U.S. Securities and Exchange Commission
Washington, D. C.  20549

FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934
       For the quarterly period ended  September 30, 2004

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
       For the transition period from                   to________.

                 Commission file number              0-2864

DIVERSIFIED REALTY, INC.
(Exact name of small business issuer as specified in its charter)

                Montana                   81-0268110
(State or other jurisdiction of  (IRS Employer Identification No.)
incorporation or organization)
128 Second Street South, Great Falls, Montana   59405
(Address of principal executive offices)

(406) 727-2600
(Issuer's telephone number)

Not Applicable
(Former name, former address and former fiscal year,
 if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes   X     No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to
be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
	      Yes  ___   No  ___
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:

                   Class              Outstanding at September 30,  2004
$.10 Par Value Common Stock                   5,363,898.6 Shares

Transitional Small Business Disclosure Format (Check One): Yes   ; No  X .
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DIVERSIFIED REALTY, INC.

FORM 10-QSB INDEX

SEPTEMBER 30, 2004

 Page Number
PART I

  Condensed Financial Statements:

Balance Sheet
  September 30, 2004	                                  2

Statements of Income and Comprehensive Income -
  Three Months and Nine Months
    Ended September 30, 2004 and 2003  	                  3

Statements of Cash Flows -
  Nine Months Ended September 30, 2004 and 2003           4

Notes to Financial Statements	                          5

  Management's Discussion and Analysis
  of the Statements of Income                             6

  Controls and Procedures                                 7

PART II

  Other Information	                                8-9

  Signatures                                             10

  Exhibits                                            11-17










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DIVERSIFIED REALTY, INC.

BALANCE SHEET

AS OF SEPTEMBER 30, 2004

 (Unaudited)
ASSETS

Current Assets

   Cash 	                            $	2,275,079

   Marketable Securities		            3,204

   Prepaid Income Taxes		                   30,936

       Total Current Assets		        2,309,219

Property, Plant and Equipment, Net		  808,458

       Total Assets	                    $	3,117,677


LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

  Accounts Payable and Accrued Liabilities   $	  32,752
  Due to Parent		                         136,049


  Current Deferred Income Tax Liability            1,306

       Total Current Liabilities		 170,107

Long-Term Deferred Tax Liability		  69,300


Stockholders' Equity

  Common Stock, $.10 Par Value,
    11,000,000 shares authorized,
    5,363,898 shares issued & outstanding	 536,389

  Additional Paid-In-Capital		       1,925,793

  Retained Earnings		                 314,189

   Accumulated Other Comprehensive Income 	   1,899

     Total Stockholders' Equity		       2,778,270

Total Liabilities and Stockholders' Equity   $ 3,117,677


See Notes to Financial Statements.

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DIVERSIFIED REALTY, INC.

STATEMENTS OF INCOME

AND COMPREHENSIVE INCOME

(Unaudited)

			For The Three Months	For The Nine Months
                              Ended			Ended
                  	September 30,		  September 30,
		        2004	    2003        2004		2003


Operating Revenues    $	30,963 	 $ 19,374     $	499,507       $	63,537



Operating Expenses	17,619     20,083        84,425		59,964

Income Before
  Income Tax		13,344 	    (709)	415,082          3,573

Income Tax
  (Expense) Benefit      3,456      1,648     (163,116)		 3,372



Net Income	      $ 16,800 	  $   939     $	251,966       $	 6,945

Other Comprehensive Income(Loss)
   Net of Income Taxes:

   Unrealized Holding
    Gains(Losses)           21 	     (94)          (50)		   234

      Comprehensive
        Income		16,821        845 	251,916          7,179

Basic Earnings
  Per Share	      $	 0.003 	  $  0.00     $	   0.05	      $  0.001

Weighted
  Average Shares     5,364,253	 5,367,374    5,365,809      5,367,554








See Notes to Financial Statements.

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DIVERSIFIED REALTY, INC.

STATEMENTS OF CASH FLOWS

                             (Unaudited)



		                           For The Nine Months
		                                 Ended
		                             September 30,
		                           2004		2003
CASH FLOWS FROM OPERATING ACTIVITIES

  Net Cash From Operations	       $  29,597      $	23,270
  Income Taxes Paid in Cash		(20,700)	  (50)

Net Cash Provided By
   Operating Activities		          8,897 	23,220


CASH FLOWS FROM INVESTING ACTIVITIES

  Cash Received on Sale of Property	483,531 	   --
  Cash Used to Purchase Property      (708,771)		   --



Net Cash Provided (Used) By
   Investing Activities		      (225,240)		   --


CASH FLOWS FROM FINANCING ACTIVITIES

   Cash Purchases of Common Stock	(1,604)		 (232)

   Net Cash Advances
      From (To) Parent Company		250,000		3,961


Net Cash (Used) By
   Financing Activities		        248,396 	3,729

     NET INCREASE (DECREASE) IN CASH     32,053        26,949

     CASH - BEGINNING OF PERIOD	      2,243,026     2,237,202

     CASH - END OF PERIOD	$     2,275,079 $   2,264,151




See Notes to Financial Statements.

