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|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



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|-------------------------------------------
|For the fiscal year ended December 31, 2007



[ ]

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.)



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|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:
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|None                                                          
|                                                              
|Securities registered under Section 12(g) of the Exchange Act:
|                                                              
|Units of Limited Partnership Interest                         
|(Title of class)                                              



Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. [ ]



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. YesX 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]



Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ]  No[X]



State issuer's revenues for its most recent fiscal year.  $1,067,000



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, 2007.  No market exists for the Limited Partnership interests of the Registrant, and, therefore, no aggregate market value can be determined.





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|-----------------------------------
|DOCUMENTS INCORPORATED BY REFERENCE
|None                               



Transitional Small Business Disclosure Format (Check one):  Yes [ ]; No [X]













FORWARD-LOOKING STATEMENTS



The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements in certain circumstances. Certain information included in this Report contains or may contain information that is forward-looking, including, without limitation, statements regarding the effect of redevelopments, the Partnerships future financial performance, including the Partnerships ability to maintain current or meet projected occupancy and rent levels, and the effect of government regulations. Actual results may differ materially from those described in the forward-looking statements and, in addition, will be affected by a variety of risks and factors that are beyond the Partnerships control including, without limitation: natural disasters such as hurricanes; national and local economic conditions; the general level of interest rates; energy costs; the terms of governmental regulations that affect the Partnerships property and interpretations of those regulations; the competitive environment in which the Partnership operates; financing risks, including the risk that the Partnerships cash flows from operations may be insufficient to meet required payments of principal and interest; real estate risks, including fluctuations in real estate values and the general economic climate in local markets and competition for tenants in such markets; insurance risks; development risks; litigation, including costs associated with prosecuting or defending claims and any adverse outcomes; and possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of properties presently owned or previously owned by the Partnership.   Readers should carefully review the Partnerships financial statements and the notes thereto, as well as the section entitled Risk Factors described in Item 1 of this Annual Report and the other documents the Partnership 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 (the "Managing General Partner"); Diversified Equities, Limited, a Tennessee limited partnership (the "Associate General Partner"); and David W. Talley (the "Individual General Partner") (collectively, the "General Partners"). The Managing General Partner is a wholly-owned 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, 2023, unless terminated prior to such date.



The offering of the Partnership's limited partnership units (the "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 2006.  The Partnership continues to own and operate one investment property as of December 31, 2007.  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, 2007 and 2006.



Risk Factors



The risk factors noted in this section and other factors noted throughout this Report describe certain risks and uncertainties that could cause the Partnerships actual results to differ materially from those contained in any forward-looking statement.



Failure to generate sufficient net operating income may limit the Partnerships ability to repay advances from affiliates.



The Partnerships ability to repay advances from affiliates to its investors depends on its ability to generate net operating income in excess of required debt payments and capital expenditure requirements. Net operating income may be adversely affected by events or conditions beyond the Partnerships control, including:



·

the general economic climate;

·

competition from other apartment communities and other housing options;

·

local conditions, such as loss of jobs or an increase in the supply of apartments, that might adversely affect apartment occupancy or rental rates;

·

changes in governmental regulations and the related cost of compliance;

·

increases in operating costs (including real estate taxes) due to inflation and other factors, which may not be offset by increased rents;

·

changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multifamily housing; and

·

changes in interest rates and the availability of financing.



The Partnerships existing and future debt financing could render it unable to operate, result in foreclosure on its property or prevent it from making distributions on its equity.



The Partnerships strategy is generally to incur debt to increase the return on its equity while maintaining acceptable interest coverage ratios. Payments of principal and interest may leave the Partnership with insufficient cash resources to operate its property or pay distributions.  The Partnership is also subject to the risk that its cash flow from operations will be insufficient to make required payments of principal and interest, and the risk that existing indebtedness may not be refinanced or that the terms of any refinancing will not be as favorable as the terms of existing indebtedness. If the Partnership fails to make required payments of principal and interest on secured debt, its lender could foreclose on the property securing such debt, which would result in loss of income and asset value to the Partnership.



Competition could limit the Partnerships ability to lease apartments or increase or maintain rents.



The Partnerships apartment property competes for residents with other housing alternatives, including other rental apartments, condominiums and single-family homes that are available for rent, as well as new and existing condominiums and single-family homes for sale. Competitive residential housing in such market area could adversely affect the Partnerships ability to lease apartments and to increase or maintain rental rates.



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 Partnership believes that its property is substantially in compliance with present requirements, the Partnership may incur unanticipated expenses to comply with the ADA and the FHAA.



Potential liability or other expenditures associated with potential environmental contamination may be costly.



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, and potential fines or penalties imposed by such agencies in connection therewith, 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, operation and management of its property, the Partnership could potentially be liable for environmental liabilities or costs associated with its property.



Moisture infiltration and resulting mold remediation may be costly.



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 policies, procedures, third-party audits and training and the Managing General Partner believes that these measures will prevent or eliminate mold exposure and will minimize the effects that mold may 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.



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:



|                       |          |                            |          
|---------------------- | -------- | -------------------------- | ---------
|                       | Date of  |                            |          
|Property               | Purchase | Type of Ownership          | Use      
|                       |          |                            |          
|Versailles on the Lake |          |                            |          
|Apartments             | 04/05/84 | Fee ownership subject to a | Apartment
|Ft. Wayne, Indiana     |          | first mortgage             | 156 units



Schedule of Property



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



|                  |                |              |             |                |          
|----------------- | -------------- | ------------ | ----------- | -------------- | ---------
|                  | Gross          |              |             |                |          
|                  | Carrying       | Accumulated  | Depreciable | Method of      | Federal  
|Property          | Value          | Depreciation | Life        | Depreciation   | Tax Basis
|                  | (in thousands) |              |             | (in thousands)
|                  |                |              |             |                |          
|Versailles on the |                |              |             |                |          
|Lake Apartments   | $6,382         | $4,979       | 5-30 yrs    | S/L            | $1,345   



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 Partnership's property.



|                       |                |          |           |            |               
|---------------------- | -------------- | -------- | --------- | ---------- | --------------
|                       | Principal      |          |           |            | Principal     
|                       | Balance At     | Stated   |           |            | Balance       
|                       | December 31,   | Interest | Period    | Maturity   | Due At        
|Property               | 2007           | Rate     | Amortized | Date       | Maturity (3)  
|                       | (in thousands) |          |           |            | (in thousands)
|Versailles on the Lake |                |          |           |            |               
|Apartments             |                |          |           |            |               
|1st mortgage           | $2,405         | (1)      | (2)       | 10/01/2010 | $2,405        



(1)

Adjustable rate based on the one-month LIBOR rate plus 0.78% to 0.98% depending upon certain performance criteria. The rate at December 31, 2007 was 6.01%.



