The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this report.

This Report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws, principally, but not only, under the captions "Business", "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations". We caution investors that any forward-looking statements in this report, or which management may make orally or in writing from time to time, are based on management's beliefs and on assumptions made by, and information currently available to, management. When used, the words "anticipate," "believe," "expect," "intend," "may," "might," "plan," "estimate," "project," "should," "will," "result" and similar expressions which do not relate solely to historical matters are intended to identify forward-looking statements. These statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties and factors that are beyond our control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. We caution you that, while forward-looking statements reflect our good faith beliefs when we make them, they are not guarantees of future performance and are impacted by actual events when they occur after we make such statements. We expressly disclaim any responsibility to update our forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on past forward-looking statements, which are based on results and trends at the time they are made, to anticipate future results or trends.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, among others, the following:

• general risks affecting the real estate industry (including, without limitation, the inability to enter into or renew leases, dependence on tenants' financial condition, and competition from other developers, owners and operators of real estate);

• risks associated with the availability and terms of financing and the use of debt to fund acquisitions and developments;

• failure to manage effectively our growth and expansion into new markets or to integrate acquisitions successfully;

• risks and uncertainties affecting property development and construction (including, without limitation, construction delays, cost overruns, inability to obtain necessary permits and public opposition to such activities);

• risks associated with downturns in the national and local economies, increases in interest rates and volatility in the securities markets;

• costs of compliance with the Americans with Disabilities Act and other similar laws and regulations;

• potential liability for uninsured losses and environmental contamination;

• risks associated with our dependence on key personnel whose continued service is not guaranteed; and

• the other risk factors identified in this Form 10-K, including those described under the Part I, Item 1A. "Risk Factors".

The risks included here are not exhaustive. Other sections of this report, including Part I, Item 1A. "Risk Factors" include additional factors that could adversely affect our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can we assess the impact of all such risk

factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results. Investors should also refer to our quarterly reports on Form 10-Q for future periods and current reports on Form 8-K as we file them with the SEC, and to other materials we may furnish to the public from time to time through Forms 8-K or otherwise.

Overview

We are an externally advised and managed real estate investment company that owns a portfolio of income producing properties and land held for development. Our property portfolio includes commercial properties and land. As of December 31, 2008, we owned or had interests in three commercial buildings comprising of 202,040 thousand square feet of leasable space, and 211 acres of undeveloped and developed land. Our commercial properties are managed by Regis Commercial, an affiliated entity.

Our primary source of income is from the interest income received on our notes receivable and the rents collected on our commercial properties, and sales of properties.

Significant transactions for the year ended December 31, 2008 include the following:

On January 25, 2008, the Company sold the following properties located in Midland, Texas for a gain on sale of $30.0 million, below:

                                Number of                   Net Cash        Debt       Gain on
Property           Location       Units      Sales price    Received     Discharged      Sale
Brighton Court    Midland, TX   60 Units    $       5,886   $     230   $      2,727   $  2,862
Del Mar           Midland, TX   92 Units            7,235       4,852          2,613      4,303
Enclave           Midland, TX   68 Units            7,068       4,687          2,765      4,138
Meridian          Midland, TX   230 Units          17,197       5,872         10,800     10,772
Signature Place   Midland, TX   57 Units            5,563       3,210          1,477      3,160
Sinclair Place    Midland, TX   114 Units           6,614       1,805          4,611      4,554

                                            $      49,563   $  20,656   $     24,993   $ 29,789

The proceeds were transferred to the company's advisor in accordance with the cash management agreement.

On May 30, 2008, Falcon Point, a 218-unit apartment complex located in Indianapolis, Indiana was condemned due to damage incurred by a tornado. We recorded a gain on involuntary conversion of $7.4 million from insurance proceeds received related to this event. The property was then sold "As Is" in November 2008 for a sales price of $115,000.

Our Board of Directors is responsible for managing the affairs of our Company and for setting the policies which guide the Company. The Company's day-to-day operations are managed by SWI. SWI's duties include, among other things, locating, investigating, evaluating and recommending real estate, mortgage note investment and sales opportunities, as well as financing and refinancing sources. SWI also serves as consultant in connection with our business plan and investment decisions made by the Board.

