UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-KSB

(Mark One)
[X]   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934

                 For the fiscal year ended December 31, 2004


[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

             For the transition period from _________to _________

                         Commission file number 0-13530

                    DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.
                 (Name of small business issuer in its charter)

         Delaware                                               62-1181565
(State or other jurisdiction of                              (I.R.S. Employer
 incorporation or organization)                             Identification No.)

                          55 Beattie Place, PO Box 1089
                        Greenville, South Carolina 29602
                    (Address of principal executive offices)

                    Issuer's telephone number (864) 239-1000

        Securities registered under Section 12(b) of the Exchange Act:

                                      None

        Securities registered under Section 12(g) of the Exchange Act:

                      Units of Limited Partnership Interest
                                (Title of class)

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___

Check if there is no disclosure  of delinquent  filers in response to Item 405
of  Regulation  S-B  contained  in  this  form,  and  no  disclosure  will  be
contained,  to the best of the registrant's  knowledge, in definitive proxy or
information  statements  incorporated  by  reference  in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.  [X]

State issuer's revenues for its most recent fiscal year.  $863,000

State the aggregate  market value of the voting  partnership  interests  held by
non-affiliates  computed  by  reference  to the price at which  the  partnership
interests  were sold,  or the average bid and asked  prices of such  partnership
interests as of December 31, 2004. No market exists for the Limited  Partnership
interests of the Registrant,  and,  therefore,  no aggregate market value can be
determined.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None

The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government  regulations.  Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including,  without limitation:  national and local
economic  conditions;  the terms of  governmental  regulations  that  affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates;  financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest;  real estate risks, including variations of real estate values and
the general  economic  climate in local markets and  competition  for tenants in
such markets;  litigation,  including  costs  associated  with  prosecuting  and
defending  claims  and  any  adverse   outcomes,   and  possible   environmental
liabilities.   Readers  should  carefully  review  the  Registrant's   financial
statements and the notes thereto,  as well as the risk factors  described in the
documents  the  Registrant  files  from  time to time  with the  Securities  and
Exchange Commission.

                                     PART I

Item 1.     Description of Business

Davidson  Diversified Real Estate I, L.P. (the "Registrant" or "Partnership") is
a Delaware limited  partnership  organized in January 1983. The general partners
of the  Partnership  are  Davidson  Diversified  Properties,  Inc.,  a Tennessee
corporation  ("Managing  General  Partner");  Diversified  Equities,  Limited, a
Tennessee limited partnership ("Associate General Partner"); and David W. Talley
("Individual  General  Partner")  (collectively,  the "General  Partners").  The
Managing  General  Partner was wholly owned by MAE GP Corporation  ("MAE") until
February  25,  1998,  at which time MAE GP was merged into  Insignia  Properties
Trust  ("IPT"),  a subsidiary of Apartment  Investment  and  Management  Company
("AIMCO"),  a publicly traded real estate investment  trust.  Thus, the Managing
General Partner is now wholly-owned by AIMCO. The Partnership Agreement provides
that the  Partnership  is to terminate on December 31, 2007,  unless  terminated
prior to such date.

The offering of the Partnership's  limited partnership units ("Units") commenced
on November 16, 1983,  and  terminated  on September 14, 1984.  The  Partnership
received  gross  proceeds from the offering of  $15,008,000  and net proceeds of
$13,507,200.  Since its initial offering,  the Partnership has not received, nor
are limited partners required to make, additional capital contributions.

The  Partnership's  business is to own and  operate  existing  residential  real
estate  properties for investment.  All of the net proceeds of the offering were
invested in six properties, five of which had been sold or foreclosed upon prior
to the  calendar  year 2003.  The  Partnership  continues to own and operate one
investment  property  as of  December  31,  2004.  See "Item 2.  Description  of
Property".

The  Partnership  receives  income  from its  property  and is  responsible  for
operating  expenses,  capital  improvements  and debt service  payments  under a
mortgage  obligation  secured by the  property.  The  Partnership  financed  its
property  through  non-recourse  debt.  Therefore,  if the  Partnership  were to
default on its loan,  the lender,  with certain  exceptions,  can generally only
look to the subject property for recovery of amounts due.

The Partnership  has no employees.  Management and  administrative  services are
provided by the  Managing  General  Partner and agents  retained by the Managing
General  Partner.  An affiliate of the Managing  General  Partner  provided such
management services for the years ended December 31, 2004 and 2003.

Risk Factors

The  real  estate  business  in which  the  Partnership  is  engaged  is  highly
competitive.  There are other  residential  properties within the market area of
the Partnership's  property.  The number and quality of competitive  properties,
including  those which may be managed by an affiliate  of the  Managing  General
Partner in such market area,  could have a material  effect on the rental market
for apartments at the  Partnership's  property and the rents that may be charged
for such  apartments.  While the Managing General Partner and its affiliates own
and/or  control a significant  number of apartment  units in the United  States,
such units represent an insignificant percentage of the total apartment units in
the United States and  competition  for the  apartments  is local.  In addition,
various limited  partnerships  have been formed by the Managing  General Partner
and/or  affiliates  to engage in  business  which  may be  competitive  with the
Partnership.

Laws benefiting  disabled persons may result in the Partnership's  incurrence of
unanticipated  expenses.  Under the Americans with  Disabilities Act of 1990, or
ADA,  all places  intended to be used by the public are required to meet certain
Federal  requirements  related to access and use by disabled persons.  Likewise,
the Fair Housing Amendments Act of 1988, or FHAA, requires apartment  properties
first occupied after March 13, 1990 to be accessible to the  handicapped.  These
and other  Federal,  state  and  local  laws may  require  modifications  to the
Partnership's  property, or restrict renovations of the property.  Noncompliance
with these laws could result in the  imposition  of fines or an award of damages
to  private  litigants  and  also  could  result  in an  order  to  correct  any
non-complying  feature,  which could result in substantial capital expenditures.
Although the Managing General Partner believes that the  Partnership's  property
is  substantially in compliance with present  requirements,  the Partnership may
incur unanticipated expenses to comply with the ADA and the FHAA.

Both the income and expenses of operating the property owned by the  Partnership
are subject to factors outside of the Partnership's  control, such as changes in
the supply  and  demand of similar  properties  resulting  from  various  market
conditions, increases/decreases in unemployment or population shifts, changes in
the availability of permanent mortgage funds, changes in zoning laws, or changes
in patterns or needs of users.  In addition,  there are risks inherent in owning
and operating residential  properties because such properties are susceptible to
the  impact of  economic  and other  conditions  outside  of the  control of the
Partnership.

From time to time, the Federal Bureau of  Investigation,  or FBI, and the United
States  Department  of  Homeland  Security  issue  alerts  regarding   potential
terrorist threats  involving  apartment  buildings.  Threats of future terrorist
attacks,  such as those  announced  by the FBI and the  Department  of  Homeland
Security,  could  have a  negative  effect on rent and  occupancy  levels at the
Partnership's  property.  The effect that future terrorist activities or threats
of such activities could have on the  Partnership's  operations is uncertain and
unpredictable. If the Partnership were to incur a loss at a property as a result
of an act of  terrorism,  the  Partnership  could  lose all or a portion  of the
capital  invested  in the  property,  as well as the  future  revenue  from  the
property.  In this regard, the Partnership has purchased insurance to cover acts
of terrorism.  The Managing General Partner does not anticipate that these costs
will have a negative effect on the Partnership's  financial condition or results
of operations.

There have been, and it is possible there may be other, Federal, state and local
legislation  and  regulations   enacted   relating  to  the  protection  of  the
environment.  The Partnership is unable to predict the extent,  if any, to which
such new  legislation  or  regulations  might occur and the degree to which such
existing or new legislation or regulations  might adversely  affect the property
owned by the Partnership.

The  Partnership  monitors its property for evidence of  pollutants,  toxins and
other dangerous substances, including the presence of asbestos. In certain cases
environmental  testing has been performed which resulted in no material  adverse
conditions or liabilities.  In no case has the Partnership  received notice that
it is a potentially  responsible party with respect to an environmental clean up
site.

A further  description  of the  Partnership's  business  is included in "Item 6.
Management's Discussion and Analysis or Plan of Operation" of this Form 10-KSB.

Item 2.     Description of Property

The following table sets forth the Partnership's investment in property:
<TABLE>
<CAPTION>

                                Date of
Property                        Purchase          Type of Ownership           Use

Versailles on the Lake
<S>                             <C>   <C>
 Apartments                     04/05/84    Fee ownership subject to a    Apartment
  Ft. Wayne, Indiana                        first mortgage                156 units
</TABLE>

Schedule of Property

Set forth  below for the  Registrant's  property  is the gross  carrying  value,
accumulated  depreciation,  depreciable life, method of depreciation and Federal
tax basis.
<TABLE>
<CAPTION>

                          Gross
                        Carrying   Accumulated   Depreciable    Method of       Federal
Property                  Value    Depreciation      Life      Depreciation    Tax Basis
                             (in thousands)                                  (in thousands)

Versailles on the
<S>                      <C>         <C>           <C>                           <C>
 Lake Apartments         $ 5,574     $ 4,103       5-30 yrs        S/L           $ 973
</TABLE>

See "Note A - Organization  and Summary of Significant  Accounting  Policies" to
the  financial  statements  included  in "Item 7.  Financial  Statements"  for a
description of the Partnership's capitalization and depreciation policies.

Schedule of Property Indebtedness

The  following  table  sets  forth  certain  information  relating  to the  loan
encumbering the Registrant's property.
<TABLE>
<CAPTION>

                           Principal                                      Principal
                           Balance At    Stated                            Balance
                          December 31,  Interest   Period     Maturity      Due At
        Property              2004        Rate    Amortized     Date     Maturity (2)
                         (in thousands)                                 (in thousands)
Versailles on the Lake
 Apartments
<S>                         <C>           <C>      <C>        <C>  <C>     <C>
  1st mortgage              $ 2,303       (1)      30 yrs     9/15/07      $ 2,139
</TABLE>

(1)   Adjustable  rate  based  on  the  Fannie  Mae  discounted  mortgage-backed
      security  index plus 85 basis  points.  The rate at December  31, 2004 was
      3.07%.

(2)   See "Note B - Mortgage Note Payable" to the financial  statements included
      in "Item 7.  Financial  Statements"  for  information  with respect to the
      Registrant's  ability to prepay the loan and other specific  details about
      the loan.

Rental Rates and Occupancy

Average  annual rental rate and occupancy for 2004 and 2003 for the property are
as follows:

                                           Average Annual             Average
                                            Rental Rates             Occupancy
                                             (per unit)
 Property                                 2004        2003        2004      2003

 Versailles on the Lake Apartments       $5,815      $5,901       85%        95%

The Managing General Partner  attributes the decrease in occupancy at Versailles
on the Lake Apartments to the soft rental market in the Fort Wayne area.

As noted under "Item 1.  Description of Business",  the real estate  industry is
highly   competitive.   The  property  is  subject  to  competition  from  other
residential  apartment  complexes  in the area.  The  Managing  General  Partner
believes that the property is adequately  insured.  The property is an apartment
complex which leases units for terms of one year or less. No residential  tenant
leases 10% or more of the  available  space.  The  property is in good  physical
condition,  subject to normal  depreciation and  deterioration as is typical for
assets of this type and age.

