PROMISSORY NOTE


$8,000,000                                                  New York, New York

                                                       As of November 20, 1997

          FOR VALUE RECEIVED ASHLEY WOODS, L.L.C., a South Carolina limited
liability company, having an address at c/o Insignia Financial Group, One
Insignia Financial Plaza, Greenville, South Carolina 29602 (hereinafter referred
to as "Borrower"), promises to pay to the order of LEHMAN BROTHERS HOLDINGS INC.
D/B/A LEHMAN CAPITAL, A DIVISION OF LEHMAN BROTHERS HOLDINGS INC., a Delaware
corporation, having an address at Three World Financial Center, 200 Vesey
Street, New York, New York 10285 (hereinafter referred to as "Lender"), or at
such other place as the holder hereof may from time to time designate in
writing, the principal sum of EIGHT MILLION AND 00/100 DOLLARS ($8,000,000.00),
in lawful money of the United States of America with interest thereon to be
computed from the date of this Note at the Applicable Interest Rate (hereinafter
defined), and to be paid as hereinafter provided.


                              A.  PAYMENT TERMS

          Borrower shall pay to Lender:

     (i)  a payment of interest only on December 1, 1997;

     (ii) a constant payment of $54,791.32 (the "Monthly Payment") on January 1,
          1998 and on the first day of each calendar month (the "Monthly Payment
          Date") thereafter to and including the first day of November, 2004,
          and

     (iii)the balance of the principal sum then outstanding and all
          interest thereon shall be due and payable on the first day of
          December, 2004 (the "Maturity Date").

     Each of such payments shall be applied as follows:

     (i)  First to the payment of interest computed at the Applicable Interest
          Rate; and

     (ii) The balance applied toward the reduction of the principal sum.


                                 B.  INTEREST

          The term "Applicable Interest Rate" as used in this Note shall mean
7.29% per annum.

          Interest on the principal sum of this Note shall be calculated in
arrears on the basis of a three hundred sixty (360) day year consisting of
twelve (12) months of thirty (30) days each.


                         C.  DEFAULT AND ACCELERATION

          The whole of the principal sum of this Note, together with all
interest accrued and unpaid thereon and all other sums due under the Security
Instrument (hereinafter defined) and this Note (all such sums hereinafter
collectively referred to as the "Debt") shall without notice become immediately
due and payable at the option of Lender if any payment required in this Note is
not paid within ten (10) days after written notice from the Lender notifying
Borrower that the same is due or on the happening of any other default, after
the expiration of any applicable notice and grace periods, herein or under the
terms of the Security Instrument (hereinafter collectively an "Event of
Default").  All of the terms, covenants and conditions contained in the Security
Instrument and the Other Security Documents (hereinafter defined) are hereby
made part of this Note to the same extent and with the same force as if they
were fully set forth herein.  In the event that it should become necessary to
employ counsel to collect the Debt or to protect, sell or foreclose the security
hereof, Borrower also agrees to pay reasonable attorney's fees for the services
of such counsel whether or not suit be brought.