(2)

Interest only payments.



(3)

See Note B  Mortgage Note Payable to the financial statements included in "Item 7. Financial Statements" for other specific details about the loan.







On September 21, 2007, the Partnership refinanced the mortgage encumbering Versailles on the Lake Apartments. The refinancing replaced the existing mortgage, which at the time of refinancing had a principal balance of approximately $2,138,000, with a new mortgage loan in the principal amount of $2,405,000. The new loan was refinanced under a secured real estate credit facility (Secured Credit Facility) with AEGON USA Realty Advisors, Inc., as agent for Transamerica Occidental Life Insurance Company, which has a maturity of October 1, 2010, with two one-year extension options. The new mortgage requires monthly payments of interest only beginning on November 1, 2007, through the October 1, 2010 maturity date, at which date the entire principal balance of $2,405,000 is due.  The new loan has a variable interest rate of the one-month LIBOR rate plus 0.78% (6.01% per annum at December 31, 2007) and resets monthly.  The variable interest rate may increase to the one-month LIBOR rate plus 0.98% if the debt service coverage ratio of the investment property decreases below a prescribed threshold. The Secured Credit Facility provides mortgage loans on properties owned by other partnerships that are affiliated with the Managing General Partner. The Secured Credit Facility creates separate loans for each property that are not cross-collateralized or cross-defaulted with the other property loans. The loans are prepayable without penalty.  As a condition of the Secured Credit Facility, the lender required AIMCO Properties, L.P., an affiliate of the Managing General Partner, to guarantee the obligations and liabilities of the Partnership with respect to the new mortgage financing.



Rental Rates and Occupancy



Average annual rental rate and occupancy for 2007 and 2006 for the property are as follows:



|                                  |                |           |      |     
|--------------------------------- | -------------- | --------- | ---- | ----
|                                  | Average Annual | Average  
|                                  | Rental Rates   | Occupancy
|                                  | (per unit)     |           |     
|Property                          | 2007           | 2006      | 2007 | 2006
|                                  |                |           |      |     
|Versailles on the Lake Apartments | $6,104         | $5,986    | 95%  | 96% 



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 2007 for the property were as follows:



|                                  |                |      
|--------------------------------- | -------------- | -----
|                                  | 2007           | 2007 
|                                  | Taxes          | Rate 
|                                  | (in thousands) |      
|                                  |                |      
|Versailles on the Lake Apartments | $  88*         | 2.48%



*Amount per 2006 billings.  Taxes are paid a year in arrears.







Capital Improvements



Versailles on the Lake Apartments



During the year ended December 31, 2007, the Partnership completed approximately $208,000 of capital improvements at the property, consisting primarily of foundation waterproofing, lighting upgrades, water heaters and floor covering replacement. These improvements were funded from operations and advances from AIMCO Properties, L.P., 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 2008. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.



Capital expenditures will be incurred only if cash is available from operations, Partnership reserves, or advances from AIMCO Properties, L.P., although AIMCO Properties, L.P. does not have a commitment to fund advances to the Partnership. 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 28, 2002, the trial court granted defendants motion to strike the complaint.  Plaintiffs took an appeal from this order.



On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. 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 May 4, 2004, the Objector filed a second appeal challenging the courts use of a referee and its order requiring Objector to pay those fees.



On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.  With regard to the settlement and judgment entered thereto, the Court of Appeals vacated the trial courts order and remanded to the trial court for further findings on the basis that the state of the record is insufficient to permit meaningful appellate review.  The matter was transferred back to the trial court on June 21, 2005.  With regard to the second appeal, the Court of Appeals reversed the order requiring the Objector to pay referee fees. With respect to the related Heller appeal, on July 28, 2005, the Court of Appeals reversed the trial courts order striking the first amended complaint.



On August 18, 2005, Objector and his counsel filed a motion to disqualify the trial court based on a peremptory challenge and filed a motion to disqualify for cause on October 17, 2005, both of which were ultimately denied and/or struck by the trial court.  On or about October 13, 2005 Objector filed a motion to intervene and on or about October 19, 2005 filed both a motion to take discovery relating to the adequacy of plaintiffs as derivative representatives and a motion to dissolve the anti-suit injunction in connection with settlement.  On November 14, 2005, Plaintiffs filed a Motion For Further Findings pursuant to the remand ordered by the Court of Appeals. Defendants joined in that motion.  On February 3, 2006, the Court held a hearing on the various matters pending before it and ordered additional briefing from the parties and Objector. On June 30, 2006, the trial court entered an order confirming its approval of the class action settlement and entering judgment thereto after the Court of Appeals had remanded the matter for further findings.  The substantive terms of the settlement agreement remain unchanged.  The trial court also entered supplemental orders on July 1, 2006, denying Objectors Motion to File a Complaint in Intervention, Objectors Motion for Leave of Discovery and Objectors Motion to Dissolve the Anti-Suit Injunction.  Notice of Entry of Judgment was served on July 10, 2006.



On August 31, 2006, the Objector filed a Notice of Appeal to the Courts June 30, 2006 and July 1, 2006 orders. The matter was argued and submitted and the Court of Appeal issued an opinion on February 20, 2008 affirming the order approving the settlement and judgment entered thereto. On March 12, 2008, the Court of Appeal denied Appellants Petition for Re-Hearing.  Appellant has until April 1, 2008 to file a Petition for Review with the California Supreme Court.