Real Estate Taxes and Rate

Real estate taxes and rate in 2004 for the property were as follows:

                                                 2004            2004
                                                 Taxes           Rate
                                            (in thousands)

Versailles on the Lake Apartments                $ 79*           1.90%

*Amount per 2003 billings.  Taxes are paid a year in arrears.

During 2003,  the state of Indiana  implemented a  reassessment  of property tax
values. The Partnership is currently appealing the reassessed property tax value
of  Versailles  on The Lake  Apartments.  In the state of Indiana,  property tax
bills  are paid one year in  arrears.  Thus,  the 2003  property  tax  bills are
received and paid in 2004.  Due to the  Partnership's  appeal of the  reassessed
property value, the property tax accrual for 2004, 2003 and 2002 is based on the
property tax value as estimated by a third party property tax specialist. During
2004,  the  Partnership   increased  its  estimate  of  property  taxes  due  by
approximately  $23,000.  If the Partnership is  unsuccessful  in its appeal,  it
could  potentially  be liable  for up to  approximately  $46,000  of  additional
property  tax  expense  related  to the  2002,  2003  and 2004  tax  years.  The
Partnership  believes  that the recorded  liability is the best  estimate of the
amounts ultimately to be paid for Indiana property taxes.

Capital Improvements

Versailles on the Lake Apartments

During the year ended December 31, 2004, the Partnership completed approximately
$172,000 of capital  improvements at the property,  consisting primarily of roof
replacement,  elevator upgrades, structural improvements,  signage upgrades, and
floor covering  replacement.  These improvements were funded from operations and
advances  from an affiliate of the Managing  General  Partner.  The  Partnership
regularly  evaluates the capital  improvement  needs of the property.  While the
Partnership  has  no  material   commitments  for  property   improvements   and
replacements,  certain routine capital expenditures are anticipated during 2005.
Such capital  expenditures will depend on the physical condition of the property
as well as anticipated cash flow generated by the property.

Capital  improvements will be incurred only to the extent of cash available from
operations and Partnership reserves. To the extent that capital improvements are
completed,  the Partnership's  distributable cash flow, if any, may be adversely
affected at least in the short term.

Item 3.     Legal Proceedings

In March 1998, several putative unit holders of limited partnership units of the
Partnership  commenced an action  entitled  Rosalie  Nuanes,  et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of  California  for the  County  of San  Mateo.  The  plaintiffs  named as
defendants,  among others,  the  Partnership,  its Managing  General Partner and
several of their  affiliated  partnerships  and corporate  entities.  The action
purported  to  assert  claims  on  behalf  of a class of  limited  partners  and
derivatively  on behalf  of a number  of  limited  partnerships  (including  the
Partnership)  that are named as nominal  defendants,  challenging,  among  other
things,  the  acquisition  of  interests  in certain  Managing  General  Partner
entities by Insignia Financial Group, Inc.  ("Insignia") and entities that were,
at one  time,  affiliates  of  Insignia;  past  tender  offers  by the  Insignia
affiliates to acquire limited partnership units;  management of the partnerships
by the  Insignia  affiliates;  and the series of  transactions  which  closed on
October 1, 1998 and February 26, 1999 whereby  Insignia and Insignia  Properties
Trust,  respectively,  were merged into AIMCO.  The plaintiffs  sought  monetary
damages and equitable relief, including judicial dissolution of the Partnership.
In addition,  during the third quarter of 2001, a complaint  captioned Heller v.
Insignia  Financial  Group (the  "Heller  action")  was filed  against  the same
defendants  that are named in the  Nuanes  action.  On or about  August 6, 2001,
plaintiffs filed a first amended  complaint.  The Heller action was brought as a
purported derivative action, and asserted claims for, among other things, breach
of fiduciary  duty,  unfair  competition,  conversion,  unjust  enrichment,  and
judicial dissolution.

On January 8, 2003,  the parties filed a  Stipulation  of Settlement in proposed
settlement of the Nuanes action and the Heller action.

In general  terms,  the  proposed  settlement  provides  for  certification  for
settlement  purposes of a settlement class consisting of all limited partners in
this  Partnership and others (the  "Partnerships")  as of December 20, 2002, the
dismissal  with  prejudice  and  release  of claims  in the  Nuanes  and  Heller
litigation,  payment by AIMCO of $9.9  million  (which shall be  distributed  to
settlement  class  members  after  deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent  appraisals of the  Partnerships'  properties  by a court  appointed
appraiser.  An affiliate of the Managing General Partner has also agreed to make
at least one round of tender offers to purchase all of the partnership interests
in the Partnerships within one year of final approval,  if it is granted, and to
provide  partners with the independent  appraisals at the time of these tenders.
The proposed  settlement also provided for the limitation of the allowable costs
which  the  Managing   General   Partner  or  its  affiliates  will  charge  the
Partnerships  in connection with this litigation and imposes limits on the class
counsel  fees and  costs in this  litigation.  On April  11,  2003,  notice  was
distributed  to  limited   partners   providing  the  details  of  the  proposed
settlement.

On June 13, 2003, the court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions.  On August 12, 2003, an objector
("Objector") filed an appeal (the "Appeal") seeking to vacate and/or reverse the
order approving the settlement and entering  judgment  thereto.  On November 24,
2003,  the Objector  filed an  application  requesting  the court order AIMCO to
withdraw settlement tender offers it had commenced,  refrain from making further
offers  pending  the appeal and auction  any units  tendered  to third  parties,
contending  that the offers did not  conform  with the terms of the  settlement.
Counsel  for the  Objector  (on behalf of another  investor)  had  alternatively
requested the court take certain action  purportedly to enforce the terms of the
settlement agreement. On December 18, 2003, the court heard oral argument on the
motions  and denied them both in their  entirety.  The  Objector  filed a second
appeal challenging the court's use of a referee and its order requiring Objector
to pay those fees.

On January 28, 2004,  the  Objector  filed his opening  brief in The Appeal.  On
April 23, 2004, the Managing General Partner and its affiliates filed a response
brief in support of the settlement and the judgment thereto. The plaintiffs have
also filed a brief in support of the settlement. On June 4, 2004, Objector filed
a reply to the briefs  submitted by the Managing General Partner and Plaintiffs.
In addition both the Objector and plaintiffs filed briefs in connection with the
second  appeal.  The Court of Appeals  heard oral  argument  on both  appeals on
September 22, 2004 and took the matters under submission.

The  Managing  General  Partner  does  not  anticipate  that  any  costs  to the
Partnership, whether legal or settlement costs, associated with these cases will
be material to the Partnership's overall operations.

As previously disclosed,  AIMCO Properties L.P. and NHP Management Company, both
affiliates of the Managing General  Partner,  are defendants in an action in the
United States District Court,  District of Columbia.  The plaintiffs have styled
their  complaint  as a  collective  action  under the Fair Labor  Standards  Act
("FLSA") and seek to certify state subclasses in California,  Maryland,  and the
District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties
L.P. failed to compensate  maintenance  workers for time that they were required
to be "on-call." Additionally, plaintiffs allege AIMCO Properties L.P. failed to
comply  with the FLSA in  compensating  maintenance  workers  for time that they
worked in responding to a call while  "on-call."  The  defendants  have filed an
answer to the amended complaint denying the substantive  allegations.  Discovery
relating  to the  certification  of the  collective  action  has  concluded  and
briefing on the matter is underway.  Although the outcome of any  litigation  is
uncertain,  AIMCO  Properties,  L.P. does not believe that the ultimate  outcome
will have a material  adverse  effect on its  financial  condition or results of
operations.  Similarly,  the Managing  General Partner does not believe that the
ultimate  outcome  will have a  material  adverse  effect  on the  Partnership's
financial condition or results of operations.

Item 4.     Submission of Matters to a Vote of Security Holders

During the quarter ended  December 31, 2004, no matters were submitted to a vote
of unit holders through the solicitation of proxies or otherwise.

                                     PART II

Item 5.     Market for the Partnership's Equity and Related Partner Matters

The Partnership,  a publicly-held  limited partnership,  offered and sold 751.84
Limited Partnership Units (the "Units") aggregating $15,008,000.  As of December
31, 2004,  there were 545 holders of record owning an aggregate of 751.59 Units.
Affiliates  of the  Managing  General  Partner  owned  328.45 Units or 43.70% at
December 31, 2004.

There were no  distributions to the partners during the years ended December 31,
2004 and 2003. Future cash  distributions  will depend on the levels of net cash
generated from  operations,  and the timing of the debt  maturity,  refinancing,
and/or  property sale. The  Partnership's  cash  available for  distribution  is
reviewed  on a monthly  basis.  There  can be no  assurance,  however,  that the
Partnership  will  generate  sufficient  funds from  operations  after  required
capital  improvements  to permit any  distributions  to its  partners in 2005 or
subsequent periods. See "Item 2. Description of Property - Capital Improvements"
for information relating to anticipated capital expenditures at the property.

In addition to its  indirect  ownership of the general  partner  interest in the
Partnership,  AIMCO and its  affiliates  owned 328.45  Units in the  Partnership
representing  43.70% of the outstanding  Units at December 31, 2004. A number of
these  Units  were  acquired  pursuant  to  tender  offers  made by AIMCO or its
affiliates.  It is possible that AIMCO or its affiliates will acquire additional
Units  in  exchange  for  cash or a  combination  of cash  and  units  in  AIMCO
Properties,  L.P., the operating  partnership of AIMCO,  either through  private
purchases or tender offers.  Pursuant to the Partnership Agreement,  unitholders
holding a majority of the Units are  entitled  to take action with  respect to a
variety of matters  that  include,  but are not  limited  to,  voting on certain
amendments  to the  Partnership  Agreement  and  voting to remove  the  Managing
General  Partner.  As a result of its  ownership  of  43.70% of the  outstanding
Units,  AIMCO and its  affiliates are in a position to influence all such voting
decisions with respect to the Partnership. Although the Managing General Partner
owes fiduciary duties to the limited  partners of the Partnership,  the Managing
General Partner also owes fiduciary duties to AIMCO as its sole stockholder.  As
a result,  the duties of the  Managing  General  Partner,  as  managing  general
partner, to the Partnership and its limited partners may come into conflict with
the duties of the Managing General Partner to AIMCO as its sole stockholder.

Item 6.     Management's Discussion and Analysis or Plan of Operation

This item should be read in conjunction with the financial  statements and other
items contained elsewhere in this report.

The  Partnership's  financial  results depend upon a number of factors including
the ability to attract and maintain tenants at the investment property, interest
rates on mortgage  loans,  costs  incurred to operate the  investment  property,
general economic conditions and weather. As part of the ongoing business plan of
the  Partnership,  the  Managing  General  Partner  monitors  the rental  market
environment of its investment  property to assess the  feasibility of increasing
rents, maintaining or increasing occupancy levels and protecting the Partnership
from increases in expenses.  As part of this plan, the Managing  General Partner
attempts  to  protect  the  Partnership  from the  burden  of  inflation-related
increases  in  expenses  by  increasing  rents and  maintaining  a high  overall
occupancy  level.   However,   the  Managing  General  Partner  may  use  rental
concessions and rental rate reductions to offset  softening  market  conditions;
accordingly,  there is no guarantee  that the Managing  General  Partner will be
able to sustain such a plan.  Further,  a number of factors that are outside the
control of the  Partnership  such as the local economic  climate and weather can
adversely or positively affect the Partnership's financial results.