Critical Accounting Policies

In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements". ("SFAS No. 157"). SFAS No. 157 defines fair value and establishes a framework for measuring fair value, which includes a hierarchy based on the quality of inputs used to measure fair value. SFAS No. 157 also expands disclosures about

fair value measurements. SFAS No. 157 does not require any new fair value measurements. SFAS No. 157 requires the categorization of financial assets and liabilities, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to the quoted prices in active markets for identical assets and liabilities and lowest priority to unobservable inputs. SFAS No. 157 requires the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement. The levels of the SFAS No. 157 fair value hierarchy are described as follows:

Level 1-Financial assets and liabilities whose values are based on unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.

Level 2-Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable for substantially the full term of the asset or liability.

Level 3-Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

SFAS No. 157 became effective for fiscal years beginning after November 15, 2007. In February 2008, the FASB deferred the effective date of SFAS No. 157 for one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The FASB also removed certain leasing transactions from the scope of SFAS No. 157. On January 1, 2008, the Company adopted SFAS No. 157. The adoption of SFAS No. 157 has not had a material effect on our financial statements.

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities-including an amendment of FASB Statement No. 115." ("SFAS No. 159"). SFAS No. 159 permits entities to choose, at specified election dates, to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. Unrealized gains and losses shall be reported on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159 became effective for fiscal years beginning after November 15, 2007. On January 1, 2008, the Company adopted SFAS No. 159 and has currently not elected to measure any financial instruments or other items (not currently required to be measured at fair value) at fair value.

In December 2007, the FASB issued SFAS No. 141 (revised 2007) ("SFAS No. 141R"), "Business Combinations." SFAS No. 141R establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree. The statement also provides guidance for recognizing and measuring the goodwill acquired in the business combination and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combinations. SFAS No. 141R is effective for financial statements issued for fiscal years beginning after December 15, 2008. Accordingly, any business combinations the Company engages in will be recorded and disclosed following existing accounting principles until January 1, 2009. The Company expects SFAS No. 141R will affect the Company's consolidated financial statements when effective, but the nature and magnitude of the specific effects will depend upon the nature, term and size of the acquisitions, if any, the Company consummates after the effective date.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements." Effective for financial statements issued for fiscal years beginning after December 15, 2008, SFAS No. 160 states that accounting and reporting for minority interests will be recharacterized as noncontrolling interests and classified as a component of equity. SFAS No. 160 applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, and will impact the recording of minority interest. The Company is currently evaluating the effects the adoption of SFAS No. 160 will have on its financial position and results of operations.

Real Estate Held for Investment

Real estate held for investment is carried at cost. Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"), requires that a property be considered impaired if the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the property. If impairment exists, an impairment loss is recognized by a charge against earnings equal to the amount by which the carrying amount of the property exceeds the fair value less cost to sell the property. If impairment of a property is recognized, the carrying amount of the property is reduced by the amount of the impairment and a new cost for the property is established. Such new cost is depreciated over the property's remaining useful life. Depreciation is provided by the straight-line method over estimated useful lives, which ranges from five to forty years.

Real Estate Held-for-Sale

Foreclosed real estate is initially recorded at new cost, defined as the lower of original cost or fair value minus estimated costs of sale. SFAS No. 144 also requires that properties held for sale be reported at the lower of carrying amount or fair value less costs of sale. If a reduction in a held for sale property's carrying amount to fair value less costs of sale is required, a provision for loss is recognized by a charge against earnings. Subsequent revisions, either upward or downward, to a held for sale property's estimated fair value less costs of sale are recorded as an adjustment to the property's carrying amount, but not in excess of the property's carrying amount when originally classified as held for sale. A corresponding charge against or credit to earnings is recognized. Properties held for sale are not depreciated.

Investments in Equity Investees

We may be considered to have the ability to exercise significant influence over the operating and investment policies of certain of its investees. Those investees are accounted for using the equity method. Under the equity method, an initial investment, recorded at cost, is increased by a proportionate share of the investee's operating income and any additional investment and decreased by a proportionate share of the investee's operating losses and distributions received.

Recognition of Rental Income

Rental income for commercial property leases is recognized on a straight-line basis over the respective lease terms. Rental income for residential property leases is recorded when due from residents and is recognized monthly as earned, which is not materially different than on a straight-line basis as lease terms are generally for periods of one year or less.