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.



Item 4.

Submission of Matters to a Vote of Security Holders



On October 25, 2007, the Partnership filed an information statement soliciting the consent of the holders of limited partnership units to extend the term of the Partnership from December 31, 2007 to December 31, 2023. The written consent expired on November 30, 2007 pursuant to its terms, with approval of the amendment being received.  Accordingly, on December 28, 2007, the Partnership Agreement was amended to extend the termination date to December 31, 2023.













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, 2007, there were 543 holders of record owning an aggregate of 751.09 Units.  Affiliates of the Managing General Partner owned 339.45 Units or 45.19% at December 31, 2007.



There were no distributions to the partners during the years ended December 31, 2007 and 2006. 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. In light of the amounts accrued and payable to affiliates of the Managing General Partner at December 31, 2007, there can be no assurance that the Partnership will generate sufficient funds from operations after required capital improvements to permit any distributions to its partners in 2008 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 339.45 Units in the Partnership representing 45.19% of the outstanding Units at December 31, 2007.  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 45.19% 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 impact the Partnerships financial results.



Results of Operations



The Partnerships net loss for the year ended December 31, 2007 was approximately $339,000 as compared to a net loss of approximately $278,000 for the year ended December 31, 2006.  The increase in net loss is due to an increase in total expenses, partially offset by an increase in total revenues.  The increase in total expenses is due to increases in operating, general and administrative and interest expenses.  Depreciation and property tax expenses remained relatively constant for the comparable periods.  The increase in operating expenses is primarily due to increases in maintenance supplies, snow removal costs, salaries and related benefits and training costs at the Partnerships investment property. The increase in interest expense is primarily due to an increase in interest expense on advances from an affiliate of the Managing General Partner as a result of a higher average outstanding balance. The increase in general and administrative expenses is primarily due to increases in professional expenses associated with the administration of the Partnership, management reimbursements to the Managing General Partner as allowed under the Partnership Agreement and costs associated with the annual audit required by the Partnership Agreement. Also included in general and administrative expenses for the years ended December 31, 2007 and 2006 are costs associated with the quarterly and annual communications with investors and regulatory agencies.



The increase in total revenues is due to increases in both rental and other income.  The increase in rental income is due to an increase in the average rental rate and reduced bad debt expense, partially offset by a decrease in occupancy at Versailles on the Lake Apartments.  The increase in other income is primarily due to an increase in resident utility reimbursements at the property.



Liquidity and Capital Resources



At December 31, 2007, the Partnership had cash and cash equivalents of approximately $88,000, compared to approximately $30,000 at December 31, 2006.  The increase in cash and cash equivalents of approximately $58,000 is due to approximately $389,000 of cash provided by financing activities, partially offset by approximately $224,000 and $107,000 of cash used in investing and operating activities, respectively. Cash provided by financing activities consisted of proceeds from the refinancing of the mortgage encumbering Versailles on the Lake Apartments and advances received from an affiliate of the Managing General Partner, partially offset by the repayment of the previous mortgage encumbering Versailles on the Lake Apartments, loan costs paid and payments of principal made on the previous mortgage encumbering the Partnerships investment property. Cash used in investing activities consisted of property improvements and replacements.  The Partnership invests its working capital reserves in interest bearing accounts.



In accordance with the Partnership Agreement, during the years ended December 31, 2007 and 2006, AIMCO Properties, L.P., an affiliate of the Managing General Partner, advanced the Partnership approximately $216,000 and $363,000, respectively, to fund operating expenses, capital improvements and fees associated with the refinancing of the mortgage encumbering Versailles on the Lake Apartments. Interest is charged at the prime rate plus 1% (8.25% as of December 31, 2007).  Interest expense on advances from AIMCO Properties, L.P. for the years ended December 31, 2007 and 2006 was approximately $77,000 and $40,000, respectively. During the year ended December 31, 2007, the Partnership made a payment of accrued interest of approximately $100,000. No such payments were made during the year ended December 31, 2006. At December 31, 2007, the amount of the outstanding advances and accrued interest is approximately $879,000 and is included in due to affiliates on the balance sheet included in Item 7. Financial Statements. The Partnership may receive additional advances of funds from AIMCO Properties, L.P. although AIMCO Properties, L.P. is not obligated to provide such advances.  For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission.



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. 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 2008. Such capital expenditures will depend on the physical condition of the property as well as anticipated cash flow generated by the property.



Capital expenditures will be incurred only if cash is available from operations, Partnership reserves, or advances from AIMCO Properties, L.P., although AIMCO Properties, L.P. does not have a commitment to fund advances to the Partnership. 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 generally sufficient for any near-term needs (exclusive of capital improvements) of the Partnership.  On September 21, 2007, the Partnership refinanced the mortgage encumbering Versailles on the Lake Apartments. The refinancing replaced the existing mortgage, which at the time of refinancing had a principal balance of approximately $2,138,000, with a new mortgage loan in the principal amount of $2,405,000. The new loan was refinanced under a secured real estate credit facility (Secured Credit Facility) with AEGON USA Realty Advisors, Inc., as agent for Transamerica Occidental Life Insurance Company, which has a maturity of October 1, 2010, with two one-year extension options. The new mortgage requires monthly payments of interest only beginning on November 1, 2007, through the October 1, 2010 maturity date, at which date the entire principal balance of $2,405,000 is due.  The new loan has a variable interest rate of the one-month LIBOR rate plus 0.78% (6.01% per annum at December 31, 2007) and resets monthly.  The variable interest rate may increase to the one-month LIBOR rate plus 0.98% if the debt service coverage ratio of the investment property decreases below a prescribed threshold. The Secured Credit Facility provides mortgage loans on properties owned by other partnerships that are affiliated with the Managing General Partner. The Secured Credit Facility creates separate loans for each property that are not cross-collateralized or cross-defaulted with the other property loans. The loans are prepayable without penalty. As a condition of the Secured Credit Facility, the lender required AIMCO Properties, L.P., an affiliate of the Managing General Partner, to guarantee the obligations and liabilities of the Partnership with respect to the new mortgage financing.  In connection with the new loan, loan costs of approximately $52,000 were capitalized and are included in other assets on the balance sheet included in Item 7. Financial Statements.  Loan costs associated with the previous mortgage were fully amortized.