Results of Operations

The   Partnership's   net  loss  for  the  year  ended  December  31,  2004  was
approximately  $175,000,  as compared to a net loss of approximately  $3,000 for
the year ended  December 31, 2003. The increase in net loss is due to a decrease
in total  revenues  and an increase  in total  expenses.  The  decrease in total
revenues is due to a decrease in rental income.  Other income remained  constant
for the  comparable  periods.  The decrease in rental income is primarily due to
decreases  in  occupancy  and  the  average  rental  rate  at the  Partnership's
investment property.

The  increase  in total  expenses  is due to  increases  in both  operating  and
property  tax  expenses,   partially   offset  by  a  decrease  in  general  and
administrative   expenses.  Both  depreciation  and  interest  expense  remained
relatively  constant  for the  comparable  periods.  The  increase in  operating
expenses is primarily due to increases in advertising  and contract  maintenance
expenses at the Partnership's investment property.

Property tax expense increased due to a change in estimate of the property taxes
due for  2002,  2003  and  2004,  related  to the  Partnership's  appeal  of the
reassessed value of Versailles on the Lake Apartments. During 2003, the state of
Indiana  implemented a reassessment  of property tax values.  The Partnership is
currently  appealing the reassessed property tax value of Versailles on the Lake
Apartments.  In the state of  Indiana,  property  tax bills are paid one year in
arrears. Thus, the 2003 property tax bills are received and paid in 2004. Due to
the  Partnership's  appeal of the reassessed  property  value,  the property tax
expense for 2004,  2003 and 2002 is based on the property tax value and tax rate
as estimated by a third party  property  tax  specialist.  During the year ended
December 31, 2004, the third party property tax specialist  revised the estimate
of 2002, 2003 and 2004 property tax expense due to a revision of the anticipated
tax rate.  This resulted in an additional  expense of  approximately  $5,000 for
2002 property taxes, an additional $11,000 for 2003 property tax expense, and an
additional  $7,000 for 2004 property tax expense for the year ended December 31,
2004.  This total  amount of  approximately  $23,000 in property tax expense was
recorded  during the third and fourth  quarters of 2004. If the  Partnership  is
unsuccessful  in  its  appeal,   it  could  potentially  be  liable  for  up  to
approximately  $46,000 of additional  property tax expense  related to the 2002,
2003 and 2004 tax years.  The Partnership  believes that the recorded  liability
and expense represent the best estimate of the amounts ultimately to be paid for
Indiana property taxes.

General and administrative  expenses decreased primarily due to decreases in the
cost of  services  included in the  management  reimbursements  to the  Managing
General Partner as allowed under the Partnership  Agreement and audit fees. Also
included in general and administrative expenses for the years ended December 31,
2004 and 2003 are costs associated with the quarterly and annual  communications
with  investors  and  regulatory  agencies and the annual audit  required by the
Partnership Agreement.

Liquidity and Capital Resources

At  December  31,  2004,  the  Partnership  had  cash and  cash  equivalents  of
approximately  $39,000,  compared to approximately $60,000 at December 31, 2003.
The decrease in cash and cash  equivalents  of  approximately  $21,000 is due to
approximately $277,000 of cash used in investing activities, partially offset by
approximately   $142,000  of  cash   provided  by   operating   activities   and
approximately  $114,000 of cash provided by financing  activities.  Cash used in
investing activities consisted of property  improvements and replacements.  Cash
provided by financing  activities consisted of advances from an affiliate of the
Managing General Partner,  partially offset by payments of principal made on the
mortgage  encumbering the  Partnership's  investment  property.  The Partnership
invests its working capital reserves in interest bearing accounts.

The sufficiency of existing  liquid assets to meet future  liquidity and capital
expenditure   requirements   is  directly   related  to  the  level  of  capital
expenditures required at the property to adequately maintain the physical assets
and other operating needs of the Partnership and to comply with Federal,  state,
and local  legal and  regulatory  requirements.  The  Managing  General  Partner
monitors  developments  in the  area of legal  and  regulatory  compliance.  For
example,  the  Sarbanes-Oxley  Act  of  2002  mandates  or  suggests  additional
compliance  measures  with  regard to  governance,  disclosure,  audit and other
areas.  In light of these changes,  the  Partnership  expects that it will incur
higher expenses related to compliance.  The Partnership  regularly evaluates the
capital improvement needs of the property. While the Partnership has no material
commitments for property improvements and replacements,  certain routine capital
expenditures  anticipated during 2005. Such capital  expenditures will depend on
the  physical  condition  of the  property  as well  as  anticipated  cash  flow
generated by the property.

The  capital  expenditures  will be  incurred  only if  cash is  available  from
operations and Partnership reserves. To the extent that capital improvements are
completed,  the Partnership's  distributable cash flow, if any, may be adversely
affected at least in the short term.

The  Partnership's  assets are thought to be sufficient for any near-term  needs
(exclusive  of  capital   improvements)   of  the   Partnership.   The  mortgage
indebtedness  encumbering  Versailles on the Lake  Apartments  of  approximately
$2,303,000 is financed  under a permanent  credit  facility  ("Permanent  Credit
Facility"). The Permanent Credit Facility has a maturity of five years, with one
five-year extension option. This Permanent Credit Facility also creates separate
loans for each property  that are not  cross-collateralized  or  cross-defaulted
with the other property  loans.  Each note under this Permanent  Credit Facility
begins as a  variable  rate loan with the option of  converting  to a fixed rate
loan after three  years.  The interest  rate on the  variable  rate loans is the
Fannie Mae discounted  mortgage-backed  security index plus 85 basis points. The
rate was 3.07% at December 31, 2004 and resets monthly.  Each loan automatically
renews at the end of each month.  In addition,  monthly  principal  payments are
required based on a 30-year  amortization  schedule,  using the interest rate in
effect  during the first  month that any  property  is in the  Permanent  Credit
Facility.  The loans are prepayable without penalty. The mortgage has a maturity
date  of  September  15,  2007  at  which  time  a  balloon   payment   totaling
approximately  $2,139,000 is due. At that time, the Managing General Partner has
the option to extend the  maturity  of this loan for another  five years.  After
that period,  the  Managing  General  Partner  will  attempt to  refinance  such
indebtedness  and/or  sell the  property  prior  to the  maturity  date.  If the
property  cannot be refinanced or sold,  the  Partnership  will risk losing such
property through foreclosure.

Pursuant to the Partnership Agreement,  the term of the Partnership is scheduled
to expire on December 31, 2007. Accordingly,  prior to such date the Partnership
will need to  either  sell its  investment  property  or extend  the term of the
Partnership.

There were no  distributions to the partners during the years ended December 31,
2004 and 2003. Future cash  distributions  will depend on the levels of net cash
generated  from  operations  and the timing of the debt  maturity,  refinancing,
and/or  property sale. The  Partnership's  cash  available for  distribution  is
reviewed  on a monthly  basis.  There  can be no  assurance,  however,  that the
Partnership  will  generate  sufficient  funds from  operations  after  required
capital  improvements  to permit any  distributions  to its  partners in 2005 or
subsequent periods.

Other

In addition to its  indirect  ownership of the general  partner  interest in the
Partnership,  AIMCO and its  affiliates  owned 328.45  Units in the  Partnership
representing  43.70% of the outstanding  Units at December 31, 2004. A number of
these  Units  were  acquired  pursuant  to  tender  offers  made by AIMCO or its
affiliates.  It is possible that AIMCO or its affiliates will acquire additional
Units  in  exchange  for  cash or a  combination  of cash  and  units  in  AIMCO
Properties,  L.P., the operating  partnership of AIMCO,  either through  private
purchases or tender offers.  Pursuant to the Partnership Agreement,  unitholders
holding a majority of the Units are  entitled  to take action with  respect to a
variety of matters  that  include,  but are not  limited  to,  voting on certain
amendments  to the  Partnership  Agreement  and  voting to remove  the  Managing
General  Partner.  As a result of its  ownership  of  43.70% of the  outstanding
Units,  AIMCO and its  affiliates are in a position to influence all such voting
decisions with respect to the Partnership. Although the Managing General Partner
owes fiduciary duties to the limited  partners of the Partnership,  the Managing
General Partner also owes fiduciary duties to AIMCO as its sole stockholder.  As
a result,  the duties of the  Managing  General  Partner,  as  managing  general
partner, to the Partnership and its limited partners may come into conflict with
the duties of the Managing General Partner to AIMCO as its sole stockholder.

Critical Accounting Policies and Estimates

A summary of the Partnership's  significant  accounting  policies is included in
"Note A - Organization and Summary of Significant  Accounting Policies" which is
included in the financial  statements  in "Item 7.  Financial  Statements".  The
Managing  General  Partner  believes that the  consistent  application  of these
policies enables the Partnership to provide readers of the financial  statements
with useful and reliable  information about the Partnership's  operating results
and financial  condition.  The preparation of financial statements in conformity
with accounting  principles generally accepted in the United States requires the
Partnership to make estimates and  assumptions.  These estimates and assumptions
affect  the  reported  amounts  of  assets  and  liabilities  at the date of the
financial statements as well as reported amounts of revenues and expenses during
the  reporting  period.  Actual  results  could  differ  from  these  estimates.
Judgments  and  assessments  of  uncertainties  are  required  in  applying  the
Partnership's  accounting policies in many areas. The Partnership  believes that
of its  significant  accounting  policies,  the  following  may involve a higher
degree of judgment and complexity.

Impairment of Long-Lived Assets

The  Partnership's  investment  property is recorded at cost,  less  accumulated
depreciation,  unless considered impaired.  If events or circumstances  indicate
that the carrying  amount of a property may be impaired,  the  Partnership  will
make an assessment of its  recoverability by estimating the undiscounted  future
cash flows,  excluding interest charges, of the property. If the carrying amount
exceeds the aggregate  future cash flows,  the  Partnership  would  recognize an
impairment  loss to the extent the carrying amount exceeds the fair value of the
property.

Real  property  investments  are  subject  to varying  degrees of risk.  Several
factors  may  adversely  affect  the  economic  performance  and  value  of  the
Partnership's  investment  property.  These factors include, but are not limited
to,  changes  in the  national,  regional  and  local  economic  climate;  local
conditions,  such as an oversupply of multifamily  properties;  competition from
other available  multifamily property owners and changes in market rental rates.
Any adverse changes in these factors could cause impairment of the Partnership's
asset.

Revenue Recognition

The Partnership generally leases apartment units for twelve-month terms or less.
The Partnership will offer rental concessions during particularly slow months or
in response  to heavy  competition  from other  similar  complexes  in the area.
Rental income attributable to leases, net of any concessions, is recognized on a
straight-line  basis over the term of the lease.  The Partnership  evaluates all
accounts  receivable  from  residents and  establishes  an allowance,  after the
application of security deposits,  for accounts greater than 30 days past due on
current tenants and all receivables due from former tenants.


<PAGE>


Item 7.     Financial Statements

DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

LIST OF FINANCIAL STATEMENTS

      Report of Independent Registered Public Accounting Firm

      Balance Sheet - December 31, 2004

      Statements of Operations - Years ended December 31, 2004 and 2003

      Statements  of Changes in Partners'  Deficit - Years ended  December 31,
      2004 and 2003

      Statements of Cash Flows - Years ended December 31, 2004 and 2003

      Notes to Financial Statements


<PAGE>


           Report of Independent Registered Public Accounting Firm


The Partners
Davidson Diversified Real Estate I, L.P.