                                D.  PREPAYMENT

          Borrower shall not have the right or privilege to prepay all or any
portion of the unpaid principal balance of this Note until November 31, 2000.
Beginning December 1, 2000, provided no Event of Default exists, the principal
balance of this Note may be prepaid, in whole but not in part, upon: (i) not
less than 30 days and not more than 45 days prior written notice (the
"Prepayment Notice") to Lender specifying the scheduled payment date on which
prepayment is to be made (the "Prepayment Date"); (ii) payment of all accrued
and unpaid interest on the outstanding principal balance of this Note to and
including the Prepayment Date together with a payment of all interest which
would have accrued on the principal balance of this Note to and including the
first day of the calendar month immediately following the Prepayment Date, if
such prepayment occurs on a date which is not the first day of a calendar month
(the "Shortfall Interest Payment"); (iii) payment of all other sums then due
under this Note, the Security Instrument and the Other Security Documents and
(iv) if the Prepayment Date occurs prior to the date which is six months prior
to the Maturity Date payment of a prepayment consideration (the "Prepayment
Consideration") in an amount equal to the greater of: (A) one (1%) percent of
the principal amount of this Note being prepaid; and (B) the present value of a
series of payments each equal to the Payment Differential (hereinafter defined)
and payable on each monthly payment date over the remaining original term of
this Note and on the Maturity Date discounted at the Reinvestment Yield
(hereinafter defined) for the number of months remaining from the Prepayment
Date to each such monthly payment date and the Maturity Date.  The term
"Reinvestment Yield" as used herein shall be equal to the lesser of (a) the
yield on the U.S. Treasury issue (primary issue) with a maturity date closest to
the Maturity Date, or (b) the yield on the U.S. Treasury issue (primary issue)
with a term equal to the remaining average life of the Debt, with each such
yield being based on the bid price for such issue as published in The Wall
Street Journal on the date that is 14 days prior to the Prepayment Date set
forth in the Prepayment Notice (or, if such bid price is not published on that
date, the next preceding date on which such bid price is so published) and
converted to a monthly compounded nominal yield.  The term "Payment
Differential" as used herein shall be equal to (x) the Applicable Interest Rate
minus the Reinvestment Yield, divided by (y) 12 and multiplied by (z) the
principal sum outstanding on such Prepayment Date after application of the
Constant Monthly Payment (if any) due on such Prepayment Date, provided that the
Payment Differential shall in no event be less than zero.  In no event, however,
shall Lender be required to reinvest any prepayment proceeds in U.S. Treasury
obligations or otherwise.  Lender shall notify Borrower of the amount, and the
basis of determination, of the required Prepayment Consideration.  If a
Prepayment Notice is given by Borrower to Lender pursuant to this Article D, the
principal balance of this Note and the other sums required under this Article D
shall be due and payable on the Prepayment Date.

          Lender shall not be obligated to accept any prepayment of the
principal balance of this Note unless it is accompanied by all sums due in
connection therewith.  Notwithstanding anything contained herein to the
contrary, provided no Event of Default exists, no Prepayment Consideration shall
be due in connection with a complete or partial prepayment resulting from the
application of insurance proceeds or condemnation awards pursuant to paragraphs
3 and 6 of the Security Instrument.  In the event of any permitted partial
prepayment of the principal balance of this Note, the amount of principal
prepaid (but not including any Prepayment Consideration or interest) shall be
applied to the principal last due under this Note and shall not release Borrower
from the obligation to pay the Constant Monthly Payments next becoming due under
this Note and the Constant Monthly Payment shall not be adjusted or recalculated
as a result of such partial prepayment.

          If a Default Prepayment (defined herein) occurs prior to the date
which is six months prior to the Maturity Date, Borrower shall pay to Lender the
entire Debt, including, without limitation, the Prepayment Consideration.

          For purposes of this Note, the term "Default Prepayment" shall mean a
prepayment of the principal amount of this Note made during the continuance of
any Event of Default or after an acceleration of the Maturity Date under any
circumstances, including, without limitation, a prepayment occurring in
connection with reinstatement of the Security Instrument provided by statute
under foreclosure proceedings or exercise of a power of sale, any statutory
right of redemption exercised by Borrower or any other party having a statutory
right to redeem or prevent foreclosure, any sale in foreclosure or under
exercise of a power of sale or otherwise.