There were no distributions to the partners during the years ended December 31, 2007 and 2006. 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. In light of the amounts accrued and payable to affiliates of the Managing General Partner at December 31, 2007, there can be no assurance that the Partnership will generate sufficient funds from operations after required capital improvements to permit any distributions to its partners in 2008 or subsequent periods.



Other



In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 339.45 Units in the Partnership representing 45.19% of the outstanding Units at December 31, 2007.  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 45.19% 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 Asset



Investment property is recorded at cost, less accumulated depreciation, unless the carrying amount of the asset is not recoverable.  If events or circumstances indicate that the carrying amount of the property may not be recoverable, the Partnership will make an assessment of its recoverability by comparing the carrying amount to the Partnerships estimate of the undiscounted future cash flows, excluding interest charges, of the property.   If the carrying amount exceeds the aggregate undiscounted future cash flows, the Partnership would recognize an impairment loss to the extent the carrying amount exceeds the estimated fair value of the property.



Real property investment is 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, general economic climate; competition from other apartment communities and other housing options; local conditions, such as loss of jobs or an increase in the supply of apartments that might adversely affect apartment occupancy or rental rates; changes in governmental regulations and the related cost of compliance; increases in operating costs (including real estate taxes) due to inflation and other factors, which may not be offset by increased rents; and changes in tax laws and housing laws, including the enactment of rent control laws or other laws regulating multi-family housing.  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.















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, 2007



Statements of Operations - Years ended December 31, 2007 and 2006



Statements of Changes in Partners' Deficit - Years ended December 31, 2007 and 2006



Statements of Cash Flows - Years ended December 31, 2007 and 2006



Notes to Financial Statements













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, 2007, 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, 2007.  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. We were not engaged to perform an audit of the Partnerships internal control over financial reporting. Our audits included 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, 2007, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles.







/s/ERNST & YOUNG LLP







Greenville, South Carolina

March 20, 2008















|                                        
|----------------------------------------
|DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.
|                                        
|BALANCE SHEET                           
|(in thousands, except unit data)        
|                                        
|December 31, 2007                       







|                                          |          |        
|----------------------------------------- | -------- | -------
|Assets                                    |          |        
|Cash and cash equivalents                 |          | $    88
|Receivables and deposits                  |          | 318    
|Other assets                              |          | 76     
|Investment property (Notes B and E):      |          |        
|Land                                      | $   191  |        
|Buildings and related personal property   | 6,191    |        
|                                          | 6,382    |        
|Less accumulated depreciation             | (4,979)  | 1,403  
|                                          |          |        
|                                          |          | $1,885 
|Liabilities and Partners' Deficit         |          |        
|Liabilities                               |          |        
|Accounts payable                          |          | $    14
|Tenant security deposit liabilities       |          | 27     
|Accrued property taxes                    |          | 98     
|Other liabilities                         |          | 78     
|Due to affiliates (Note D)                |          | 1,200  
|Mortgage note payable (Note B)            |          | 2,405  
|                                          |          |        
|Partners' Deficit                         |          |        
|General partners                          | $   (59) |        
|Limited partners (751.09 units issued and |          |        
|outstanding)                              | (1,878)  | (1,937)
|                                          |          |        
|                                          |          | $1,885 





See Accompanying Notes to Financial Statements















|                                        
|----------------------------------------
|DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.
|                                        
|STATEMENTS OF OPERATIONS                
|(in thousands, except per unit data)    







|                                             |                          |          
|-------------------------------------------- | ------------------------ | ---------
|                                             | Years Ended December 31,
|                                             | 2007                     | 2006     
|Revenues:                                    |                          |          
|Rental income                                | $    908                 | $    888 
|Other income                                 | 159                      | 130      
|Total revenues                               | 1,067                    | 1,018    
|                                             |                          |          
|Expenses:                                    |                          |          
|Operating                                    | 671                      | 637      
|General and administrative                   | 98                       | 76       
|Depreciation                                 | 304                      | 294      
|Interest                                     | 238                      | 195      
|Property taxes                               | 95                       | 94       
|Total expenses                               | 1,406                    | 1,296    
|                                             |                          |          
|Net loss (Note C)                            | $(339)                   | $(278)   
|                                             |                          |          
|Net loss allocated to general partners (5%)  | $    (17)                | $    (14)
|                                             |                          |          
|Net loss allocated to limited partners (95%) | (322)                    | (264)    
|                                             | $(339)                   | $(278)   
|                                             |                          |          
|Net loss per limited partnership unit        | $(428.43)                | $(351.26)





See Accompanying Notes to Financial Statements















|                                          
|------------------------------------------
|DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.  
|                                          
|STATEMENTS OF CHANGES IN PARTNERS' DEFICIT
|(in thousands, except unit data)          







|                               |             |          |          |         
|------------------------------ | ----------- | -------- | -------- | --------
|                               | Limited     |          |          |         
|                               | Partnership | General  | Limited  |         
|                               | Units       | Partners | Partners | Total   
|                               |             |          |          |         
|Original capital contributions | 751.84      | $1       | $15,008  | $15,009 
|                               |             |          |          |         
|Partners' deficit at           |             |          |          |         
|December 31, 2005              | 751.59      | $   (28) | $(1,292) | $(1,320)
|                               |             |          |          |         
|Net loss for the year ended    |             |          |          |         
|December 31, 2006              | --          | (14)     | (264)    | (278)   
|                               |             |          |          |         
|Partners' deficit at           |             |          |          |         
|December 31, 2006              | 751.59      | (42)     | (1,556)  | (1,598) 
|                               |             |          |          |         
|Abandonment of Units (Note A)  | (0.50)      | --       | --       | --      
|                               |             |          |          |         
|Net loss for the year ended    |             |          |          |         
|December 31, 2007              | --          | (17)     | (322)    | (339)   
|                               |             |          |          |         
|Partners' deficit at           |             |          |          |         
|December 31, 2007              | 751.09      | $(59)    | $(1,878) | $(1,937)