We have audited the  accompanying  balance  sheet of Davidson  Diversified  Real
Estate  I,  L.P.  as of  December  31,  2004,  and  the  related  statements  of
operations,  changes in  partners'  deficit,  and cash flows for each of the two
years in the period ended December 31, 2004. These financial  statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes consideration of
internal  control  over  financial  reporting  as a basis  for  designing  audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Partnership's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes  examining,  on a test  basis,  evidence  supporting  the  amounts  and
disclosures in the financial  statements,  assessing the  accounting  principles
used and  significant  estimates made by management,  and evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  financial  position of Davidson  Diversified  Real
Estate I, L.P. at December 31, 2004,  and the results of its  operations and its
cash flows for each of the two years in the period ended  December 31, 2004,  in
conformity with accounting principles generally accepted in the United States.



                                                          /s/ERNST & YOUNG LLP



Greenville, South Carolina
March 10, 2005


<PAGE>





                   DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

                                  BALANCE SHEET
                        (in thousands, except unit data)

                                December 31, 2004
<TABLE>
<CAPTION>

Assets
<S>                                                                           <C>
   Cash and cash equivalents                                                  $ 39
   Receivables and deposits                                                     299
   Other assets                                                                 102
   Investment property (Notes B & E):
      Land                                                     $ 191
      Buildings and related personal property                   5,383
                                                                5,574
      Less accumulated depreciation                            (4,103)        1,471

                                                                            $ 1,911
Liabilities and Partners' Deficit

Liabilities
   Accounts payable                                                           $ 40
   Tenant security deposit liabilities                                           15
   Accrued property taxes (Note F)                                               81
   Other liabilities                                                             80
   Due to affiliates (Note D)                                                   522
   Mortgage note payable (Note B)                                             2,303

Partners' Deficit
   General partners                                            $ (18)
   Limited partners (751.59 units issued and
      outstanding)                                             (1,112)       (1,130)

                                                                            $ 1,911

              See Accompanying Notes to Financial Statements
</TABLE>



<PAGE>


                   DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

                            STATEMENTS OF OPERATIONS
                      (in thousands, except per unit data)

<TABLE>
<CAPTION>


                                                               Years Ended
                                                               December 31,
                                                         2004               2003
Revenues:
<S>                                                   <C>               <C>
  Rental income                                       $    758          $    862
  Other income                                             105               105
         Total revenues                                    863               967

Expenses:
  Operating                                                522               487
  General and administrative                                72                86
  Depreciation                                             275               278
  Interest                                                  72                70
  Property taxes                                            97                49
         Total expenses                                  1,038               970

Net loss (Note C)                                     $   (175)         $     (3)

Net loss allocated to general partners (5%)           $     (9)         $     --

Net loss allocated to limited partners (95%)              (166)               (3)
                                                      $   (175)         $     (3)

Net loss per limited partnership unit                 $(220.87)         $  (3.99)

              See Accompanying Notes to Financial Statements
</TABLE>

<PAGE>


                   DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

                  STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
                        (in thousands, except unit data)

<TABLE>
<CAPTION>


                                         Limited
                                       Partnership    General     Limited
                                          Units       Partners   Partners     Total

<S>                                       <C>           <C>       <C>        <C>
Original capital contributions            751.84        $ 1       $15,008    $15,009

Partners' deficit at
  December 31, 2002                       751.59        $ (9)     $ (943)     $ (952)

Net loss for the year ended
  December 31, 2003                           --           --          (3)        (3)

Partners' deficit at
  December 31, 2003                       751.59           (9)       (946)      (955)

Net loss for the year ended
  December 31, 2004                           --           (9)       (166)      (175)

Partners' deficit at
  December 31, 2004                       751.59       $ (18)     $(1,112)   $(1,130)

              See Accompanying Notes to Financial Statements
</TABLE>

                   DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

                            STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>


                                                                      Years Ended
                                                                      December 31,
                                                                     2004      2003
Cash flows from operating activities:
<S>                                                                <C>          <C>
  Net loss                                                         $ (175)      $ (3)
  Adjustments to reconcile net loss to net cash provided by
   operating activities:
     Depreciation                                                     275          278
     Amortization of loan costs                                        14           14
     Change in accounts:
      Receivables and deposits                                         39           (8)
      Other assets                                                    (44)          (6)
      Accounts payable                                                  5          (14)
      Tenant security deposit liabilities                              (2)           2
      Due to affiliates                                                23           (2)
      Accrued property taxes                                            5          (10)
      Other liabilities                                                 2          (11)

        Net cash provided by operating activities                     142          240

Cash flows from investing activities:
  Property improvements and replacements                             (277)         (71)
  Net withdrawals from restricted escrows                              --           64

        Net cash used in investing activities                        (277)          (7)

Cash flows from financing activities:
  Payments on mortgage note payable                                   (64)         (54)
  Advances from affiliate                                             178            3
  Payments on advances from affiliate                                  --         (194)

        Net cash provided by (used in) financing activities           114         (245)

Net decrease in cash and cash equivalents                             (21)         (12)
Cash and cash equivalents at beginning of year                         60           72
Cash and cash equivalents at end of year                            $ 39        $ 60
Supplemental disclosure of cash flow information:
  Cash paid for interest                                            $ 59        $ 57

Supplemental disclosure of non-cash activity:
  Property improvements and replacements in accounts payable        $ 38        $ 143

              See Accompanying Notes to Financial Statements
</TABLE>


                   DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.

                          NOTES TO FINANCIAL STATEMENTS

                                December 31, 2004

Note A - Organization and Summary of Significant Accounting Policies

Organization:  Davidson  Diversified  Real Estate I, L.P. (the  "Partnership" or
"Registrant"),  is a Delaware limited partnership organized on January 14, 1983,
to acquire and operate  residential real estate  properties.  As of December 31,
2004, the Partnership operates one residential  property,  located in Ft. Wayne,
Indiana.  The  Partnership's  managing  general partner is Davidson  Diversified
Properties,  Inc. (the "Managing General Partner"). The Managing General Partner
is a subsidiary of Apartment  Investment and  Management  Company  ("AIMCO"),  a
publicly traded real estate investment trust. The Partnership Agreement provides
that the  Partnership  is to terminate  on December  31, 2007 unless  terminated
prior to such date.

Allocations to Partners: Net loss from operations of the Partnership and taxable
(loss) income are  allocated  95% to the limited  partners and 5% to the general
partners.  Distributions  of available cash (cash flow) are allocated  among the
limited  partners and the general  partners in accordance  with the  Partnership
Agreement.

Allocation of net income for tax purposes, arising from the occurrence of a sale
or refinancing shall be allocated as follows:

      First, an amount equal to the aggregate deficit in the capital accounts of
      the general and limited partners having deficits in their capital accounts
      shall be  allocated  to each such partner in the same ratio as the deficit
      such  partner's  capital  account  bears  to the  aggregate  of  all  such
      partner's deficits.

      Second, to the limited partners in an amount equal to the cash distributed
      to them from a sale or refinancing.

      Third,  the remainder,  if any, 5% to the general  partners and 95% to the
      limited partners.

Distributions  of cash from sales or  refinancings  shall be  distributed in the
following order of priority:

      First,  to the limited  partners,  an amount which when added to all prior
      distributions  of cash  from  sales  or  refinancings  shall  equal  their
      original invested  capital,  plus an amount which, when added to all prior
      distributions to the limited partners  (excluding  distributions which are
      deducted in the calculation of adjusted invested  capital),  will equal 8%
      per annum  cumulative  noncompounded on their adjusted  invested  capital,
      commencing  the last day of the  calendar  quarter in which  each  limited
      partner is admitted to the Partnership through the date of payment.

      Second,  to an affiliate of the general  partners,  an amount equal to its
      subordinated real estate  commission,  which fee is equal to the lesser of
      (i) 3% of the gross  sales  price of a property  or (ii)  one-half  of the
      competitive commission, as defined, but may only be paid after the limited
      partners have received  their priority  distributions  as discussed in the
      previous paragraph.

      Third, 85% of the remaining cash from sales or refinancings to the limited
      partners and 15% of the remaining cash from sales or  refinancings  to the
      general partners.

Depreciation:  Depreciation  is  provided by the  straight-line  method over the
estimated lives of the investment  property and related personal  property.  For
Federal income tax purposes,  the  accelerated  cost recovery method is used for
real property over 19 years for additions  after May 8, 1985, and before January
1, 1987. As a result of the Tax Reform Act of 1986, for additions after December
31, 1986, the modified accelerated cost recovery method is used for depreciation
of (1) real  property  additions  over 27 1/2 years,  and (2) personal  property
additions over 5 years.

Investment  Property:  Investment property consists of one apartment complex and
is stated at cost.  Acquisition  fees are  capitalized as a cost of real estate.
The  Partnership  capitalizes  all  expenditures  in excess of $250 that clearly
relate  to the  acquisition  and  installation  of real  and  personal  property
components.  These  expenditures  include  costs  incurred  to replace  existing
property components, costs incurred to add a material new feature to a property,
and costs that  increase  the useful  life or  service  potential  of a property
component.  These  capitalized  costs are depreciated  over the estimated useful
life of the asset. Expenditures for ordinary repairs,  maintenance and apartment
turnover  costs are  expensed as  incurred.  In  accordance  with  Statement  of
Financial  Accounting Standards ("SFAS") No. 144, "Accounting for the Impairment
or Disposal of Long-Lived Assets",  the Partnership records impairment losses on
long-lived assets used in operations when events and circumstances indicate that
the assets might be impaired  and the  undiscounted  cash flows  estimated to be
generated by those assets are less than the carrying amounts of those assets. No
adjustments  for  impairment of value were recorded in the years ended  December
31, 2004 and 2003.

Cash and Cash Equivalents:  Cash and cash equivalents  includes cash on hand and
in banks.  At certain  times,  the amount of cash deposited at a bank may exceed
the limit on insured deposits.  Cash balances included  approximately $32,000 at
December 31, 2004 that are  maintained  by an affiliated  management  company on
behalf of affiliated entities in cash concentration accounts.

Tenant  Security  Deposits:  The  Partnership  requires  security  deposits from
lessees for the duration of the lease.  Deposits  are  refunded  when the tenant
vacates,  provided  the tenant has not damaged the unit and is current on rental
payments.

Use of Estimates:  The  preparation of financial  statements in conformity  with
accounting   principles   generally  accepted  in  the  United  States  requires
management to make estimates and assumptions that affect the amounts reported in
the financial  statements and  accompanying  notes.  Actual results could differ
from those estimates.

Advertising:  The  Partnership  expenses the costs of  advertising  as incurred.
Advertising expense,  included in operating expenses,  was approximately $27,000
and $14,000 for the years ended December 31, 2004 and 2003, respectively.

Deferred Costs: At December 31, 2004, loan costs of approximately  $68,000,  net
of accumulated  amortization  of  approximately  $31,000,  are included in other
assets and are being  amortized over the life of the related loan.  Amortization
expense for each of the years ended December 31, 2004 and 2003 was approximately
$14,000 and is included in interest expense. Amortization expense is expected to
be approximately  $14,000 for both of the years 2005 and 2006 and  approximately
$9,000 for 2007.

Leasing   commissions  and  other  direct  costs  incurred  in  connection  with
successful  leasing  efforts are  deferred and  amortized  over the terms of the
related leases. Amortization of these costs is included in operating expenses.