          Notwithstanding any provision of this Article D to the contrary,
Lender may require Borrower, in lieu of a prepayment as contemplated in the
first paragraph of this Article D, to deliver to Lender the Defeasance
Collateral (hereinafter defined) in the manner contemplated herein.  After
Lender's receipt of the Prepayment Notice, Lender shall, if it so elects, advise
Borrower that, in lieu of a prepayment, the Defeasance Collateral shall be
required, in which event Borrower shall be entitled to a release of the Property
(hereinafter defined) from the lien of the Security Instrument and the Other
Security Documents upon satisfaction of the following:

          I.  Lender shall have received written confirmation from the rating
agencies that have rated the REMIC "real estate mortgage investment conduit"
(defined in Section 860D of the Internal Revenue Code of 1986, as amended from
time to time or any successor statute (the "Code")) ("REMIC") related to the
Securities (as defined in the Security Instrument) that such substitution of
Defeasance Collateral will not result in a downgrade, withdrawal or
qualification of the ratings then assigned to any of the Securities; provided,
however, that in the event that Lender or its agent is unable to obtain such
confirmation, the Lender or its agent shall so advise Borrower and Borrower will
then be subject to the other provisions of this Article D set forth above;

          II.  all accrued and unpaid interest and all other sums due under this
Note, the Security Instrument and other Security Documents up to the date of the
delivery of the Defeasance Collateral (the "Release Date"), including, without
limitation, all costs and expenses incurred by Lender or its agents in
connection with such release (including, without limitation, the review of the
proposed Defeasance Collateral and the preparation of the Defeasance Security
Agreement (as hereinafter defined) and the related documentation), shall be
fully paid on or before the Release Date; and

          III.  Borrower shall have delivered to Lender on or before the Release
Date:

               (a)  a pledge and security agreement, in form and substance
          satisfactory to Lender in its sole discretion, creating a first
          priority security interest in favor of Lender in the Defeasance
          Collateral (the "Defeasance Security Agreement"), which shall provide,
          among other things, that any excess received by Lender from the
          Defeasance Collateral over the amount payable by Borrower hereunder
          shall be refunded to Borrower promptly following each Monthly Payment
          Date and the Maturity Date;

               (b)  direct, non-callable obligations of the United States of
          America (the "US Obligations") that provide for payments prior, but as
          close as possible, to all successive Monthly Payment Dates occurring
          after the Release Date and the Maturity Date, with each such payment
          being equal to or greater than the amount of the corresponding
          Constant Monthly Payment required to be paid under this Note for the
          balance of the term hereof and the amount required to be paid on the
          Maturity Date (the "Defeasance Collateral"), each of which shall be
          duly endorsed by the holder thereof as directed by Lender or
          accompanied by a written instrument of transfer in form and substance
          wholly satisfactory to Lender (including, without limitation, such
          instrument as may be required by the depository institution holding
          such securities or the issuer thereof, as the case may be, to
          effectuate book-entry transfers and pledges through the book-entry
          facilities of such institution) in order to perfect upon the delivery
          of the Defeasance Security Agreement the first priority security
          interest therein in favor of the Lender in conformity with all
          applicable state and federal laws governing the granting of such
          security interests, provided, however, that the price of the
          Defeasance Collateral shall not exceed all sums that would otherwise
          be due in connection with a prepayment of the principal balance of
          this Note under the first paragraph of this Article D; Borrower shall
          authorize and direct that the payments received from the U.S.
          Obligations shall be made directly to Lender or Lender's designee and
          applied to satisfy the Obligations of Borrower under this Note;

               (c) evidence reasonably satisfactory to Lender that title to the
          Release Property has been transferred to an entity other than
          Borrower;

               (d) Lender shall have received an opinion of Borrower's counsel,
          dated as of the Release Date, in form reasonably satisfactory to
          Lender stating, among other things, that (A) the Defeasance Collateral
          and the U.S. Obligations have been duly and validly assigned and
          delivered to Lender and Lender has a valid, perfected, first priority
          lien and security interest in the Defeasance Collateral delivered by
          Borrower, (B) the Defeasance Collateral has been validly assigned to
          the REMIC, (C) the Defeasance has been effected in accordance with the
          requirements of Treasury Regulation 1.860(g)-2(a)(8) (as such
          regulation may be amended or substituted from time to time) and will
          not be treated as an exchange pursuant to Section 1001 of the Code and
          (D) the tax qualification and status of the REMIC will not be
          adversely affected or impaired as a result of the Defeasance;

