for as refinancing transactions with the Company continuing to report
the assets and new debt incurred by the Metra partnerships on the Company&#146;s financial statements.
As properties were sold to independent third parties, the transactions were reported as sales. On
January&nbsp;25, 2008, the resulting partnership sold all of the remaining Metra Properties consisting
of four properties partially owned by the resulting MOPI and two other properties owned by the
Company to Today Realty, Inc., an independent third party. No material relationship exist between
the Company, any of its affiliates or any director or officer of the Company or any associate of
any such director or officer of the Company and Today Realty, Inc., other than in respect to the
transaction. As the Metra Properties had continued to have been carried on the books of the
Company, the January&nbsp;2008 transaction was accounted for as a sale resulting in payment to the
Company of an aggregate consideration of $49.6&nbsp;million. The principal followed in determining the
amount of consideration was negotiation between the parties. With the corresponding sale, $17.1
million in real property assets was removed from the balance sheet of the Company as well as $25
million in aggregate liabilities. The Company received approximately $19.9&nbsp;million in net cash
proceeds from the sale.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;On August&nbsp;22, 2005, the Company purchased 10.08 acres of land located in Dallas County,
Texas, from TCI (a related party) for $13&nbsp;million. The purchase price was paid with cash of $7
million and the conveyance to the seller of $6&nbsp;million in notes receivable held by the Company.
The cash was obtained from financing the land acquired in the transaction. The agreement includes
a put option whereby for the period of fifteen months after the closing, the Company has the right
to resell the property to the seller for a price of $13&nbsp;million plus a preferred return of 9% per
annum accruing from the closing date. Due to the related-party nature of the transaction,
including the likelihood that the Company will exercise its put option, this transaction has been
treated as a financing transaction. The Company continues to carry the $6&nbsp;million of notes as a
receivable and has recorded the $7&nbsp;million as a receivable from TCI. TCI pays the Company interest
in an amount equal to what the Company pays for its loan on the property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Company is a partner with TCI in Nakash Income Associates nd TCI Eton Square, L.P. TCI
owns 1,037,184 shares of Common Stock of the Company (approximately 24.92%).
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In 2007, the Company paid SWI and its affiliates and related parties $1&nbsp;million in advisory
fees and $154,000 in mortgage brokerage and equity refinancing fees. In addition, from time to
time, the Company has made advances to SWI which generally have not had specific repayment terms,
did not bear interest until July&nbsp;1, 2005, and have been reflected in the Company&#146;s financial
statements as receivables from or payables to affiliates. At December&nbsp;31, 2007, the Company was
owed $23.9&nbsp;million from SWI. Effective July&nbsp;1, 2005, such advances bear interest at 1% above the
prime rate per annum.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-24-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Restrictions on Related Party Transactions</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Article&nbsp;FOURTEENTH of the Company&#146;s Articles of Incorporation provides that the Company shall
not, directly or indirectly, contract or engage in any transaction with (1)&nbsp;any director, officer
or employee of the Company, (2)&nbsp;any director, officer or employee of the advisor, (3)&nbsp;the advisor,
or (4)&nbsp;any affiliate or associate (as such terms are defined in Rule&nbsp;12b-2 under the Securities
Exchange Act of 1934, as amended) of any of the aforementioned persons, unless (a)&nbsp;the material
facts as to the relationship among or financial interest of the relevant individuals or persons and
as to the contract or transaction are disclosed to or are known by the Company&#146;s Board of Directors
or the appropriate committee thereof, and (b)&nbsp;the Company&#146;s Board of Directors or appropriate
committee thereof determines that such contract or transaction is fair to the Company and
simultaneously authorizes or ratifies such contract or transaction by the affirmative vote of a
majority of independent directors of the Company entitled to vote thereon. Article&nbsp;FOURTEENTH
defines an &#147;Independent Director&#148; as one who is neither an officer or an employee of the Company,
nor a director, officer or employee of the Company&#146;s advisor.
</DIV>
<!-- link1 "OTHER MATTERS" -->
<DIV align="left"><A NAME="004"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>OTHER MATTERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Board of Directors knows of no other matters that may be properly or should be brought
before the Annual Meeting. However, if any other matters are properly brought before the Annual
Meeting, the persons named in the enclosed proxy or their substitutes will vote in accordance with
their best judgment on such matters.
</DIV>