Leases: The Partnership  generally leases apartment units for twelve-month terms
or less. The Partnership will offer rental concessions during  particularly slow
months or in response to heavy  competition from other similar  complexes in the
area.  Rental  income  attributable  to  leases,  net  of  any  concessions,  is
recognized on a straight-line  basis over the term of the lease. The Partnership
evaluates all accounts  receivable  from residents and establishes an allowance,
after the application of security  deposits,  for accounts  greater than 30 days
past due on current tenants and all receivables due from former tenants.

Fair Value of Financial Instruments: SFAS No. 107, "Disclosures about Derivative
Financial  Instruments",   as  amended  by  SFAS  No.  119,  "Disclosures  about
Derivative  Financial  Instruments  and  Fair  Value of  Financial  Instruments"
requires  disclosure  of fair value  information  about  financial  instruments,
whether or not recognized in the balance  sheet,  for which it is practicable to
estimate  fair  value.  Fair value is defined in the SFAS as the amount at which
the  instruments  could be exchanged in a current  transaction  between  willing
parties,  other than in a forced or liquidation  sale. The Partnership  believes
that the  carrying  amount of its  financial  instruments  (except for long term
debt)  approximates  their fair value due to the short  term  maturity  of these
instruments.  The  Partnership  estimates fair value by discounting  future cash
flows using a discount  rate  commensurate  with that  currently  believed to be
available to the Partnership for similar term, fully amortizing  long-term debt.
The  fair  value  of the  Partnership's  long  term  debt  at the  Partnership's
incremental borrowing rate approximates its carrying balance.

Segment Reporting: SFAS No. 131, "Disclosure about Segments of an Enterprise and
Related  Information"  established  standards  for the way that public  business
enterprises  report  information  about operating  segments in annual  financial
statements and required that those enterprises report selected information about
operating segments in interim financial  reports.  SFAS No. 131 also established
standards for related disclosures about products and services, geographic areas,
and major  customers.  As defined in SFAS No. 131, the  Partnership has only one
reportable segment.


<PAGE>



Note B - Mortgage Note Payable
<TABLE>
<CAPTION>

                          Principal     Monthly                           Principal
                         Balance At     Payment     Stated                 Balance
                        December 31,   Including   Interest   Maturity      Due At
       Property             2004        Interest     Rate       Date       Maturity
                             (in thousands)                             (in thousands)
Versailles on the Lake
 Apartments
<S>                        <C>           <C>          <C>     <C>  <C>     <C>
  1st mortgage             $ 2,303       $   11       (1)     9/15/07      $ 2,139
</TABLE>

(1)   Adjustable  rate based on Fannie Mae discounted  mortgage-backed  security
      index plus 85 basis points. The rate at December 31, 2004 was 3.07%.

The mortgage is financed under a permanent  credit facility  ("Permanent  Credit
Facility"). The Permanent Credit Facility has a maturity of five years, with one
five-year extension option. This Permanent Credit Facility also creates separate
loans for each property  that are not  cross-collateralized  or  cross-defaulted
with the other property  loans.  Each note under this Permanent  Credit Facility
begins as a  variable  rate loan with the option of  converting  to a fixed rate
loan after three  years.  The interest  rate on the  variable  rate loans is the
Fannie Mae discounted  mortgage-backed  security index plus 85 basis points. The
rate was 3.07% at December 31, 2004 and resets monthly.  Each loan automatically
renews at the end of each month.  In addition,  monthly  principal  payments are
required based on a 30-year  amortization  schedule,  using the interest rate in
effect  during the first  month that any  property  is in the  Permanent  Credit
Facility. The loans are prepayable without penalty.

The  mortgage  note  payable  is  non-recourse  and is  secured by pledge of the
respective  apartment property and by pledge of revenues from the property.  The
property may not be sold subject to existing indebtedness.

Scheduled principal payments of the mortgage note payable subsequent to December
31, 2004, are as follows (in thousands):

                               2005         $    55
                               2006              62
                               2007           2,186
                               Total        $ 2,303

Note C - Income Taxes

The Partnership  received a ruling from the Internal  Revenue Service that it is
to be classified as a partnership for Federal income tax purposes.  Accordingly,
no  provision  for  income  taxes  is made in the  financial  statements  of the
Partnership. Taxable income or loss of the Partnership is reported in the income
tax returns of its partners.

The  following  is a  reconciliation  of reported  net loss and Federal  taxable
income (in thousands, except per unit data):

                                                2004           2003
Net loss as reported                        $     (175)    $       (3)
Add (deduct):
  Depreciation differences                         153            145
  Unearned income                                    6            (24)
  Other                                             51            (97)
Federal taxable income                      $       35     $       21
Federal taxable income per limited
  partnership unit                          $   197.64     $   111.87

The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net liabilities at December 31, 2004 (in thousands):

                                                         2004
Net  liabilities  as  reported                        $ (1,130)
Differences  in basis of  assets  and
liabilities:
  Buildings and land                                        94
  Accumulated depreciation                                (592)
  Other                                                     58
Net liabilities - Federal tax basis                   $ (1,570)

Note D - Transactions with Affiliated Parties

The Partnership has no employees and depends on the Managing General Partner and
its  affiliates  for  the  management  and  administration  of  all  Partnership
activities.   Affiliates  of  the  Managing  General  Partner  provide  property
management services to the Partnership.  The Partnership  Agreement provides for
payments to  affiliates  for  services  and  reimbursement  of certain  expenses
incurred by affiliates on behalf of the Partnership.

Affiliates of the Managing General Partner receive 5% of gross receipts from the
Partnership's   property  as  compensation  for  providing  property  management
services.  The  Partnership  paid to such affiliates  approximately  $42,000 and
$47,000 for the years ended December 31, 2004 and 2003, respectively,  which are
included in operating expenses.

Affiliates  of  the  Managing   General  Partner  charged  the  Partnership  for
reimbursement of accountable  administrative expenses amounting to approximately
$46,000  and  $42,000  for  the  years  ended   December   31,  2004  and  2003,
respectively,  which are  included in general and  administrative  expenses  and
investment property. The portion of these reimbursements  included in investment
property  for the years ended  December  31,  2004 and 2003 are fees  related to
construction  management  services  provided  by an  affiliate  of the  Managing
General  Partner  of  approximately   $6,000  and  $1,000,   respectively.   The
construction  management  service fees are  calculated  based on a percentage of
current  year   additions  to  investment   property.   At  December  31,  2004,
approximately  $18,000 was owed to affiliates for unpaid  reimbursements,  which
are included on the balance sheet in due to affiliates.

In accordance  with the Partnership  Agreement,  during the years ended December
31,  2004  and  2003  the  Managing   General  Partner  loaned  the  Partnership
approximately  $178,000 and $3,000,  respectively,  to fund capital improvements
and  operating  expenses at  Versailles  on the Lake  Apartments.  The  Managing
General  Partner loaned the  Partnership  approximately  $260,000 during 2002 to
cover non-resident withholding taxes. Interest is charged at the prime rate plus
1% (6.25% as of December 31, 2004). As a result of these loans, interest expense
for each of the years ended December 31, 2004 and 2003 was approximately $5,000.
During the year ended December 31, 2003 the Partnership made principal  payments
to the Managing General Partner of approximately  $194,000 and interest payments
of approximately $7,000 with cash provided by operations.  No such payments were
made on advances  during the year ended December 31, 2004. At December 31, 2004,
the amount of the  outstanding  loans and  accrued  interest  was  approximately
$183,000 and is included on the balance sheet in due to affiliates.

The  Partnership is liable to an affiliate of the Managing  General  Partner for
real estate  commissions  in the amounts of  approximately  $125,000  for Revere
Village  Apartments and  approximately  $196,000 for Essex  Apartments,  both of
which were sold in previous years. The total amount of approximately $321,000 is
included on the balance sheet in due to affiliates.  Payment of the  commissions
will not be made to the  affiliate  until the  limited  partners  have  received
distributions  equal to  their  original  invested  capital,  plus 8% per  annum
cumulative  non-compounded on their adjusted invested capital  commencing on the
last day of the calendar  quarter in which each limited  partner was admitted to
the Partnership through the date of payment.

The  Partnership  insures its  property up to certain  limits  through  coverage
provided by AIMCO which is  generally  self-insured  for a portion of losses and
liabilities  related to workers  compensation,  property  casualty  and  vehicle
liability.  The Partnership  insures its property above the AIMCO limits through
insurance  policies  obtained  by  AIMCO  from  insurers  unaffiliated  with the
Managing General Partner. During the years ended December 31, 2004 and 2003, the
Partnership  was charged by AIMCO and its affiliates  approximately  $15,000 and
$13,000,  respectively,  for insurance  coverage and fees associated with policy
claims administration.

In addition to its  indirect  ownership of the general  partner  interest in the
Partnership,  AIMCO and its  affiliates  owned 328.45  Units in the  Partnership
representing  43.70% of the outstanding  Units at December 31, 2004. A number of
these  Units  were  acquired  pursuant  to  tender  offers  made by AIMCO or its
affiliates.  It is possible that AIMCO or its affiliates will acquire additional
Units  in  exchange  for  cash or a  combination  of cash  and  units  in  AIMCO
Properties,  L.P., the operating  partnership of AIMCO,  either through  private
purchases or tender offers.  Pursuant to the Partnership Agreement,  unitholders
holding a majority of the Units are  entitled  to take action with  respect to a
variety of matters  that  include,  but are not  limited  to,  voting on certain
amendments  to the  Partnership  Agreement  and  voting to remove  the  Managing
General  Partner.  As a result of its  ownership  of  43.70% of the  outstanding
Units,  AIMCO and its  affiliates are in a position to influence all such voting
decisions with respect to the Partnership. Although the Managing General Partner
owes fiduciary duties to the limited  partners of the Partnership,  the Managing
General Partner also owes fiduciary duties to AIMCO as its sole stockholder.  As
a result,  the duties of the  Managing  General  Partner,  as  managing  general
partner, to the Partnership and its limited partners may come into conflict with
the duties of the Managing General Partner to AIMCO as its sole stockholder.

Note E - Investment Property and Accumulated Depreciation

                                                 Initial Cost
                                                To Partnership
                                                (in thousands)
<TABLE>
<CAPTION>

                                                        Buildings         Net Cost
                                                       and Related      Capitalized
                                                         Personal      Subsequent to
Description                Encumbrances      Land        Property       Acquisition
                          (in thousands)                               (in thousands)
Versailles on the Lake
<S>                           <C>           <C>          <C>              <C>
 Apartments                   $ 2,303       $ 191        $ 3,847          $ 1,536
</TABLE>


                        Gross Amount At Which
                             Carried
                        At December 31, 2004
                           (in thousands)
<TABLE>
<CAPTION>

                              Buildings
                                 And                           Date of
                               Personal          Accumulated  Construc-   Date    Depreciable
     Description       Land    Property   Total  Depreciation   tion    Acquired     Life
                                                (in thousands)
Versailles on the
Lake
<S>                    <C>     <C>       <C>       <C>          <C>       <C>      <C>
 Apartments            $ 191   $ 5,383   $ 5,574   $ 4,103      1970      04/84    5-30 yrs
</TABLE>

Reconciliation  of  "investment  property  and  accumulated   depreciation"  (in
thousands):

                                              Years Ended December 31,
                                                 2004          2003
Investment Property

Balance at beginning of year                    $ 5,402       $ 5,188
    Property improvements                           172           214
Balance at end of year                          $ 5,574       $ 5,402

Accumulated Depreciation

Balance at beginning of year                    $ 3,828       $ 3,550
    Additions charged to expense                    275           278
Balance at end of year                          $ 4,103       $ 3,828

The  aggregate  cost of the real  estate  for  Federal  income tax  purposes  at
December  31,  2004  and  2003  is  approximately   $5,668,000  and  $5,501,000,
respectively. The accumulated depreciation taken for Federal income tax purposes
at  December  31,  2004 and 2003 is  approximately  $4,695,000  and  $4,574,000,
respectively.