               (e)  a certificate by Borrower's independent public accountant
          certifying that all of the requirements set forth in Clause I and II
          above and this Clause III have been fully satisfied;

               (f)  such other certificates, documents or instruments as Lender
          may reasonably require; and

               (g)  Notwithstanding the foregoing, no such Release shall be
          made, given or be deemed effective under this Article D until the
          first day after expiration of the period during which the delivery to
          Lender of the Defeasance Collateral in connection therewith is subject
          to avoidance and recovery as a preferential transfer under 11 U.S.C.
          547 in the event of a bankruptcy of the delivering person or entity
          without such avoidance and recovery (which day shall be identified in
          writing by Borrower at any time that Borrower delivers the Defeasance
          Collateral to Lender), unless Lender receives, at the time of such
          delivery, an opinion of counsel to the effect that such delivery of
          the Defeasance Collateral would not be avoided and recovered as a
          preferential transfer under 11 U.S.C. 547 in the event of the filing
          of a bankruptcy petition in respect of the conveying or delivering
          person or entity.

          Upon compliance with the foregoing requirements relating to the
delivery of the Defeasance Collateral, the Property shall be released from the
lien of the Security Instrument and the Other Security Documents and the
Defeasance Collateral shall constitute collateral which shall secure this Note
and the Debt.  Lender will, at Borrower's expenses, execute and deliver any
agreements reasonably requested by Borrower to release the lien of the Security
Instrument from the Property.  Upon the release by the Lender in accordance with
this Article D, Borrower shall have no further right to prepay this Note
pursuant to the other provisions of this Article D or otherwise.


                             E.  DEFAULT INTEREST

          Borrower does hereby agree that upon the occurrence of an Event of
Default or upon the failure of Borrower to pay the Debt in full on the Maturity
Date, Lender shall be entitled to receive and Borrower shall pay interest
("Default Interest") on the entire unpaid principal sum at the rate of (i) the
greater of (a) two percent (2%) over the Prime Rate (hereinafter defined), as
such Prime Rate shall change from time to time or (b) five percent (5%) over the
Applicable Interest Rate then in effect or (ii) the maximum rate of interest
which Borrower may by law pay, whichever is lower, to be computed from the
occurrence of the Event of Default until the actual receipt and collection of
the Debt (the "Default Interest Rate").  This charge shall be added to the Debt,
and shall be deemed secured by the Security Instrument.  This clause, however,
shall not be construed as an agreement or privilege to extend the date of the
payment of the Debt, nor as a waiver of any other right or remedy accruing to
Lender by reason of the occurrence of any Event of Default.  The term "Prime
Rate" as used in this Note shall mean the daily "prime rate" published in The
Wall Street Journal from the date of the Event of Default, as such "prime rate"
shall change from time to time.  In the event The Wall Street Journal ceases to
publish the "prime rate" then Lender shall select an equivalent publication
which publishes such "prime rate"; and in the event such prime rates are no
longer generally published or are limited, regulated or administered by a
governmental or quasi-governmental body, then Lender shall select a comparable
interest rate index.


                                 F.  SECURITY

          This Note is secured by the Security Instrument and the Other Security
Documents.  The term "Security Instrument" as used in this Note shall mean the
Mortgage and Security Agreement dated as of the date hereof in the principal sum
of $8,000,000 given by Borrower to Lender encumbering the fee estate of Borrower
in certain premises located in Hamilton County, State of Ohio and other
property, as more particularly described therein and intended to be duly
recorded in said County.  The term "Other Security Documents" as used in this
Note shall mean all and any of the documents other than this Note or the
Security Instrument now or hereafter executed by Borrower and/or others and by
or in favor of Lender, which wholly or partially secure or guarantee payment of
this Note.  Whenever used, the singular number shall include the plural, the
plural the singular, and the words "Lender" and "Borrower" shall include their
respective successors, assigns, heirs, executors and administrators.