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DIVERSIFIED REALTY, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004

Note 1.  Basis of Presentation
In the opinion of management, all adjustments necessary (consisting of
only normal recurring accruals) have been made to the unaudited financial
statements to present fairly the financial position as of September 30,
2004 and the results of the Company's operations for the nine months ended
September 30, 2004 and 2003 and cash flows for the nine months ended
September 30, 2004 and 2003.  The results of operations for the nine months
ended September 30, 2004 and 2003 are not necessarily indicative of the
results to be expected for the full year.

Parent - M Corp, Great Falls, Montana owns approximately 95% of the
outstanding shares of the Company.

Note 2.  Significant Accounting Policies
For purposes of the statements of cash flows, cash equivalents include
time deposits, certificates of deposit and money market accounts, all with
original maturities of three months or less.

Comprehensive income includes net income, as well as other changes in
stockholder's equity that result from transactions and economic events other
than those with stockholders.  The Company's only significant element of
other comprehensive income is unrealized gains and losses on
available-for-sale securities.

Basic earnings per share (EPS) is calculated by dividing net income by the
weighted number of common shares outstanding for the period.

Note 3.  Contingencies
The Board of Directors has approved the Company's participation in an attempt
to purchase a savings and loan institution.  The Company will participate in
the purchase with its parent, M Corp.   Should the purchase take place, the
liquidity of the Company will be significantly affected.

The Board of Directors has approved a merger between a newly formed company
and Diversified Realty, Inc. in order to take the Company private and such
merger is pending.  Schedule 13e-3 and Schedule 13e-3/A have been filed
electronically with the Securities Exchange Commission, and can be viewed at
www.sec.com.

Note 4.  Real Estate Sale
Diversified Realty, Inc. owned one property, not operated as a rental unit,
in Clearwater, Florida. On May 25, 2004 the Company sold this property which
was carried on the financial statements at a cost of $122,000 with $61,015 in
accumulated depreciation.  The Company recorded a gain of $426,451 during the
second quarter of 2004.  The new property identified in connection with this
exchange,  located at 2212 Broadwater Avenue in Billings, Montana, was
purchased on August 1, 2004.   The cost of the new property totaled $708,771.
This property is a commercial building, currently leasing to three tenants.

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DIVERSIFIED REALTY, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE INCOME STATEMENT

September 30, 2004

A summary of the period-to-period changes in items included in the
statements of income is shown below.

                                           COMPARISON OF

				  THREE MONTHS	         NINE MONTHS
				     ENDED	            ENDED
			    	  SEPTEMBER 30,	        SEPTEMBER 30,
     				  2004 AND 2003         2004 AND 2003

Revenues		          $  11,588    (60%)    $ 435,970 (686%)


Expenses			    (2,464)    (12%)       24,461  (41%)


Net Income		            15,860   (1,687%)     245,020 (3,527%)

Revenues increased $435,970 (686%) in the first nine months of 2004 as
compared with the first nine months of 2003 due to the sale of Clearwater,
Florida property during May of 2004 resulting in a gain of $426,451 during
second quarter, an increase in interest and dividend revenues of $571 (4.6%),
and an increase in rental income of $8,946 (17.6%).  Operating expenses
increased $24,461 (40.8%) in the first nine months of 2004 ($2,464 decrease
during third quarter of 2004) as compared with the first nine months of 2003
due primarily to an increase in legal fees, travel expenses, depreciation,
and property taxes paid during third quarter in connection with the 1031
tax-deferred exchange of properties.  The provision for income tax expense
increased $166,489 (4,937%) in the first nine months of 2004 as compared with
the first nine months of 2003 due primarily to the deferred tax calculated
on the gain on sale of property.









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DIVERSIFIED REALTY, INC.

CONTROLS AND PROCEDURES

SEPTEMBER 30, 2004

Evaluation of disclosure controls and procedures.  Based on an evaluation
carried out under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial
Officer during the 90-day period prior to the filing of this report, our
Chief Executive Officer and Chief Financial Officer believe that our
disclosure controls and procedures, as defined in Securities Exchange Act
Rules 13a-14 and 15d-14, are, to the best of their knowledge, effective.

Changes in internal controls, subsequent to the date of this evaluation.
Our Chief Executive Officer and Chief Financial Officer are not aware of
any significant changes in our internal controls over financial reporting,
including any corrective actions with regard to significant deficiencies
and material weakness, or in other factors that could significantly affect
these controls to ensure that information required to be disclosed by us,
in reports that we file or submit under the Securities Act, is recorded,
processed, summarized, and reported within the time period specified in
Securities and Exchange Commission rules or regulations.






