Note F - Accrued Property Taxes

During 2003,  the state of Indiana  implemented a  reassessment  of property tax
values. The Partnership is currently appealing the reassessed property tax value
of  Versailles  on The Lake  Apartments.  In the state of Indiana,  property tax
bills  are paid one year in  arrears.  Thus,  the 2003  property  tax  bills are
received and paid in 2004.  Due to the  Partnership's  appeal of the  reassessed
property value, the property tax accrual for 2004, 2003 and 2002 is based on the
property tax value as estimated by a third party property tax specialist. During
2004,  the  Partnership   increased  its  estimate  of  property  taxes  due  by
approximately  $23,000.  If the Partnership is  unsuccessful  in its appeal,  it
could  potentially  be liable  for up to  approximately  $46,000  of  additional
property  tax  expense  related  to the  2002,  2003  and 2004  tax  years.  The
Partnership  believes  that the recorded  liability is the best  estimate of the
amounts ultimately to be paid for Indiana property taxes.  During the year ended
December 31, 2004, the Partnership  paid the tax bills for the 2002 and 2003 tax
years.  The  difference  between the property taxes paid based on the reassessed
value and the  property  taxes  based on the  estimated  value is  approximately
$30,000 and is included in other assets as prepaid property taxes.  However, the
Partnership is continuing to appeal the reassessed property value.

Note G - Fourth-Quarter Adjustment

The Partnership's policy is to record management  reimbursements to the Managing
General Partner as allowed under the Partnership Agreement on a quarterly basis,
using estimated financial  information furnished by an affiliate of the Managing
General Partner.  For the first three quarters of 2003, these  reimbursements of
accountable  administrative expenses were based on estimated amounts. During the
fourth  quarter of 2003 the  Partnership  recorded an  adjustment  to management
reimbursements to the Managing General Partner of approximately ($39,000) due to
a difference in the estimated  costs and the actual costs  incurred.  The actual
management  reimbursements  to the Managing  General  Partner for the year ended
December  31,  2003 were  approximately  $41,000 as  compared  to the  estimated
management  reimbursements  to the Managing  General Partner for the nine months
ended September 30, 2003 of approximately  $57,000. The adjustment to management
reimbursements was included in general and administrative expenses.

Note H - Contingencies

In March 1998, several putative unit holders of limited partnership units of the
Partnership  commenced an action  entitled  Rosalie  Nuanes,  et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of  California  for the  County  of San  Mateo.  The  plaintiffs  named as
defendants,  among others,  the  Partnership,  its Managing  General Partner and
several of their  affiliated  partnerships  and corporate  entities.  The action
purported  to  assert  claims  on  behalf  of a class of  limited  partners  and
derivatively  on behalf  of a number  of  limited  partnerships  (including  the
Partnership)  that are named as nominal  defendants,  challenging,  among  other
things,  the  acquisition  of  interests  in certain  Managing  General  Partner
entities by Insignia Financial Group, Inc.  ("Insignia") and entities that were,
at one  time,  affiliates  of  Insignia;  past  tender  offers  by the  Insignia
affiliates to acquire limited partnership units;  management of the partnerships
by the  Insignia  affiliates;  and the series of  transactions  which  closed on
October 1, 1998 and February 26, 1999 whereby  Insignia and Insignia  Properties
Trust,  respectively,  were merged into AIMCO.  The plaintiffs  sought  monetary
damages and equitable relief, including judicial dissolution of the Partnership.
In addition,  during the third quarter of 2001, a complaint  captioned Heller v.
Insignia  Financial  Group (the  "Heller  action")  was filed  against  the same
defendants  that are named in the  Nuanes  action.  On or about  August 6, 2001,
plaintiffs filed a first amended  complaint.  The Heller action was brought as a
purported derivative action, and asserted claims for, among other things, breach
of fiduciary  duty,  unfair  competition,  conversion,  unjust  enrichment,  and
judicial dissolution.

On January 8, 2003,  the parties filed a  Stipulation  of Settlement in proposed
settlement of the Nuanes action and the Heller action.

In general  terms,  the  proposed  settlement  provides  for  certification  for
settlement  purposes of a settlement class consisting of all limited partners in
this  Partnership and others (the  "Partnerships")  as of December 20, 2002, the
dismissal  with  prejudice  and  release  of claims  in the  Nuanes  and  Heller
litigation,  payment by AIMCO of $9.9  million  (which shall be  distributed  to
settlement  class  members  after  deduction of attorney fees and costs of class
counsel and certain costs of settlement) and up to $1 million toward the cost of
independent  appraisals of the  Partnerships'  properties  by a court  appointed
appraiser.  An affiliate of the Managing General Partner has also agreed to make
at least one round of tender offers to purchase all of the partnership interests
in the Partnerships within one year of final approval,  if it is granted, and to
provide  partners with the independent  appraisals at the time of these tenders.
The proposed  settlement also provided for the limitation of the allowable costs
which  the  Managing   General   Partner  or  its  affiliates  will  charge  the
Partnerships  in connection with this litigation and imposes limits on the class
counsel  fees and  costs in this  litigation.  On April  11,  2003,  notice  was
distributed  to  limited   partners   providing  the  details  of  the  proposed
settlement.

On June 13, 2003, the court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions.  On August 12, 2003, an objector
("Objector") filed an appeal (the "Appeal") seeking to vacate and/or reverse the
order approving the settlement and entering  judgment  thereto.  On November 24,
2003,  the Objector  filed an  application  requesting  the court order AIMCO to
withdraw settlement tender offers it had commenced,  refrain from making further
offers  pending  the appeal and auction  any units  tendered  to third  parties,
contending  that the offers did not  conform  with the terms of the  settlement.
Counsel  for the  Objector  (on behalf of another  investor)  had  alternatively
requested the court take certain action  purportedly to enforce the terms of the
settlement agreement. On December 18, 2003, the court heard oral argument on the
motions  and denied them both in their  entirety.  The  Objector  filed a second
appeal challenging the court's use of a referee and its order requiring Objector
to pay those fees.

On January 28, 2004,  the  Objector  filed his opening  brief in The Appeal.  On
April 23, 2004, the Managing General Partner and its affiliates filed a response
brief in support of the settlement and the judgment thereto. The plaintiffs have
also filed a brief in support of the settlement. On June 4, 2004, Objector filed
a reply to the briefs  submitted by the Managing General Partner and Plaintiffs.
In addition both the Objector and plaintiffs filed briefs in connection with the
second  appeal.  The Court of Appeals  heard oral  argument  on both  appeals on
September 22, 2004 and took the matters under submission.

The  Managing  General  Partner  does  not  anticipate  that  any  costs  to the
Partnership, whether legal or settlement costs, associated with these cases will
be material to the Partnership's overall operations.

As previously disclosed,  AIMCO Properties L.P. and NHP Management Company, both
affiliates of the Managing General  Partner,  are defendants in an action in the
United States District Court,  District of Columbia.  The plaintiffs have styled
their  complaint  as a  collective  action  under the Fair Labor  Standards  Act
("FLSA") and seek to certify state subclasses in California,  Maryland,  and the
District of Columbia. Specifically, the plaintiffs contend that AIMCO Properties
L.P. failed to compensate  maintenance  workers for time that they were required
to be "on-call." Additionally, plaintiffs allege AIMCO Properties L.P. failed to
comply  with the FLSA in  compensating  maintenance  workers  for time that they
worked in responding to a call while  "on-call."  The  defendants  have filed an
answer to the amended complaint denying the substantive  allegations.  Discovery
relating  to the  certification  of the  collective  action  has  concluded  and
briefing on the matter is underway.  Although the outcome of any  litigation  is
uncertain,  AIMCO  Properties,  L.P. does not believe that the ultimate  outcome
will have a material  adverse  effect on its  financial  condition or results of
operations.  Similarly,  the Managing  General Partner does not believe that the
ultimate  outcome  will have a  material  adverse  effect  on the  Partnership's
financial condition or results of operations.

The  Partnership  is unaware  of any other  pending  or  outstanding  litigation
matters involving it or its investment property that are not of a routine nature
arising in the ordinary course of business.

Environmental

Various  Federal,  state and local laws subject  property owners or operators to
liability for management,  and the costs of removal or  remediation,  of certain
hazardous  substances  present on a property.  Such laws often impose  liability
without regard to whether the owner or operator knew of, or was responsible for,
the release or presence of the  hazardous  substances.  The  presence of, or the
failure to manage or remedy properly,  hazardous substances may adversely affect
occupancy at affected  apartment  communities and the ability to sell or finance
affected properties.  In addition to the costs associated with investigation and
remediation  actions brought by government  agencies,  the presence of hazardous
substances  on a  property  could  result in claims by  private  plaintiffs  for
personal injury,  disease,  disability or other  infirmities.  Various laws also
impose  liability for the cost of removal,  remediation or disposal of hazardous
substances  through a  licensed  disposal  or  treatment  facility.  Anyone  who
arranges for the disposal or treatment of hazardous  substances  is  potentially
liable  under such laws.  These laws often impose  liability  whether or not the
person arranging for the disposal ever owned or operated the disposal  facility.
In connection with the ownership and operation of its property,  the Partnership
could  potentially be liable for  environmental  liabilities or costs associated
with its property.

Mold

The Partnership is aware of lawsuits  against owners and managers of multifamily
properties asserting claims of personal injury and property damage caused by the
presence of mold, some of which have resulted in substantial  monetary judgments
or settlements. The Partnership has only limited insurance coverage for property
damage loss claims  arising from the  presence of mold and for  personal  injury
claims related to mold exposure. Affiliates of the Managing General Partner have
implemented a national  policy and  procedures to prevent or eliminate mold from
its properties  and the Managing  General  Partner  believes that these measures
will  eliminate,  or at least  minimize,  the  effects  that mold  could have on
residents.  To date,  the  Partnership  has not incurred  any material  costs or
liabilities  relating to claims of mold  exposure  or to abate mold  conditions.
Because the law  regarding  mold is unsettled and subject to change the Managing
General  Partner  can make no  assurance  that  liabilities  resulting  from the
presence of or exposure to mold will not have a material  adverse  effect on the
Partnership's financial condition or results of operations.

As  previously  disclosed,  the  Central  Regional  Office of the United  States
Securities  and  Exchange   Commission   (the  "SEC")  is  conducting  a  formal
investigation relating to certain matters.  Although the staff of the SEC is not
limited  in the  areas  that it may  investigate,  AIMCO  believes  the areas of
investigation include AIMCO's miscalculated monthly net rental income figures in
third quarter 2003,  forecasted  guidance,  accounts payable,  rent concessions,
vendor  rebates,  capitalization  of payroll and certain  other  costs,  and tax
credit  transactions.  AIMCO is cooperating  fully. AIMCO is not able to predict
when the matter  will be  resolved.  AIMCO does not  believe  that the  ultimate
outcome  will  have a  material  adverse  effect on its  consolidated  financial
condition or results of operations. Similarly, the Managing General Partner does
not believe that the ultimate outcome will have a material adverse effect on the
Partnership's financial condition or results of operations.