<!-- link1 "FINANCIAL STATEMENTS" -->
<DIV align="left"><A NAME="005"></A></DIV>
<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>FINANCIAL STATEMENTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The audited financial statements of the Company, in comparative form for the years ended
December&nbsp;31, 2006 and 2007 are contained in the 2007 Annual Report to Stockholders, which preceded
the delivery of this proxy statement in April&nbsp;2008. However, such report and the financial
statements contained therein are not to be considered part of this solicitation.
</DIV>

<!-- link1 "SOLICITATION OF PROXIES" -->
<DIV align="left"><A NAME="006"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SOLICITATION OF PROXIES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>THIS PROXY STATEMENT IS FURNISHED TO STOCKHOLDERS TO SOLICIT PROXIES ON BEHALF OF THE BOARD OF
DIRECTORS OF INCOME OPPORTUNITY REALTY INVESTORS, INC. </B>The cost of soliciting proxies will be born
by the Company. Directors and officers of the Company may, without additional compensation,
solicit by mail, in person or by telecommunication.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->-25-<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<!-- link1 "FUTURE PROPOSALS OF STOCKHOLDERS" -->
<DIV align="left"><A NAME="007"></A></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>FUTURE PROPOSALS OF STOCKHOLDERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Stockholder proposals for our Annual Meeting to be held in 2009 must be received by us by
December&nbsp;31, 2008, and must otherwise comply with the rules promulgated by the Securities and
Exchange Commission to be considered for inclusion in our proxy statement for that year. Any
stockholder proposal, whether or not to be included in our proxy materials, must be sent to our
Corporate Secretary at 1800 Valley View Lane, Suite&nbsp;300, Dallas, Texas 75234.
</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>COPIES OF INCOME OPPORTUNITY REALTY INVESTORS, INC.&#146;S ANNUAL REPORT FOR THE FISCAL YEAR ENDED
DECEMBER 31, 2007 TO THE SECURITIES AND EXCHANGE COMMISSION ON FORM 10-K AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION (WITHOUT EXHIBITS) ARE AVAILABLE TO STOCKHOLDERS WITHOUT CHARGE
THROUGH OUR WEBSITE AT </B><U><B><I>WWW.INCOMEOPP-REALTY.COM</I></B></U> <B>OR UPON WRITTEN REQUEST TO INCOME
OPPORTUNITY REALTY INVESTORS, INC., 1800 VALLEY VIEW LANE, SUITE 300, DALLAS, TEXAS 75234, ATTN:
DIRECTOR OF INVESTOR RELATIONS.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Dated: October&nbsp;15, 2008.
</DIV>

<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left">By order of the Board of Directors,<BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" style="border-bottom: 1px solid #000000" align="left">/s/ Louis J. Corna
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">Louis J. Corna, Executive Vice President,&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD colspan="3" align="left">General Counsel, Tax Counsel and Secretary&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>


<P align="center" style="font-size: 10pt"><!-- Folio -->-26-<!-- /Folio -->
</DIV>



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<DIV style="font-family: Helvetica,Arial,sans-serif">


<DIV align="center" style="font-size: 11pt; margin-top: 18pt"><B>ANNUAL
MEETING OF STOCKHOLDERS OF</B>
</DIV>


<DIV align="center" style="font-size: 22pt; margin-top: 18pt"><B>INCOME
OPPORTUNITY REALTY INVESTORS, INC.</B>
</DIV>


<DIV align="center" style="font-size: 11pt; margin-top: 12pt"><B>November&nbsp;20, 2008</B>
</DIV>


<DIV align="center" style="font-size: 16pt; margin-top: 88pt">Please sign, date and mail<BR>
your proxy card in the<BR>
envelope provided as soon<BR>
as possible.
</DIV>






<DIV align="center" style="font-size: 8pt; margin-top: 60pt"><FONT face="Wingdings">&#226;</FONT>
&nbsp;Please
detach along perforated line and mail in the envelope
provided.&nbsp;<FONT face="Wingdings">&#226;</FONT>
</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom" style="font-size: 18pt">
    <TD width="2%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
    <TD width="32%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size:1pt">
    <TD align="right" valign="bottom"><DIV style="border-bottom: 11px solid #000000">&nbsp;</DIV></TD>

<TD align="left" valign="top" style="font-size:12pt">&nbsp;&nbsp;&nbsp;20530000000000000000&nbsp;&nbsp;&nbsp;7</TD>
    <TD align="left" valign="top" style="font-size:12pt">112008</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR style="font-size: 3pt">
    <TD width="1%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="30%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="middle">
<TD style="border-bottom: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>
<TD style="border-bottom: 1px solid #000000; border-top: 1px solid #000000">&nbsp;</TD>