See Accompanying Notes to Financial Statements















|                                        
|----------------------------------------
|DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.
|                                        
|STATEMENTS OF CASH FLOWS                
|(in thousands)                          







|                                                        |                          |         
|------------------------------------------------------- | ------------------------ | --------
|                                                        | Years Ended December 31,
|                                                        | 2007                     | 2006    
|Cash flows from operating activities:                   |                          |         
|Net loss                                                | $  (339)                 | $  (278)
|Adjustments to reconcile net loss to net cash (used in) |                          |         
|provided by operating activities:                       |                          |         
|Depreciation                                            | 304                      | 294     
|Amortization of loan costs                              | 14                       | 14      
|Change in accounts:                                     |                          |         
|Receivables and deposits                                | 14                       | (10)    
|Other assets                                            | 3                        | (3)     
|Accounts payable                                        | (35)                     | 31      
|Tenant security deposit liabilities                     | 3                        | 7       
|Due to affiliates                                       | (88)                     | 59      
|Accrued property taxes                                  | 6                        | 3       
|Other liabilities                                       | 11                       | 10      
|Net cash (used in) provided by operating activities     | (107)                    | 127     
|                                                        |                          |         
|Cash flows used in investing activities:                |                          |         
|Property improvements and replacements                  | (224)                    | (449)   
|                                                        |                          |         
|Cash flows from financing activities:                   |                          |         
|Payments on mortgage note payable                       | (42)                     | (62)    
|Repayment of mortgage note payable                      | (2,138)                  | --      
|Proceeds from mortgage note payable                     | 2,405                    | --      
|Loan costs paid                                         | (52)                     | --      
|Advances from affiliate                                 | 216                      | 363     
|Net cash provided by financing activities               | 389                      | 301     
|                                                        |                          |         
|Net increase (decrease) in cash and cash equivalents    | 58                       | (21)    
|Cash and cash equivalents at beginning of year          | 30                       | 51      
|Cash and cash equivalents at end of year                | $88                      | $30     
|Supplemental disclosure of cash flow information:       |                          |         
|Cash paid for interest                                  | $220                     | $142    
|Supplemental disclosure of non-cash activity:           |                          |         
|Property improvements and replacements included in      |                          |         
|accounts payable                                        | $--                      | $16     





See Accompanying Notes to Financial Statements















|                                        
|----------------------------------------
|DAVIDSON DIVERSIFIED REAL ESTATE I, L.P.
|                                        
|NOTES TO FINANCIAL STATEMENTS           
|                                        
|December 31, 2007                       



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, 2007, 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, 2023 unless terminated prior to such date.



Abandoned Units:  During 2007, the number of limited partnership units (the Units) decreased by 0.50 Units due to limited partners abandoning their Units.  In abandoning his or her Units, a limited partner relinquishes all right, title and interest in the Partnership as of the date of the abandonment.



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. Net loss per limited partnership unit was computed by dividing the net loss allocated to the limited partners by 751.59 Units for both 2007 and 2006. 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 modified accelerated cost recovery method is used for depreciation of (1) real property 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.  The Partnership capitalizes costs incurred in connection with capital expenditure activities, including redevelopment and construction projects, other tangible property improvements and replacements of existing property components.  Costs including interest, property taxes and operating costs associated with redevelopment and construction projects are capitalized during periods in which redevelopment and construction projects are in progress in accordance with Statement of Financial Accounting Standards (SFAS) No. 34, Capitalization of Interest Costs and SFAS No. 67, Accounting for Costs and the Initial Rental Operations of Real Estate Properties.  Costs incurred in connection with capital projects are capitalized where the costs of the project exceed $250.  Included in these capitalized costs are payroll costs associated with time spent by site employees in connection with the planning, execution and control of all capital expenditure activities at the property level.  The Partnership did not capitalize any costs related to interest, property taxes or operating costs during the years ended December 31, 2007 and 2006. Capitalized costs are depreciated over the useful life of the asset.  Expenditures for ordinary repairs, maintenance and apartment turnover costs are expensed as incurred.



In accordance with 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 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 necessary for the years ending December 31, 2007 and 2006.



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 $68,000 at December 31, 2007 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 and such deposits are included in receivables and deposits. 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 $40,000 and $32,000 for the years ended December 31, 2007 and 2006, respectively.















Deferred Costs: At December 31, 2007, loan costs of approximately $52,000, net of accumulated amortization of approximately $5,000, are included in other assets and are being amortized over the term of the related loan agreement. Amortization expense for each of the years ended December 31, 2007 and 2006 was approximately $14,000 and is included in interest expense. Amortization expense is expected to be approximately $17,000 for both 2008 and 2009 and approximately $13,000 for 2010.



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 Fair Value of 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 amounts of its financial instruments (except for long term debt) approximates their fair value due to the short term maturity of these instruments. The fair value of the Partnership's long term debt 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.



Recent Accounting Pronouncements: In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. SFAS No. 157 applies whenever other standards require assets or liabilities to be measured at fair value and does not expand the use of fair value in any new circumstances. SFAS No. 157 establishes a hierarchy that prioritizes the information used in developing fair value estimates. The hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data, such as the reporting entitys own data. SFAS No. 157 requires fair value measurements to be disclosed by level within the fair value hierarchy.  In February 2008, the FASB issued FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157, which deferred the effective date of SFAS No. 157 for all nonrecurring fair value measurements of non-financial assets and non-financial liabilities until fiscal years beginning after November 15, 2008.  The provisions of SFAS No. 157 are applicable to recurring fair value measurements of financial assets and liabilities for fiscal years beginning after November 15, 2007, which for the Partnership is generally limited to annual disclosures required by SFAS No. 107.  The Partnership is in the process of implementing SFAS No. 157; however, it has not completed its evaluation and thus has not yet determined the effect that SFAS No. 157 will have on the Partnerships financial statements.