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DIVERSIFIED REALTY, INC.

PART II

OTHER INFORMATION


SEPTEMBER 30, 2004



ITEM 1	LEGAL PROCEEDINGS

None

ITEM 2	UNREGISTERED SALES OF EQUITY SECURITIES AND
USE OF PROCEEDS

None

ITEM 3	DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5	OTHER INFORMATION

None














8
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DIVERSIFIED REALTY, INC.

PART II

OTHER INFORMATION - CONTINUED


SEPTEMBER 30, 2004


ITEM 6	EXHIBITS


          Exhibit
          Number 	Description                                   Page #

	3.1		Articles of Incorporation                        11
	3.2		By-Laws                                          11
	10		Material Contracts                               11
	31.1		Certification required under Section 302      12-13
	31.2		Certification required under Section 302      14-15
	32.1            Certification required under Section 906         16
	32.2            Certification required under Section 906         16






















9
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SIGNATURES



In accordance with the requirements of section 13 or 15(d) of the
Exchange Act, the Registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.





DIVERSIFIED REALTY, INC.
Registrant



Date:   October 25, 2004             By:      s/R. Bruce Robson
                            			R. Bruce Robson,
President, Chairman of the Board




In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the Registrant and in
the capacities indicated on October 25, 2004.



Director					s/Tyler Arneson
                                                  Tyler Arneson

Director					s/S.M. McCann
			                          S.M. McCann

Chief Financial Officer				s/D. Mellinger
                                                  D. Mellinger

Chief Executive Officer				s/Paul J. McCann
                                                  Paul J. McCann







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DIVERSIFIED REALTY, INC.

EXHIBIT 3.1

ARTICLES OF INCORPORATION


The Articles of Incorporation were signed on December 2, 1957.  There
have been no amendments to the Articles of Incorporation during the
third fiscal quarter of 2004.



EXHIBIT 3.2

BY-LAWS


During the third quarter ending September 30, 2004, there were no
changes to the Diversified Realty, Inc. By-laws.



EXHIBIT 10

MATERIAL CONTRACTS

On May 25,2004, a contract was executed for the sale of property
located in Clearwater, Florida in the amount of $520,000.  This
property was carried on the financial statements at a cost of $122,000
with $61,015 in accumulated depreciation.  The Company recorded a gain
of $426,451 during the second quarter of 2004.  The net proceeds from
the sale, $483,531 are held by Asset Preservation Inc. pending a
tax-deferred like-kind exchange expected to occur during the third
quarter of 2004.  The Company finalized the exchange of property on
August 1, 2004, identifying and purchasing a commercial building
located at 2212 Broadwater Avenue in Billings, Montana.  This cost of
the new property was $708,771.  There are currently three leasing
tenants.








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DIVERSIFIED REALTY, INC.

EXHIBIT 31.1

CERTIFICATION

I, Paul J. McCann, certify that:

1.  I have reviewed this quarterly report on Form 10-QSB of
    Diversified Realty, Inc.

2.  Based on my knowledge, this report does not contain any
    untrue statement of a material fact or omit to state a material fact
    necessary to make the statements made, in light of the circumstances
    under which such statements were made, not misleading with respect to
    the period covered by this report;

3.  Based on my knowledge, the financial statements, and other financial
    information included in the quarterly report, fairly present in
    all material respects the financial condition, results of operations
    and cash flows of Diversified Realty, Inc., as of, and for, the
    periods presented in this report.

4.  Diversified Realty, Inc.'s other certifying officers and I are
    responsible for establishing and maintaining disclosure controls and
    procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)
    and internal control over financial reporting (as defined in Exchange
    Act Rules 13a-15(f) and 15d-15(f) for Diversified Realty, Inc. and
    have:

    a. Designed such disclosure controls and procedures, or caused such
    disclosure controls and procedures to be designed under our
    supervision, to ensure that material information relating to
    Diversified Realty, Inc., including its consolidated subsidiaries, is
    made known to us by others within those entities, particularly during
    the period in which this report is being prepared;

    b.  Evaluated the effectiveness of Diversified Realty, Inc.'s
    disclosure controls and procedures and presented in this report our
    conclusions about the effectiveness of the disclosure controls and
    procedures, as of the end of the period covered by this report based
    on such evaluation; and:

    c. Disclosed in this report any change in Diversified Realty, Inc.'s
    internal control over financial reporting that occurred during
    Diversified Realty, Inc.'s third fiscal quarter that has materially
    affected, or is reasonably likely to materially affect Diversified
    Realty, Inc.'s internal control over financial reporting;
12
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DIVERSIFIED REALTY, INC.