Revenue Recognition on the Sale of Real Estate

Sales of real estate are recognized when and to the extent permitted by Statement of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate" ("SFAS No. 66"), as amended by SFAS No. 144. Until the requirements of SFAS No. 66 for full profit recognition have been met, transactions are accounted for using the deposit, installment, cost recovery or financing method, whichever is appropriate. When IOT provides seller financing, gain is not recognized at the time of sale unless the buyer's initial investment and continuing investment are deemed to be adequate as determined by SFAS No. 66 guidelines.

Related Party Transactions

The Company has historically engaged in and may continue to engage in certain business transactions with related parties, including but not limited to asset acquisition and dispositions. Transactions involving related parties cannot be presumed to be carried out on an arm's length basis due to the absence of free market forces

that naturally exist in business dealings between two or more unrelated entities. Related party transactions may not always be favorable to our business and may include terms, conditions and agreements that are not necessarily beneficial to or in the best interest of our company.

Non-performing Notes Receivable

IOT considers a note receivable to be non-performing when the maturity date has passed without principal repayment and the borrower is not making interest payments. Any new note receivable that results from a modification or extension of a note considered non-performing will also be considered non-performing, without regard to the borrower's adherence to payment terms.

Interest Recognition on Notes Receivable

Interest income is not recognized on notes receivable that have been delinquent for 60 days or more. In addition, accrued but unpaid interest income is only recognized to the extent that the net realizable value of the underlying collateral exceeds the carrying value of the receivable.

Allowance for Estimated Losses

A valuation allowance is provided for estimated losses on notes receivable considered to be impaired. Impairment is considered to exist when it is probable that all amounts due under the terms of the note will not be collected. Valuation allowances are provided for estimated losses on notes receivable to the extent that the investment in the note exceeds management's estimate of fair value of the collateral securing such note.

Fair Value of Financial Instruments

The following assumptions were used in estimating the fair value of its notes receivable, marketable equity securities and notes payable. For performing notes receivable, the fair value was estimated by discounting future cash flows using current interest rates for similar loans. For non-performing notes receivable, the estimated fair value of IOT's interest in the collateral property was used. For marketable equity securities, fair value was based on the year-end closing market price of each security. For notes payable, the fair value was estimated using current rates for mortgages with similar terms and maturities.

Contractual Obligations

We have contractual obligations and commitments primarily with regards to the payment of mortgages. The following table aggregates our expected contractual obligations and commitments and includes items not accrued, per Generally Accepted Accounting Principles, through the term of the obligation such as interest expense and operating leases. Our aggregate obligations subsequent to December 31, 2008 are shown in the table below (dollars in thousands);

                                                 Less than 1                                    More than 5
                                     Total          Year          1-3 Years      4-5 Years         years
Long-term debt obligation           $ 45,825    $      39,966    $     3,068    $     2,791    $          -
Capital lease obligation                  -                -              -              -                -
Operating lease obligation             9,198            9,198             -              -                -
Purchase obligation                       -                -              -              -                -
Other long-term debt liabilities
reflected on the Registrant's
Balance Sheet under GAAP               2,460            2,460             -              -                -

Total                               $ 57,483    $      51,624    $     3,068    $     2,791    $          -

Results of Operations

The following discussion is based on our Consolidated Financial Statements "Consolidated Statement of Operations" for the years ended December 31, 2008, 2007, and 2006 from Part I, Item 8, "Financial Statements and Supplementary Data" and is not meant to be an all-inclusive discussion of the changes in our net income applicable to common shares. Instead, we have focused on significant fluctuations within our operations that we feel are relevant to obtain an overall understanding of the change in income applicable to common shareholders.

Our current operations consist of three commercial buildings, which include an office building, a shopping center and a commercial warehouse. We generate revenues through leasing of the commercial space. Our operating expenses relate mainly to the administration and maintenance costs associated with the operation of these buildings.

We also have other income and expense items. We receive interest income from the funds deposited with our advisor at Prime plus 1%. We have receivables from our affiliates which also provide interest income. In addition, we have received significant non-recurring proceeds from insurance claims which are included in our income from involuntary conversion. Our other significant expense item is from the mortgage expense which includes interest payments on the debt secured by our properties.