In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. The Partnership adopted SFAS No. 159 on January 1, 2008, and at that time did not elect the fair value option for any of its financial instruments or other items within the scope of SFAS No. 159.



In June 2007, the American Institute of Certified Public Accountants (the AICPA) issued Statement of Position No. 07-1, Clarification of the Scope of the Audit and Accounting Guide Investment Companies and Accounting by Parent Companies and Equity Method Investors for Investments in Investment Companies ("SOP 07-1").  SOP 07-1 provides guidance for determining whether the accounting principles of the AICPA Audit and Accounting Guide Investment Companies are required to be applied to an entity by clarifying the definition of an investment company and, whether investment company accounting should be retained by a parent company upon consolidation of an investment company subsidiary, or by an investor in the application of the equity method of accounting to an investment company investee. In February 2008, the FASB issued FASB Staff Position SOP 07-1-1 that indefinitely defers the effective date of SOP 07-1.















Note B - Mortgage Note Payable



|                       |                |          |          |               
|---------------------- | -------------- | -------- | -------- | --------------
|                       | Principal      |          |          | Principal     
|                       | Balance At     | Stated   |          | Balance       
|                       | December 31,   | Interest | Maturity | Due At        
|Property               | 2007           | Rate     | Date     | Maturity      
|                       | (in thousands) |          |          | (in thousands)
|Versailles on the Lake |                |          |          |               
|Apartments             |                |          |          |               
|1st mortgage           | $2,405         | (1)      | 10/01/10 | $2,405        



(1)

Adjustable rate based on the one-month LIBOR rate plus 0.78% to 0.98% depending upon certain performance criteria. The rate at December 31, 2007 was 6.01%.



On September 21, 2007, the Partnership refinanced the mortgage encumbering Versailles on the Lake Apartments. The refinancing replaced the existing mortgage, which at the time of refinancing had a principal balance of approximately $2,138,000, with a new mortgage loan in the principal amount of $2,405,000. The new loan was refinanced under a secured real estate credit facility (Secured Credit Facility) with AEGON USA Realty Advisors, Inc., as agent for Transamerica Occidental Life Insurance Company, which has a maturity of October 1, 2010, with two one-year extension options. The new mortgage requires monthly payments of interest only beginning on November 1, 2007, through the October 1, 2010 maturity date, at which date the entire principal balance of $2,405,000 is due.  The new loan has a variable interest rate of the one-month LIBOR rate plus 0.78% (6.01% per annum at December 31, 2007) and resets monthly.  The variable interest rate may increase to the one-month LIBOR rate plus 0.98% if the debt service coverage ratio of the investment property decreases below a prescribed threshold. The Secured Credit Facility provides mortgage loans on properties owned by other partnerships that are affiliated with the Managing General Partner. The Secured Credit Facility creates separate loans for each property that are not cross-collateralized or cross-defaulted with the other property loans. The loans are prepayable without penalty.  As a condition of the Secured Credit Facility, the lender required AIMCO Properties, L.P., an affiliate of the Managing General Partner, to guarantee the obligations and liabilities of the Partnership with respect to the new mortgage financing.  In connection with the new loan, loan costs of approximately $52,000 were capitalized and are included in other assets.  Loan costs associated with the previous mortgage were fully amortized.



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



Scheduled principal payments on the mortgage note payable subsequent to December 31, 2007, are as follows (in thousands):



|     |        
|---- | -------
|2008 | $    --
|2009 | --     
|2010 | 2,405  
|     | $2,405 















Note C - Income Taxes



The Partnership is 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 loss (in thousands, except per unit data):



|                                          |            |           
|----------------------------------------- | ---------- | ----------
|                                          | 2007       | 2006      
|                                          |            |           
|Net loss as reported                      | $    (339) | $    (278)
|Add (deduct):                             |            |           
|Depreciation differences                  | 146        | 146       
|Unearned income                           | (5)        | 3         
|Other                                     | (24)       | 15        
|Federal taxable loss                      | $(222)     | $(114)    
|Federal taxable (loss) income per limited |            |           
|partnership unit (1)                      | $(245.42)  | $422.48   



(1)

For 2007 and 2006, allocations under the Internal Revenue Code section 704(b) result in the limited partners being allocated a non-pro rata amount of taxable income or loss.



The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net liabilities at December 31, 2007 (in thousands):



|                                                |          
|----------------------------------------------- | ---------
|                                                | 2007     
|Net liabilities as reported                     | $ (1,937)
|Differences in basis of assets and liabilities: |          
|Buildings and land                              | 99       
|Accumulated depreciation                        | (157)    
|Other                                           | 25       
|Net liabilities - Federal tax basis             | $(1,970) 



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.  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 $52,000 and $50,000 for the years ended December 31, 2007 and 2006, 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 $59,000 and $84,000 for the years ended December 31, 2007 and 2006, respectively, which is included in general and administrative expenses and investment property. The portion of these reimbursements included in investment property for the years ended December 31, 2007 and 2006 are construction management services provided by an affiliate of the Managing General Partner of approximately $20,000 and $50,000, respectively.









In accordance with the Partnership Agreement, during the years ended December 31, 2007 and 2006, AIMCO Properties, L.P., an affiliate of the Managing General Partner, advanced the Partnership approximately $216,000 and $363,000, respectively, to fund operating expenses, capital improvements and fees associated with the refinancing of the mortgage encumbering Versailles on the Lake Apartments. Interest is charged at the prime rate plus 1% (8.25% as of December 31, 2007).  Interest expense on advances from AIMCO Properties, L.P. for the years ended December 31, 2007 and 2006 was approximately $77,000 and $40,000, respectively. During the year ended December 31, 2007, the Partnership made a payment of accrued interest of approximately $100,000. No such payments were made during the year ended December 31, 2006. At December 31, 2007, the amount of the outstanding advances and accrued interest is approximately $879,000 and is included in due to affiliates. The Partnership may receive additional advances of funds from AIMCO Properties, L.P. although AIMCO Properties, L.P. is not obligated to provide such advances.  For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission.