                              G.  SAVINGS CLAUSE

          This Note is subject to the express condition that at no time shall
Borrower be obligated or required to pay interest on the principal balance due
hereunder at a rate which could subject Lender to either civil or criminal
liability as a result of being in excess of the maximum interest rate which
Borrower is permitted by applicable law to contract or agree to pay.  If by the
terms of this Note, Borrower is at any time required or obligated to pay
interest on the principal balance due hereunder at a rate in excess of such
maximum rate, the Applicable Interest Rate shall be deemed to be immediately
reduced to such maximum rate and all previous payments in excess of the maximum
rate shall be deemed to have been payments in reduction of principal and not on
account of the interest due hereunder.

                               H.  LATE CHARGE

          If any sum payable under this Note is not received by Lender within
five (5) days of the date on which it is due, without taking into account or
including within said five (5) day period any applicable notice or grace period,
Borrower shall pay to Lender upon demand an amount equal to the lesser of five
percent (5%) of such unpaid sum or the maximum amount permitted by applicable
law to defray the expenses incurred by Lender in handling and processing such
delinquent payment and to compensate Lender for the loss of the use of such
delinquent payment and such amount shall be secured by the Security Instrument
and the Other Security Documents.  Nothing contained herein is intended to
affect the rights of Lender in and to any Default Interest due to Lender
pursuant to the provisions of paragraph E hereof entitled "Default Interest".

                              I.  MISCELLANEOUS

          This Note may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Borrower or Lender, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.

          If Borrower consists of more than one person or party, the obligations
and liabilities of each such person or party shall be joint and several.  The
foregoing sentence, however, is not intended to affect the limited liability of
any limited partner or stockholder of Borrower afforded by applicable
partnership or corporate law.

          Borrower and all others who may become liable for the payment of all
or any part of the Debt do hereby severally waive presentment and demand for
payment, notice of dishonor, protest and notice of protest and non-payment.  No
release of any security for the Debt or extension of time for payment of this
Note or any installment hereof, and no alteration, amendment or waiver of any
provision of this Note, the Security Instrument or the Other Security Documents
made by agreement between Lender and any other person or party shall release,
modify, amend, waive, extend, change, discharge, terminate or affect the
liability of Borrower, and any other who may become liable for the payment of
all or any part of the Debt, under this Note, the Security Instrument or the
Other Security Documents.

          Borrower (and the undersigned representative of Borrower, if any)
represents that Borrower has full power, authority and legal right to execute
and deliver this Note, the Security Instrument and the Other Security Documents
and that this Note, the Security Instrument and the Other Security Documents
constitute valid and binding obligations of Borrower.

          This Note shall be governed and construed in accordance with the laws
of the State of New York and the applicable laws of the United States of
America.