<TD nowrap valign="middle" align="center" style="border-right: 0px solid #000000; border-bottom: 1px solid #000000; border-left: 0px solid #000000; border-top: 1px solid #000000"><DIV
style="margin-left:0px; text-indent:-0px; font-size: 7pt">
<B>The Board of Directors of Income Opportunity Realty Investors, Inc. recommends approval of all nominees for election as directors, and
<BR>
a vote FOR ratification of the appointment of Swalm &amp; Associates,
P.C. as the independent registered public accounting firm.<br>
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE
</B></DIV></TD>

<TD align="left" valign="bottom" style="border-bottom: 1px solid #000000; border-top: 1px solid #000000"><BR style="font-size: 12pt"><FONT face="Wingdings" style="font-size: 14pt">&#120;</FONT></TD>
<TD style="border-bottom: 1px solid #000000; border-bottom: 1px solid #000000">&nbsp;</TD>

</TR>
</TABLE>
</DIV>




<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom"  style="font-size: 3pt">
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%" style="border-right: 1px solid #000000">&nbsp;</TD>

    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="21%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"  style="font-size: 6pt">FOR
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"  style="font-size: 6pt">AGAINST
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"  style="font-size: 6pt">ABSTAIN</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;&nbsp;&nbsp;1.</TD>
    <TD>&nbsp;</TD>
<TD colspan="8" valign="top" align="left" style="border-right: 1px solid #000000; font-size: 8pt">
Election of directors:
</TD>

    <TD align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">2.</TD>
    <TD nowrap valign="top">&nbsp;</TD>

<TD align="left" valign="top" colspan="2" rowspan="3" style="font-size: 8pt"><DIV align="justify">Ratification of the Appointment of Swalm &amp; Associates, P.C. as
the independent registered public accounting firm.<br><br>
</DIV></TD>
    <TD>&nbsp;</TD>

<TD align="center" valign="top" rowspan="3"><FONT face="Wingdings" style="font-size: 16pt">&#111;</FONT></TD>
    <TD align="center" valign="top" rowspan="3">&nbsp;</TD>

<TD align="center" valign="top" rowspan="3"><FONT face="Wingdings" style="font-size: 16pt">&#111;</FONT></TD>
    <TD align="center" valign="top" rowspan="3">&nbsp;</TD>

<TD align="center" valign="top" rowspan="3"><FONT face="Wingdings" style="font-size: 16pt">&#111;</FONT></TD>
</TR>
<TR valign="bottom">
<TD valign="middle" rowspan="3"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;<FONT face="Wingdings" style="font-size: 18pt">&#111;</FONT></DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD colspan="2"><B>NOMINEES:</B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD align="left" valign="top" colspan="2" nowrap style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="font-size: 6pt"><B>FOR ALL NOMINEES</B></TD>


<TD align="left" valign="top">O</TD>
    <TD colspan="2" nowrap valign="top">David E. Allard</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD align="left" valign="top" colspan="2" nowrap style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD valign="top">&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
<TD align="left" valign="middle" nowrap style="font-size: 8pt">&nbsp;
</TD>

    <TD align="left" valign="top">O</TD>
    <TD colspan="2" nowrap>R. Neil Crouch</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD align="left" valign="top" colspan="2" nowrap style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">3.</TD>
    <TD nowrap valign="top">&nbsp;</TD>
    <TD align="left" valign="top" colspan="8" rowspan="2" style="font-size: 8pt">
<DIV align="justify">   In their discretion on any other matters
which may properly come before the meeting or any adjournment(s) thereof.</DIV></TD></TR>
<TR valign="bottom">
<TD valign="top" rowspan="2"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;<FONT face="Wingdings" style="font-size: 18pt">&#111;</FONT></DIV></TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD align="left" valign="top" nowrap style="font-size: 6pt"><B>WITHHOLD AUTHORITY</B></TD>
    <TD align="left" valign="top">O</TD>
    <TD colspan="2" nowrap>Robert A. Jakuszewski</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD align="left" valign="top" colspan="2" nowrap style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
    <TD align="right" valign="top">&nbsp;</TD>
    <TD nowrap valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="font-size: 6pt"><B>FOR ALL NOMINEES</B>