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, general liability 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, 2007 and 2006, the Partnership was charged by AIMCO and its affiliates approximately $28,000 and $26,000, 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 339.45 Units in the Partnership representing 45.19% of the outstanding Units at December 31, 2007.  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 45.19% 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) |            
|                       |                |                |             |               
|                       |                |                | Buildings   | Net Cost      
|                       |                |                | and Related | Capitalized   
|                       |                |                | Personal    | Subsequent to 
|Description            | Encumbrances   | Land           | Property    | Acquisition   
|                       | (in thousands) |                |             | (in thousands)
|Versailles on the Lake |                |                |             |               
|Apartments             | $2,405         | $191           | $3,847      | $2,344        



|                       |                               |           |        |                |           |          |            
|---------------------- | ----------------------------- | --------- | ------ | -------------- | --------- | -------- | -----------
|                       | Gross Amount At Which Carried |           |        |                |          
|                       | At December 31, 2007          |           |        |                |          
|                       | (in thousands)                |           |        |                |          
|                       |                               |           |        |                |           |          |            
|                       |                               | Buildings |        |                |           |          |            
|                       |                               | And       |        |                | Date of   |          |            
|                       |                               | Personal  |        | Accumulated    | Construc- | Date     | Depreciable
|Description            | Land                          | Property  | Total  | Depreciation   | tion      | Acquired | Life       
|                       |                               |           |        | (in thousands) |           |          |            
|Versailles on the Lake |                               |           |        |                |           |          |            
|Apartments             | $191                          | $6,191    | $6,382 | $4,979         | 1970      | 04/84    | 5-30 yrs   



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



|                                       |                          |        
|-------------------------------------- | ------------------------ | -------
|                                       | Years Ended December 31,
|                                       | 2007                     | 2006   
|Investment Property                    |                          |        
|                                       |                          |        
|Balance at beginning of year           | $ 6,174                  | $ 5,709
|Property improvements and replacements | 208                      | 465    
|Balance at end of year                 | $6,382                   | $6,174 
|                                       |                          |        
|Accumulated Depreciation               |                          |        
|                                       |                          |        
|Balance at beginning of year           | $ 4,675                  | $ 4,381
|Additions charged to expense           | 304                      | 294    
|Balance at end of year                 | $4,979                   | $4,675 



The aggregate cost of the real estate for Federal income tax purposes at December 31, 2007 and 2006 is approximately $6,481,000 and $6,274,000, respectively. The accumulated depreciation taken for Federal income tax purposes at December 31, 2007 and 2006 is approximately $5,136,000 and $4,978,000, respectively.



Note F - 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 28, 2002, the trial court granted defendants motion to strike the complaint.  Plaintiffs took an appeal from this order.



On January 8, 2003, the parties filed a Stipulation of Settlement in proposed settlement of the Nuanes action and the Heller action. 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 May 4, 2004, the Objector filed a second appeal challenging the courts use of a referee and its order requiring Objector to pay those fees.



On March 21, 2005, the Court of Appeals issued opinions in both pending appeals.  With regard to the settlement and judgment entered thereto, the Court of Appeals vacated the trial courts order and remanded to the trial court for further findings on the basis that the state of the record is insufficient to permit meaningful appellate review.  The matter was transferred back to the trial court on June 21, 2005.  With regard to the second appeal, the Court of Appeals reversed the order requiring the Objector to pay referee fees. With respect to the related Heller appeal, on July 28, 2005, the Court of Appeals reversed the trial courts order striking the first amended complaint.



On August 18, 2005, Objector and his counsel filed a motion to disqualify the trial court based on a peremptory challenge and filed a motion to disqualify for cause on October 17, 2005, both of which were ultimately denied and/or struck by the trial court.  On or about October 13, 2005 Objector filed a motion to intervene and on or about October 19, 2005 filed both a motion to take discovery relating to the adequacy of plaintiffs as derivative representatives and a motion to dissolve the anti-suit injunction in connection with settlement.  On November 14, 2005, Plaintiffs filed a Motion For Further Findings pursuant to the remand ordered by the Court of Appeals. Defendants joined in that motion.  On February 3, 2006, the Court held a hearing on the various matters pending before it and ordered additional briefing from the parties and Objector. On June 30, 2006, the trial court entered an order confirming its approval of the class action settlement and entering judgment thereto after the Court of Appeals had remanded the matter for further findings.  The substantive terms of the settlement agreement remain unchanged.  The trial court also entered supplemental orders on July 1, 2006, denying Objectors Motion to File a Complaint in Intervention, Objectors Motion for Leave of Discovery and Objectors Motion to Dissolve the Anti-Suit Injunction.  Notice of Entry of Judgment was served on July 10, 2006.



On August 31, 2006, the Objector filed a Notice of Appeal to the Courts June 30, 2006 and July 1, 2006 orders. The matter was argued and submitted and the Court of Appeal issued an opinion on February 20, 2008 affirming the order approving the settlement and judgment entered thereto. On March 12, 2008, the Court of Appeal denied Appellants Petition for Re-Hearing.  Appellant has until April 1, 2008 to file a Petition for Review with the California Supreme Court.



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.



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, and potential fines or penalties imposed by such agencies in connection therewith, 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, operation and management 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 policies, procedures, third-party audits and training and the Managing General Partner believes that these measures will prevent or eliminate mold exposure and will minimize the effects that mold may 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.













ITEM 8.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure



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 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.



Managements Report on Internal Control Over Financial Reporting



The Partnerships management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the principal executive and principal financial officers of the Managing General Partner, who are the equivalent of the Partnerships principal executive officer and principal financial officer, respectively, and effected by the Partnerships management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:



·

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets;



·

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of the Partnerships management; and



·

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on the financial statements.



Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.



The Partnerships management assessed the effectiveness of the Partnerships internal control over financial reporting as of December 31, 2007.  In making this assessment, the Partnerships management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework.



Based on their assessment, the Partnerships management concluded that, as of December 31, 2007, the Partnerships internal control over financial reporting is effective.