EXHIBIT 31.1 - CONTINUED

CERTIFICATION

 5. Diversified Realty Inc.'s other certifying officers and I have
    disclosed, based on our most recent evaluation of internal control
    over financial reporting, to Diversified Realty, Inc.'s auditors and
    the audit committee of Diversified Realty, Inc.'s Board of Directors
    (or persons performing the equivalent functions):

    a.  All significant deficiencies and material weaknesses in the
    design or operation of internal controls over financial reporting which
    are reasonably likely to adversely affect Diversified Realty,  Inc.'s
    ability to record, process, summarize and report financial information;
    and

    b. any fraud, whether or not material, that involves management or
    other employees who have a significant role in Diversified Realty,
    Inc.'s internal control over financial reporting.



    Date: October 25, 2004                 s/Paul J. McCann
                  	     	             Paul J. McCann,
                                             Chief Executive Officer

















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DIVERSIFIED REALTY, INC.

EXHIBIT 31.2

CERTIFICATION

I, D. Mellinger, certify that:

1. I have reviewed this quarterly report on Form 10-QSB of
     Diversified Realty, Inc.

2. Based on my knowledge, this report does not contain any
   untrue statement of a material fact or omit to state a material
   fact necessary to make the statements made, in light of the
   circumstances under which such statements were made, not
   misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other
   financial information included in the quarterly report, fairly
   present in all material respects the financial condition, results
   of operations and cash flows of Diversified Realty, Inc., as of,
   and for, the periods presented in this report.

4. Diversified Realty, Inc.'s other certifying officers and I are
   responsible for establishing and maintaining disclosure controls
   and procedures (as defined in Exchange Act Rules 13a-15(e) and
   15d-15(e) and internal control over financial reporting (as defined
   in Exchange Act Rules 13a-15(f) and 15d-15(f) for Diversified
   Realty, Inc. and have:

   a.  Designed such disclosure controls and procedures, or caused such
   disclosure controls and procedures to be designed under our
   supervision, to ensure that material information relating to
   Diversified Realty, Inc., including its consolidated subsidiaries,
   is made known to us by others within those entities, particularly
   during the period in which this report is being prepared;

   b.  Evaluated the effectiveness of Diversified Realty, Inc.'s
   disclosure control and procedures and presented in this report our
   conclusions about the effectiveness of the disclosure controls and
   procedures, as of the end of the period covered by this report based
   on such evaluation; and:

   c. Disclosed in this report any change in Diversified Realty,
   Inc.'s internal control over financial reporting that occurred
   during Diversified Realty, Inc.'s third fiscal quarter that has
   materially affected, or is reasonably likely to materially affect
   Diversified Realty, Inc.'s internal control over financial
   reporting;

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DIVERSIFIED REALTY, INC.

EXHIBIT 31.2 - CONTINUED

CERTIFICATION

5. Diversified Realty Inc.'s other certifying officers and I have
   disclosed, based on our most recent evaluation of internal control
   over financial reporting, to Diversified Realty, Inc.'s auditors and
   the audit committee of Diversified Realty, Inc.'s Board of Directors
   (or persons performing the equivalent functions):

   a.  All significant deficiencies and material weaknesses in the
   design or operation of internal controls over financial reporting
   which are reasonably likely to adversely affect Diversified Realty,
   Inc.'s ability to record, process, summarize and report financial
   information; and

   b.  any fraud, whether or not material, that involves management or
   other employees who have a significant role in Diversified Realty,
   Inc.'s internal control over financial reporting.



    Date: October 25, 2004             s/D. Mellinger
                              	       D. Mellinger,
                                       Chief Financial Officer

















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DIVERSIFIED REALTY, INC.
EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED UPRSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Diversified Realty, Inc.
on Form 10-QSB for the period ending September 30, 2004 as filed with
the Securities and Exchange Commission on the date hereof
(the "Report"),  I, Paul J. McCann, Chief Executive Officer of
Diversified Realty, Inc., certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
to the best of my knowledge and belief, that;

The report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of Diversified Realty, Inc.

Date:  October 25,  2004             	 s/Paul J. McCann
                                           Paul J. McCann,
					   Chief Executive Officer


EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED UPRSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Diversified Realty, Inc.
on Form 10-QSB for the period ending September 30, 2004 as filed with
the Securities and Exchange Commission on the date hereof
(the "Report"), I, D. Mellinger, Chief Financial Officer of
Diversified Realty, Inc., certify, pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
to the best of my knowledge and belief, that;

The report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations
of Diversified Realty, Inc.

Date:   October 25, 2004              	 s/D. Mellinger
				           D. Mellinger,
                                           Chief Financial Officer


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