Comparison of the year ended December 31, 2008 to the year ended December 31, 2007

We had a net income applicable to common shares of $26.7 million or $6.41 per diluted earnings per share for the year ended December 31, 2008 which included income from discontinued operations, net of minority interest of $14.1 million, as compared to a net loss applicable to common shares of ($0.7 million) or ($0.18) per diluted earnings per share for the same period ended 2007 which includes a loss from discontinued operations, net of minority interest of ($0.2 million).

Property revenue and operating expense

Although our revenues were relatively constant, our property operations expense increased due to an overall increase in costs and additional repairs and maintenance incurred.

Advisory fees decreased in the current year. The advisory fees are based on total net assets. We sold seven apartments in January and one in November reducing our asset base, thus reducing our fee.

Other income (expense)

Our interest income has decreased as compared to the prior period. The decrease is due to no longer accruing interest income on our notes receivables from Unified Housing Foundation, an affiliated entity. The receivables are excess cash flow notes. The entity is required to pay on the notes when they generate excess cash flow, thus interest income is recorded when received.

Mortgage loan interest expense has decreased primarily due to paying off the mortgages on the six Midland/Odessa properties that were sold in January of this year. In addition, we paid off the mortgage on the Falcon Point apartments that were sold in November of 2008.

Earnings from unconsolidated subsidiaries and investees decreased due to writing off the majority of the value of our investment in Nakash Income Associates.

Income from involuntary conversion is due to insurance proceeds received from the tornado damage incurred on the Falcon Point apartments. There were no involuntary conversions in the prior years.

Due to the overall positive income, we had a net income fee expense due to our advisor. This was not applicable in the prior year due to an overall net loss incurred.

Discontinued operations

Our discontinued operations consist of seven apartment complexes. Six of the apartment complexes; Brighton Court, Del Mar, Enclave, Meridian, Signature Place, and Sinclair Place which are known as the Midland/Odessa properties were sold in January 2008. One of the apartments, Falcon Point, was reclassified to discontinued operations in May 2008 due to the condemnation of the property as a result of tornado damage and management's subsequent decision to sell the property. The property was sold "As-Is" in November 2008. The statements of operations for all prior periods presented have been restated to reflect the reclassification to discontinued operations. Included in discontinued operations for 2008 is a gain of $29.8 million, net of minority interest, on the sale of these properties. The results of operations from these properties are shown below (dollars in thousands):

                                                           For Years Ended December 31,
                                                           2008                    2007
Revenue
Rental                                                $          983          $        7,242
Property operations                                            1,144                   4,097

                                                                (161 )                 3,145

Expenses
Interest                                                      (2,533 )                (2,899 )
General and administration                                      (878 )                    (5 )
Depreciation                                                     (49 )                  (563 )

                                                              (3,460 )                (3,467 )

Net loss from discontinued operations before
gains on sale of real estate, taxes, fees and
minority interest                                             (3,621 )                  (322 )
Gain on sale of discontinued operations                       29,750                      -
Net income/sales fee to affiliate                             (4,512 )                    -

Income (loss) from discontinued operations, net
of minority interest before tax                               21,617                    (322 )
Tax benefit (expense)                                         (7,566 )                   113

Income (loss) from discontinued operations, net
of minority interest                                  $       14,051          $         (209 )

Comparison of the year ended December 31, 2007 to the year ended December 31, 2006

We had a net loss applicable to common shares of ($735,000) or ($0.18) per diluted earnings per share in 2007, which includes a loss from discontinued operations of ($209,000), as compared to a net income applicable to common shares of $172,000 or $0.04 per diluted earnings per share which includes income from discontinued operation of $560,000 for the same period ended 2006.

Property revenue and operating expense

General and administrative expense increased in 2007. The increase was attributable to an overall increase in costs and additional repairs and maintenance incurred during the year.

Advisory fees increased in 2007. The advisory fees are based in part on the total assets base for the year. The asset base increased in 2007 as result of purchases of Falcon Point and Travelers land in 2006.

Other income (expense)

Interest income increased in 2007. This increase is due to the additional interest income accrued on the transfer of $9.4 million to the advisor. Per the management agreement, the advisor receives excess cash which pays interest at . . .