<PAGE>



Item 8.     Changes in and  Disagreements  with  Accountants on Accounting and
            Financial Disclosures

            None.

Item 8A.    Controls and Procedures

(a) Disclosure Controls and Procedures.  The Partnership's management,  with the
participation of the principal executive officer and principal financial officer
of the Managing  General  Partner,  who are the equivalent of the  Partnership's
principal executive officer and principal financial officer,  respectively,  has
evaluated  the  effectiveness  of  the  Partnership's  disclosure  controls  and
procedures (as such term is defined in Rules  13a-15(e) and 15d-15(e)  under the
Securities  Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report.  Based on such  evaluation,  the principal
executive  officer  and  principal  financial  officer of the  Managing  General
Partner, who are the equivalent of the Partnership's principal executive officer
and principal  financial officer,  respectively,  have concluded that, as of the
end of such period,  the  Partnership's  disclosure  controls and procedures are
effective.

(b) Internal Control Over Financial  Reporting.  There have not been any changes
in the Partnership's  internal control over financial reporting (as such term is
defined in Rules  13a-15(f)  and  15d-15(f)  under the Exchange  Act) during the
fourth quarter of 2004 that have materially  affected,  or are reasonably likely
to  materially  affect,  the  Partnership's   internal  control  over  financial
reporting.

Item 8b.    Other Information

            None.


<PAGE>


                                    PART III

Item 9.     Directors,  Executive  Officers,  Promoters  and Control  Persons,
            Compliance with Section 16(a) of the Exchange Act

Davidson  Diversified Real Estate I, L.P. (the  "Partnership" or "Registrant")
has no officers or  directors.  Davidson  Diversified  Properties,  Inc.  (the
"Managing  General  Partner")  manages and  controls the  Partnership  and has
general responsibility and authority in all matters affecting its business.

The names of the directors and officers of the Managing General  Partner,  their
ages and the nature of all positions presently held by them are set forth below.
There are no family relationships between or among any directors and officers.

Martha L. Long                   45   Director and Senior Vice President
Harry G. Alcock                  42   Director and Executive Vice President
Miles Cortez                     61   Executive Vice President, General Counsel
                                       and Secretary
Patti K. Fielding                41   Executive Vice President
Paul J. McAuliffe                48   Executive Vice President and Chief
                                      Financial Officer
Thomas M. Herzog                 42   Senior Vice President and Chief Accounting
                                       Officer
Stephen B. Waters                43   Vice President

Martha L. Long has been a Director  and Senior Vice  President of the Managing
General  Partner  since  February  2004.  Ms.  Long has been with AIMCO  since
October  1998 and has served in  various  capacities.  From 1998 to 2001,  Ms.
Long served as Senior Vice  President and Controller of AIMCO and the Managing
General  Partner.  During  2002 and 2003,  Ms.  Long  served  as  Senior  Vice
President of Continuous Improvement for AIMCO.

Harry G. Alcock was appointed as a Director of the Managing  General  Partner in
October 2004 and was appointed  Executive Vice President of the Managing General
Partner  in  February  2004 and has been  Executive  Vice  President  and  Chief
Investment Officer of AIMCO since October 1999. Prior to October 1999 Mr. Alcock
served as a Vice President of AIMCO from July 1996 to October 1997,  when he was
promoted to Senior Vice  President  Acquisitions  where he served until  October
1999. Mr. Alcock has had responsibility for acquisition and financing activities
of AIMCO since July 1994.

Miles  Cortez was  appointed  Executive  Vice  President,  General  Counsel  and
Secretary  of the  Managing  General  Partner in  February  2004 and of AIMCO in
August 2001. Prior to joining AIMCO, Mr. Cortez was the senior partner of Cortez
Macaulay Bernhardt & Schuetze LLC, a Denver law firm, from December 1997 through
September 2001.

Patti K. Fielding was appointed  Executive  Vice President - Securities and Debt
of the Managing  General Partner in February 2004 and of AIMCO in February 2003.
Ms.  Fielding was appointed  Treasurer of AIMCO in January 2005. Ms. Fielding is
responsible  for  debt  financing  and the  treasury  department.  Ms.  Fielding
previously  served as Senior Vice  President - Securities and Debt of AIMCO from
January 2000 to February 2003. Ms.  Fielding  joined AIMCO in February 1997 as a
Vice President.

Paul J. McAuliffe has been Executive Vice President and Chief Financial  Officer
of the Managing  General  Partner since April 2002. Mr.  McAuliffe has served as
Executive Vice  President of AIMCO since  February 1999 and was appointed  Chief
Financial Officer of AIMCO in October 1999. From May 1996 until he joined AIMCO,
Mr. McAuliffe was Senior Managing Director of Secured Capital Corp.

Thomas M.  Herzog was  appointed  Senior  Vice  President  and Chief  Accounting
Officer of the Managing General Partner in February 2004 and of AIMCO in January
2004.  Prior to joining AIMCO in January 2004, Mr. Herzog was at GE Real Estate,
serving  as Chief  Accounting  Officer & Global  Controller  from  April 2002 to
January 2004 and as Chief Technical Advisor from March 2000 to April 2002. Prior
to joining GE Real  Estate,  Mr.  Herzog was at  Deloitte & Touche LLP from 1990
until 2000.

Stephen B. Waters was appointed Vice President of the Managing  General  Partner
in April  2004.  Mr.  Waters  previously  served as a  Director  of Real  Estate
Accounting   since   joining   AIMCO  in   September   1999.   Mr.   Waters  has
responsibilities for real estate and partnership accounting with AIMCO.

One or more of the above persons are also directors and/or officers of a general
partner (or general partner of a general partner) of limited  partnerships which
either have a class of  securities  registered  pursuant to Section 12(g) of the
Securities Exchange Act of 1934, or are subject to the reporting requirements of
Section  15(d) of such Act.  Further,  one or more of the above persons are also
directors and/or officers of Apartment Investment and Management Company and the
general  partner  of  AIMCO  Properties,  L.P.,  entities  that  have a class of
securities  registered  pursuant to Section 12(g) of the Securities Exchange Act
of 1934, or are subject to the reporting  requirements  of Section 15(d) of such
Act.

The board of directors of the Managing  General Partner does not have a separate
audit committee. As such, the board of directors of the Managing General Partner
fulfills  the  functions  of an audit  committee.  The  board of  directors  has
determined  that  Martha L. Long meets the  requirement  of an "audit  committee
financial expert".

The directors and officers of the Managing  General  Partner with authority over
the Partnership are all employees of subsidiaries of AIMCO.  AIMCO has adopted a
code of ethics that applies to such  directors  and  officers  that is posted on
AIMCO's  website  (www.AIMCO.com).   AIMCO's  website  is  not  incorporated  by
reference to this filing.

Item 10.    Executive Compensation

Neither the directors nor officers of the Managing  General Partner received any
remuneration from the Registrant.

Item 11.    Security Ownership of Certain Beneficial Owners and Management

Except as noted below, no person or entity was known by the Registrant to be the
beneficial owners of more than 5% of the Limited Partnership Units (the "Units")
of the Registrant as of December 31, 2004.


<PAGE>



                        Entity                     Number of Units    Percentage

      AIMCO Properties, L.P.                            224.05           29.81%
        (an affiliate of AIMCO)
      Cooper River Properties, L.L.C.                    85.65           11.40%
        (an affiliate of AIMCO)
      AIMCO IPLP, L.P.                                   18.50            2.46%
        (an affiliate of AIMCO)
      Davidson Diversified Properties, Inc.                .25            0.03%
        (an affiliate of AIMCO)

Cooper River  Properties,  L.L.C.,  AIMCO IPLP, L.P. and Davidson  Diversified
Properties,  Inc. are  indirectly  ultimately  owned by AIMCO.  Their business
address is 55 Beattie Place, Greenville, SC 29602.

AIMCO  Properties,  L.P. is indirectly  ultimately  controlled  by AIMCO.  Its
business address is 4582 S. Ulster St. Parkway, Suite 1100, Denver, CO 80237.

As of December 31, 2004, no director or officer of the Managing  General Partner
owns,  nor do the directors or officers as a group own any of the  Partnership's
Units. No such director or officer had any right to acquire beneficial ownership
of additional Units of the Partnership.

Item 12.    Certain Relationships and Related Transactions

The Partnership has no employees and depends on the Managing General Partner and
its  affiliates  for  the  management  and  administration  of  all  Partnership
activities.   Affiliates  of  the  Managing  General  Partner  provide  property
management services to the Partnership.  The Partnership  Agreement provides for
payments to  affiliates  for  services  and  reimbursement  of certain  expenses
incurred by affiliates on behalf of the Partnership.

Affiliates of the Managing General Partner receive 5% of gross receipts from the
Partnership's   property  as  compensation  for  providing  property  management
services.  The  Partnership  paid to such affiliates  approximately  $42,000 and
$47,000 for the years ended December 31, 2004 and 2003, respectively,  which are
included in operating expenses on the statements of operations included in "Item
7. Financial Statements".

Affiliates  of  the  Managing   General  Partner  charged  the  Partnership  for
reimbursement of accountable  administrative expenses amounting to approximately
$46,000  and  $42,000  for  the  years  ended   December   31,  2004  and  2003,
respectively,  which are  included in general and  administrative  expenses  and
investment  property on the financial  statements included in "Item 7. Financial
Statements". The portion of these reimbursements included in investment property
for the years ended December 31, 2004 and 2003 are fees related to  construction
management  services provided by an affiliate of the Managing General Partner of
approximately  $6,000 and  $1,000,  respectively.  The  construction  management
service fees are  calculated  based on a percentage of current year additions to
investment  property.  At December 31, 2004,  approximately  $18,000 was owed to
affiliates for unpaid reimbursements, which are included in due to affiliates on
the balance sheet included in "Item 7. Financial Statements".

In accordance  with the Partnership  Agreement,  during the years ended December
31,  2004  and  2003  the  Managing   General  Partner  loaned  the  Partnership
approximately  $178,000 and $3,000,  respectively,  to fund capital improvements
and  operating  expenses at  Versailles  on the Lake  Apartments.  The  Managing
General  Partner loaned the  Partnership  approximately  $260,000 during 2002 to
cover non-resident withholding taxes. Interest is charged at the prime rate plus
1% (6.25% as of December 31, 2004). As a result of these loans, interest expense
for each of the years ended December 31, 2004 and 2003 was approximately $5,000.
During the year ended December 31, 2003 the Partnership made principal  payments
to the Managing General Partner of approximately  $194,000 and interest payments
of approximately $7,000 with cash provided by operations.  No such payments were
made on advances  during the year ended December 31, 2004. At December 31, 2004,
the amount of the  outstanding  loans and  accrued  interest  was  approximately
$183,000 and is included in due to affiliates  on the balance sheet  included in
"Item 7. Financial Statements".