</TD>
    <TD align="left" valign="top">O</TD>
    <TD colspan="2" nowrap>Peter L. Larsen</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD align="left" valign="top" colspan="2" nowrap style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="font-size: 8pt"><B>&nbsp;</B>
</TD>
    <TD align="left" valign="top">O</TD>
    <TD colspan="2" nowrap>Martha C. Stephens</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD align="left" valign="top" colspan="2" nowrap style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="10" valign="top" rowspan="4" align="left" style="font-size: 8pt"><DIV align="justify"><B>THIS PROXY WILL BE VOTED AS DIRECTED BUT IF NO DIRECTION IS
INDICATED, IT WILL BE VOTED FOR ALL NOMINEES AND FOR RATIFICATION OF THE APPOINTMENT OF SWALM &amp; ASSOCIATES, P.C. AS INDEPENDENT
AUDITORS. ON OTHER MATTERS THAT MAY COME BEFORE SAID MEETING, THIS PROXY WILL BE VOTED IN THE DISCRETION OF THE ABOVE-NAMED
PERSONS.</B></DIV></TD>
</TR>

<TR valign="bottom">

<TD align="left" valign="top" rowspan="2"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;&nbsp;&nbsp;<FONT face="Wingdings" style="font-size: 18pt">&#111;</FONT>
</DIV><BR>
</TD>
    <TD>&nbsp;</TD>

<TD align="left" valign="top" rowspan="2" style="font-size: 6pt"><BR style="font-size: 2pt"><B>FOR ALL EXCEPT </B><BR>
(See Instructions below)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
<TD align="left" valign="top" colspan="2" nowrap style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>

</TR>
<TR valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" valign="top">&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="border-right: 1px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>

<TD colspan="10" valign="top" align="left" style="font-size: 8pt"><DIV align="justify"></DIV></TD>
</TR>


<TR valign="bottom">

<TD colspan="10" align="left" valign="top" style="border-right: 1px solid #000000; border-bottom: 1px solid #000000"><DIV align="justify" style="font-size: 8pt">
<DIV style="margin-left: 78px; text-indent: -78px; margin-right: 5px"><B><U>INSTRUCTIONS:</U></B>
<FONT  style="font-size: 7pt">To withhold authority to vote for any individual nominee(s), mark
<B>&#147;FOR ALL EXCEPT&#148; </B>and fill in the circle next to each
nominee you wish to withhold, as shown here:
</FONT><FONT face="Webdings" style="font-size: 12pt">&#61;</FONT>
</DIV></DIV>
</TD>

    <TD colspan="11" valign="top" align="left">&nbsp;</TD>

</TR>
<TR style="font-size: 75pt">

<TD colspan="10" style="border-right: 1px solid #000000; border-bottom: 1px solid #000000">&nbsp;</TD>

    <TD colspan="11" valign="top" align="left">&nbsp;</TD>

</TR>


<TR valign="bottom">

<TD valign="top" colspan="8" style="border-right: 0px solid #000000; border-top: 0px solid #000000; border-bottom: 1px solid #000000">
<DIV align="justify" style="font-size: 7pt">
To change the address on your account, please check the box
 at right and indicate your new address in the address space
 above. Please note that  changes to the registered name(s)
 on the account may not be submitted
 via this method.<FONT style="font-size: 3pt"><BR><BR></FONT></DIV>
</TD>


<TD align="center" valign="middle" colspan="2" style="border-right: 1px solid #000000; border-top: 0px solid #000000; border-bottom: 1px solid #000000"><FONT face="Wingdings" style="font-size:18pt">&#111;</FONT></TD>

    <TD valign="top" colspan="11" align="left">&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 8pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom" style="font-size: 1pt">
    <TD width="2%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="1">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<!--
<TR valign="bottom">

<TD nowrap><DIV style="margin-left:0px; text-indent:-0px">Signature
of Stockholder&nbsp;
</DIV></TD>
    <TD align="left" valign="top" colspan="3" style="font-size: 16pt"><DIV style="border: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD align="left">&nbsp;Date:&nbsp;
</TD>
    <TD align="left" valign="top" colspan="2" style="font-size: 16pt"><DIV style="border: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD align="left" nowrap colspan="3">&nbsp;Signature
of Stockholder&nbsp;
</TD>
    <TD align="left" valign="top" colspan="2" style="font-size: 16pt"><DIV style="border: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD align="left">&nbsp;Date:&nbsp;
</TD>
    <TD align="left" valign="top" colspan="2" style="font-size: 16pt"><DIV style="border: 1px solid #000000">&nbsp;</DIV></TD>
</TR> -->