                               J.  EXCULPATION

          Lender shall not enforce the liability and obligation of Borrower to
perform and observe the obligations contained in this Note or the Security
Instrument by any action or proceeding wherein a money judgment shall be sought
against Borrower or any general or limited partner or member of Borrower
(hereinafter collectively referred to as the "Exculpated Parties"), except that
Lender may bring a foreclosure action, action for specific performance or other
appropriate action or proceeding to enable Lender to enforce and realize upon
this Note, the Security Instrument, the Other Security Documents, and the
interest in the Property, the Rents (as defined in the Security Instrument) and
any other collateral given to Lender created by this Note, the Security
Instrument and the Other Security Documents; provided, however, that any
judgment in any such action or proceeding shall be enforceable against the
Exculpated Parties only to the extent of Borrower's interest in the Property, in
the Rents and in any other collateral given to Lender.  Lender, by accepting
this Note and the Security Instrument, agrees that it shall not sue for, seek or
demand any deficiency judgment against the Exculpated Parties in any such action
or proceeding, under or by reason of or under or in connection with the Security
Instrument, the Other Security Documents or this Note.  The provisions of this
paragraph shall not, however, (i) constitute a waiver, release or impairment of
any obligation evidenced or secured by the Security Instrument, the Other
Security Documents or this Note; (ii) impair the right of Lender to name
Borrower as a party defendant in any action or suit for judicial foreclosure and
sale under the Security Instrument; (iii) affect the validity or enforceability
of any guaranty made in connection with the Security Instrument, this Note, or
the Other Security Documents; (iv) impair the right of Lender to obtain the
appointment of a receiver upon the occurrence and continuance of an Event of
Default; (v) impair the enforcement of the Assignment of Leases and Rents dated
the date hereof given by Borrower to Lender executed in connection herewith;
(vi) impair the right of Lender to bring suit with respect to fraud or
intentional misrepresentation by Borrower, the Exculpated Parties or any other
person or entity in connection with the Security Instrument, this Note or the
Other Security Documents; (vii) impair the right of Lender to obtain the Rents
received by any of the Exculpated Parties after the occurrence and continuance
of an Event of Default; (viii) impair the right of Lender to bring suit with
respect to the Exculpated Parties' misappropriation of tenant security deposits
or Rents collected in advance; (ix) impair the right of Lender to obtain
insurance proceeds or condemnation awards due to Lender under the Security
Instrument; (x) impair the right of Lender to enforce the provisions of sub-
paragraphs 36(g) through 36(k), inclusive and paragraphs 34 and 35 of the
Security Instrument against the Borrower (excluding the general and limited
partners or members of Borrower); or (xi) impair the right of Lender to recover
any part of the Debt from the Borrower (excluding the general and limited
partners or members of Borrower) following the breach of any covenant contained
in paragraphs 9 or 55 of the Security Instrument.


          THIS NOTE, AND THE OTHER SECURITY DOCUMENTS EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING BETWEEN LENDER, BORROWER AND THE OTHER RESPECTIVE
PARTIES HERETO AND THERETO AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS
BETWEEN SUCH PARTIES RELATING TO THE SUBJECT MATTER HEREOF AND THEREOF AND MAY
NOT BE CONTRADICTED BY EVIDENCE OF PRIOR CONTEMPORANEOUS OR SUBSEQUENT
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.


          IN WITNESS WHEREOF, Borrower has duly executed this Note under seal as
of the day and year first above written.


                         ASHLEY WOODS, L.L.C., a South Carolina limited
                         liability company

                         By:  DAVIDSON DIVERSIFIED REAL ESTATE I, L.P., a
                              Delaware limited partnership, its sole member

                              By:  DAVIDSON DIVERSIFIED PROPERTIES, INC., a
                                   Tennessee corporation, its general partner


                                   By:  /s/ Robert D. Long, Jr.
                                        Name:   Robert D. Long, Jr.
                                        Title:  Vice President


STATE OF South Carolina       )
                              )SS:
COUNTY OF Greenville          )


          This instrument was acknowledged before me on the 20th day of
November, 1997, by Robert D. Long, Jr., who is the Vice President of DAVIDSON
DIVERSIFIED PROPERTIES, INC., a Tennessee corporation, on behalf of said
corporation, which corporation is the general partner of DAVIDSON DIVERSIFIED
REAL ESTATE I, L.P., a Delaware limited partnership which is the sole member and
acknowledged this instrument on behalf of ASHLEY WOODS, L.L.C., a South Carolina
limited liability company.


[SEAL]

                                   /s/ S. Tamara T. Burdick
                                   Notary Public in and for the
                                   State of South Carolina


My Commission Expires:             Print name of Notary Public
July 22, 2007

                                   S. Tamara T. Burdick