The  Partnership is liable to an affiliate of the Managing  General  Partner for
real estate  commissions  in the amounts of  approximately  $125,000  for Revere
Village  Apartments and  approximately  $196,000 for Essex  Apartments,  both of
which were sold in previous years. The total amount of approximately $321,000 is
included on the balance sheet in due to affiliates on the balance sheet included
in "Item 7. Financial  Statements".  Payment of the commissions will not be made
to the affiliate until the limited partners have received distributions equal to
their original invested capital, plus 8% per annum cumulative  non-compounded on
their  adjusted  invested  capital  commencing  on the last day of the  calendar
quarter in which each limited  partner was admitted to the  Partnership  through
the date of payment.

The  Partnership  insures its  property up to certain  limits  through  coverage
provided by AIMCO which is  generally  self-insured  for a portion of losses and
liabilities  related to workers  compensation,  property  casualty  and  vehicle
liability.  The Partnership  insures its property above the AIMCO limits through
insurance  policies  obtained  by  AIMCO  from  insurers  unaffiliated  with the
Managing General Partner. During the years ended December 31, 2004 and 2003, the
Partnership  was charged by AIMCO and its affiliates  approximately  $15,000 and
$13,000,  respectively,  for insurance  coverage and fees associated with policy
claims administration.

In addition to its  indirect  ownership of the general  partner  interest in the
Partnership,  AIMCO and its  affiliates  owned 328.45  Units in the  Partnership
representing  43.70% of the outstanding  Units at December 31, 2004. A number of
these  Units  were  acquired  pursuant  to  tender  offers  made by AIMCO or its
affiliates.  It is possible that AIMCO or its affiliates will acquire additional
Units  in  exchange  for  cash or a  combination  of cash  and  units  in  AIMCO
Properties,  L.P., the operating  partnership of AIMCO,  either through  private
purchases or tender offers.  Pursuant to the Partnership Agreement,  unitholders
holding a majority of the Units are  entitled  to take action with  respect to a
variety of matters  that  include,  but are not  limited  to,  voting on certain
amendments  to the  Partnership  Agreement  and  voting to remove  the  Managing
General  Partner.  As a result of its  ownership  of  43.70% of the  outstanding
Units,  AIMCO and its  affiliates are in a position to influence all such voting
decisions with respect to the Partnership. Although the Managing General Partner
owes fiduciary duties to the limited  partners of the Partnership,  the Managing
General Partner also owes fiduciary duties to AIMCO as its sole stockholder.  As
a result,  the duties of the  Managing  General  Partner,  as  managing  general
partner, to the Partnership and its limited partners may come into conflict with
the duties of the Managing General Partner to AIMCO as its sole stockholder.


<PAGE>


Item 13.    Exhibits

            See Exhibit Index.

Item 14.    Principal Accountant Fees and Services

The Managing  General Partner has  reappointed  Ernst & Young LLP as independent
auditors to audit the financial  statements  of the  Partnership  for 2005.  The
aggregate  fees billed for  services  rendered by Ernst & Young LLP for 2004 and
2003 are described below.

Audit Fees. Fees for audit services  totaled  approximately  $27,000 and $32,000
for 2004 and 2003, respectively.  Fees for audit services also included fees for
the reviews of the Partnership's Quarterly Reports on Form 10-QSB.

Tax Fees. Fees for tax services totaled approximately $6,000 and $7,000 for 2004
and 2003, respectively.


<PAGE>


                                   SIGNATURES



In  accordance  with  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.



                                    DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.


                                    By:   Davidson Diversified Properties,
                                           Inc.,
                                          Managing General Partner


                                    By:   /s/Martha L. Long
                                          Martha L. Long
                                          Senior Vice President


                                          /s/Stephen B. Waters
                                    By:   Stephen B. Waters
                                          Vice President


                                    Date: March 18, 2005


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

/s/Harry G. Alcock            Director and Executive   Date: March 18, 2005
Harry G. Alcock               Vice President

/s/Martha L. Long             Director and Senior Vice Date: March 18, 2005
Martha L. Long                President

/s/Stephen B. Waters          Vice President           Date: March 18, 2005
Stephen B. Waters


<PAGE>



                     DAVIDSON DIVERSIFIED REAL ESTATE I, LP

                                  EXHIBIT INDEX

Exhibit           Description

    3A            Partnership  Agreement  dated January 14, 1983 is incorporated
                  by reference to Exhibit A to the Prospectus of the Partnership
                  dated November 16, 1983 as filed with the Commission  pursuant
                  to Rule 424(b) under the Act.

    3B            Amendment  No.  1 dated  January  1,  1986 to the  Partnership
                  Agreement  is  incorporated  by reference to Exhibit 3B to the
                  Partnership's  Annual  Report on Form 10-K for the fiscal year
                  ended December 31, 1985.

    4             Certificate  of Limited  Partnership  dated December 2, 1982
                  is   incorporated   by   reference   to  Exhibit  4  to  the
                  Partnership's  Annual  Report  on Form  10-K for the  fiscal
                  year ended December 31, 1987.

   4A             Certificate of Amendment of Certificate of Limited Partnership
                  dated March 24, 1983 is  incorporated  by reference to Exhibit
                  4A to the  Partnership's  Annual  Report  on Form 10-K for the
                  fiscal year ended December 31, 1987.

    4B            Restated Certificate of Limited Partnership dated June 8, 1983
                  is   incorporated   by   reference   to   Exhibit  4B  to  the
                  Partnership's  Annual  Report on Form 10-K for the fiscal year
                  ended December 31, 1987.

    4C            Amended and Restated  Certificate of Limited Partnership dated
                  January 1, 1986 is  incorporated by reference to Exhibit 4C to
                  the  Partnership's  Annual  Report on Form 10-K for the fiscal
                  year ended December 31, 1987.

   10D            Contract  for Sale of Real Estate for  Versailles  on the Lake
                  dated  March  16,  1984   between   Versailles   on  the  Lake
                  Associates,  an Illinois  limited  partnership  and  Tennessee
                  Trust  Company,  Trustee,  is  incorporated  by  reference  to
                  Exhibit 10(b) to the Partnership's  Current Report on Form 8-K
                  dated April 4, 1984.

   10E            Assignment  of Contract  for Sale dated April 2, 1984  between
                  Tennessee Trust Company, Trustee and the Partnership (relating
                  to  Versailles  on the Lake  Apartments)  is  incorporated  by
                  reference to Exhibit 10L to the Partnership's Annual Report on
                  Form 10-K for the fiscal year ended December 31, 1984.

   10W            Multifamily  Note dated  September  16,  2002,  by and between
                  Davidson   Diversified  Real  Estate  I,  a  Delaware  limited
                  partnership   and  GMAC   Commercial   Mortgage   Corporation.
                  (Incorporated  by reference to Exhibit 10W to the  Partnership
                  Quarterly  Report on Form  10-QSB  for the nine  months  ended
                  September 30, 2002.)

   31.1           Certification  of  equivalent  of  Chief  Executive  Officer
                  pursuant     to     Securities     Exchange     Act    Rules
                  13a-14(a)/15d-14(a),  as Adopted  Pursuant to Section 302 of
                  the Sarbanes-Oxley Act of 2002.

   31.2           Certification  of  equivalent  of  Chief  Financial  Officer
                  pursuant     to     Securities     Exchange     Act    Rules
                  13a-14(a)/15d-14(a),  as Adopted  Pursuant to Section 302 of
                  the Sarbanes-Oxley Act of 2002.

   32.1           Certification   Pursuant  to  18  U.S.C.  Section  1350,  as
                  Adopted  Pursuant to Section 906 of the  Sarbanes-Oxley  Act
                  of 2002.


<PAGE>


Exhibit 31.1
                                  CERTIFICATION

I, Martha L. Long, certify that:


1.    I have reviewed this annual report on Form 10-KSB of Davidson  Diversified
      Real Estate I, L.P.;

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 this  report,  fairly  present  in all  material
      respects the financial condition,  results of operations and cash flows of
      the small  business  issuer as of, and for, the periods  presented in this
      report;

4.    The  small  business  issuer's  other  certifying  officer(s)  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)) for
      the small business issuer 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 the
            small business issuer, 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  the  small  business   issuer'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 the small  business  issuer's
            internal  control over financial  reporting that occurred during the
            small  business  issuer's  most  recent  fiscal  quarter  (the small
            business  issuer's  fourth  fiscal  quarter in the case of an annual
            report) that has  materially  affected,  or is reasonably  likely to
            materially affect, the small business issuer's internal control over
            financial reporting; and

5.    The  small  business  issuer's  other  certifying  officer(s)  and I  have
      disclosed,  based on our most recent  evaluation of internal  control over
      financial reporting, to the small business issuer's auditors and the audit
      committee of the small  business  issuer's  board of directors (or persons
      performing the equivalent functions):

      (a)   All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely  affect the small business  issuer'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 the small  business
            issuer's internal control over financial reporting.


Date: March 18, 2005

                                    /s/Martha L. Long
                                    Martha L. Long
                                    Senior Vice President of Davidson
                                    Diversified Properties, Inc., equivalent
                                    of the chief executive officer of the
                                    Partnership


<PAGE>


Exhibit 31.2
                                  CERTIFICATION

I, Stephen B. Waters, certify that:


1.    I have reviewed this annual report on Form 10-KSB of Davidson  Diversified
      Real Estate I, L.P.;

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 this  report,  fairly  present  in all  material
      respects the financial condition,  results of operations and cash flows of
      the small  business  issuer as of, and for, the periods  presented in this
      report;

4.    The  small  business  issuer's  other  certifying  officer(s)  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)) for
      the small business issuer 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 the
            small business issuer, 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  the  small  business   issuer'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 the small  business  issuer's
            internal  control over financial  reporting that occurred during the
            small  business  issuer's  most  recent  fiscal  quarter  (the small
            business  issuer's  fourth  fiscal  quarter in the case of an annual
            report) that has  materially  affected,  or is reasonably  likely to
            materially affect, the small business issuer's internal control over
            financial reporting; and

5.    The  small  business  issuer's  other  certifying  officer(s)  and I  have
      disclosed,  based on our most recent  evaluation of internal  control over
      financial reporting, to the small business issuer's auditors and the audit
      committee of the small  business  issuer's  board of directors (or persons
      performing the equivalent functions):

      (a)   All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely  affect the small business  issuer'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 the small  business
            issuer's internal control over financial reporting.


Date: March 18, 2005

                                /s/Stephen B. Waters
                                Stephen B. Waters
                                Vice President of Davidson
                                Diversified Properties, Inc.,
                                equivalent of the chief
                                financial officer of the
                                Partnership


<PAGE>


Exhibit 32.1


                          Certification of CEO and CFO
                       Pursuant to 18 U.S.C. Section 1350,
                             As Adopted Pursuant to
                Section 906 of the Sarbanes-Oxley Act of 2002



In connection with the Annual Report on Form 10-KSB of Davidson Diversified Real
Estate I, L.P.  (the  "Partnership"),  for the year ended  December  31, 2004 as
filed with the  Securities  and  Exchange  Commission  on the date  hereof  (the
"Report"),  Martha L. Long, as the equivalent of the chief executive  officer of
the Partnership, and Stephen B. Waters, as the equivalent of the chief financial
officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section
1350,  as adopted  pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002,
that, to the best of his knowledge:

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

      (2)   The  information  contained in the Report  fairly  presents,  in all
            material respects, the financial condition and results of operations
            of the Partnership.


                                           /s/Martha L. Long
                                    Name:  Martha L. Long
                                    Date:  March 18, 2005


                                           /s/Stephen B. Waters
                                    Name:  Stephen B. Waters
                                    Date:  March 18, 2005



This  certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley  Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.