<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR style="font-size: 1pt">
    <TD width="10%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="25%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="20%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD valign="bottom" nowrap><DIV style="margin-left:0px; text-indent:-0px; font-size: 7pt">Signature
of Stockholder
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" colspan="1"><DIV style="border: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" style="font-size: 7pt">Date:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="border: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>

<TD align="left" valign="bottom" nowrap style="font-size: 7pt">Signature
of Stockholder
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="border: 1px solid #000000">&nbsp;</DIV>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="bottom" style="font-size: 7pt">Date:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><DIV style="border: 1px solid #000000">&nbsp;</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom" style="font-size: 1pt">
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="86%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">

<TD valign="bottom"><DIV style="margin-left:0px; text-indent:-0px"><FONT style="border-bottom: 11px solid #000000; width: 50%">&nbsp;</FONT>
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="font-size: 6pt"><B>Note:</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top" style="font-size: 6pt"><DIV align="justify">Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should
sign. When signing as executor, administrator, attorney, trustee or guardian, please give full
title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by
authorized person.
</DIV></TD>
    <TD>&nbsp;</TD>

<TD align="right" valign="bottom"><FONT style="border-bottom: 11px solid #000000; width: 50%">&nbsp;</FONT>
</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>







<P align="center" style="font-size: 10pt">&nbsp;
</DIV>

<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#toc">Table of Contents</A></H5><P>


<DIV style="font-family: Helvetica,Arial,sans-serif">


<DIV align="center" style="margin-top: 200pt">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>


<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD>&nbsp;</TD>
</TR>

</TABLE>
</DIV>





<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="10%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size:1pt">
    <TD align="right" valign="top" style="font-size:12pt">&#127;
</TD>
    <TD>&nbsp;</TD>
<TD align="right" valign="bottom"><DIV style="border-bottom: 11px solid #000000">&nbsp;</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="center" style="font-size: 14pt; margin-top: 68pt"><B>INCOME OPPORTUNITY REALTY INVESTORS, INC.</B>
</DIV>


<DIV align="center" style="font-size: 11pt; margin-top: 6pt"><B>This Proxy is solicited on behalf of the Board of Directors</B>
</DIV>


<DIV align="center" style="font-size: 11pt; margin-top:1pt"><b>for
the Annual Meeting of Stockholders to be held November 20, 2008.</B>
</DIV>



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR style="font-size:1pt">
    <TD width="97%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size:1pt">
    <TD align="left" valign="bottom">
<DIV align="left" style="font-size: 11pt; margin-top: 18pt"><DIV align="justify">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The undersigned stockholder of INCOME OPPORTUNITY REALTY
INVESTORS, INC. hereby appoints <font style="white-space: nowrap">R. NEIL CROUCH</font> and LOUIS J. CORNA, and each of them proxies with full power of substitution in each of them, in the name, place and stead of the
undersigned, as attorneys and proxies to vote all shares of Common Stock, par value $0.01 per share, of INCOME OPPORTUNITY REALTY INVESTORS, INC. which the undersigned is
entitled to vote at the Annual Meeting of Stockholders to be held on Thursday, November 20, 2008, at 2:00 p.m., local Dallas, Texas time, at 1800 Valley View Lane, Suite 300, Dallas, Texas
75234, or any adjournment(s) thereof, with all powers the undersigned would possess if personally present, as indicated below, for the transaction of such business as may properly come
before said meeting or any adjournment(s) thereof, all as set forth in the October 15, 2008 Proxy Statement for said meeting.
</DIV>

</DIV>
 </TD>

    <TD>&nbsp;</TD>

</TR>
</TABLE>
</DIV>






<DIV align="center" style="font-size: 11pt; margin-top: 12pt"><B>(Continued and to be signed on the reverse side)</B>
</DIV>



<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="2%">&nbsp;</TD>
    <TD width="83%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR style="font-size:1pt">
    <TD align="left" valign="bottom"><DIV style="border-bottom: 11px solid #000000">&nbsp;</DIV></TD>

    <TD>&nbsp;</TD>
    <TD align="right" valign="top" style="font-size:10pt">14475&nbsp;&nbsp;</TD>
<TD align="right" valign="top"><DIV style="border-bottom: 11px solid #000000">&nbsp;</DIV></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>






</DIV>



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