This annual report does not include an attestation report of the Partnerships registered public accounting firm regarding internal control over financial reporting. Managements report was not subject to the attestation by the Partnerships registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Partnership to provide only managements report in this annual report.



(b)

Changes in Internal Control Over Financial Reporting.



There have been no significant changes in the Partnerships internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter of 2007 that have materially affected, or are reasonably likely to materially affect, the Partnerships internal control over financial reporting.



Item 8B.

Other Information



None.













PART III



Item 9.

Directors, Executive Officers, Promoters and Control Persons and Corporate Governance; 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.



|                  |     |                                                
|----------------- | --- | -----------------------------------------------
|Name              | Age | Position                                       
|                  |     |                                                
|Martha L. Long    | 48  | Director and Senior Vice President             
|Harry G. Alcock   | 45  | Director and Executive Vice President          
|Timothy Beaudin   | 49  | Executive Vice President and Chief Development 
|                  |     | Officer                                        
|Lisa R. Cohn      | 39  | Executive Vice President, General Counsel      
|                  |     | and Secretary                                  
|Patti K. Fielding | 44  | Executive Vice President  Securities and Debt;
|                  |     | Treasurer                                      
|Thomas M. Herzog  | 45  | Executive Vice President and Chief             
|                  |     | Financial Officer                              
|Scott W. Fordham  | 40  | Senior Vice President and Chief Accounting     
|                  |     | Officer                                        
|Stephen B. Waters | 46  | 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 Partnerin February 2004 and has been Executive Vice President of AIMCO since October 1999.  Mr. Alcock has had responsibility for acquisition and financing activities of AIMCO since July 1994, serving as Vice President from July 1996 to October 1997 and as Senior Vice President from October 1997 to October 1999. Mr. Alcock focuses on transactions related to AIMCOs portfolio of properties in the western portion of the United States.



Timothy Beaudin was appointed Executive Vice President and Chief Development Officer of the Managing General Partner and AIMCO in October 2005.  Prior to this time, beginning in 1995, Mr. Beaudin was with Catellus Development Corporation, a San Francisco, California-based real estate investment trust.  During his last five years at Catellus, Mr. Beaudin served as Executive Vice President, with management responsibility for development, construction and asset management.



Lisa R. Cohn was appointed Executive Vice President, General Counsel and Secretary of the Managing General Partner and AIMCO in December 2007.  From January 2004 to December 2007, Ms. Cohn served as Senior Vice President and Assistant General Counsel of AIMCO.  Ms. Cohn joined AIMCO in July 2002 as Vice President and Assistant General Counsel.  Prior to joining AIMCO, Ms. Cohn was in private practice with the law firm of Hogan and Hartson LLP.



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 and the Managing General Partner 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.



Thomas M. Herzog was appointed Chief Financial Officer of the Managing General Partner and AIMCO in November 2005 and was appointed Executive Vice President of the Managing General Partner and AIMCO in July 2005.  In January 2004, Mr. Herzog joined AIMCO as Senior Vice President and Chief Accounting Officer and of the Managing General Partner in February 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 to 2000.



Scott W. Fordham was appointed Senior Vice President and Chief Accounting Officer in January 2007 of the Managing General Partner and AIMCO. Prior to joining AIMCO, Mr. Fordham served as Vice President and Chief Accounting Officer of Brandywine Realty Trust from January 2006 through December 2006. Prior to the merger of Prentiss Properties Trust with Brandywine Realty Trust, Mr. Fordham served as Senior Vice President and Chief Accounting Officer of Prentiss Properties Trust and was in charge of the corporate accounting and financial reporting groups. Prior to joining Prentiss Properties Trust in 1992, Mr. Fordham worked in public accounting with PricewaterhouseCoopers LLP.



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



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 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, 2007.



|                                      |                 |           
|------------------------------------- | --------------- | ----------
|Entity                                | Number of Units | Percentage
|                                      |                 |           
|AIMCO Properties, L.P.                | 235.05          | 31.30%    
|(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, 2007, 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, and Director Independence



The Partnership has no employees and depends on the Managing General Partner and its affiliates for the management and administration of all Partnership activities.  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 $52,000 and $50,000 for the years ended December 31, 2007 and 2006, 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 $59,000 and $84,000 for the years ended December 31, 2007 and 2006, respectively, which is 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, 2007 and 2006 are construction management services provided by an affiliate of the Managing General Partner of approximately $20,000 and $50,000, respectively.





In accordance with the Partnership Agreement, during the years ended December 31, 2007 and 2006, AIMCO Properties, L.P., an affiliate of the Managing General Partner, advanced the Partnership approximately $216,000 and $363,000, respectively, to fund operating expenses, capital improvements and fees associated with the refinancing of the mortgage encumbering Versailles on the Lake Apartments. Interest is charged at the prime rate plus 1% (8.25% as of December 31, 2007).  Interest expense on advances from AIMCO Properties, L.P. for the years ended December 31, 2007 and 2006 was approximately $77,000 and $40,000, respectively. During the year ended December 31, 2007, the Partnership made a payment of accrued interest of approximately $100,000. No such payments were made during the year ended December 31, 2006. At December 31, 2007, the amount of the outstanding advances and accrued interest is approximately $879,000 and is included in due to affiliates on the balance sheet included in Item 7. Financial Statements. The Partnership may receive additional advances of funds from AIMCO Properties, L.P. although AIMCO Properties, L.P. is not obligated to provide such advances.  For more information on AIMCO Properties, L.P., including copies of its audited balance sheet, please see its reports filed with the Securities and Exchange Commission.



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, general liability 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, 2007 and 2006, the Partnership was charged by AIMCO and its affiliates approximately $28,000 and $26,000, 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 339.45 Units in the Partnership representing 45.19% of the outstanding Units at December 31, 2007.  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 45.19% 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.



Neither of the Managing General Partners directors is independent under the independence standards established for New York Stock Exchange listed companies as both directors are employed by the parent of the Managing General Partner.



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 2008. The aggregate fees billed for services rendered by Ernst & Young LLP during the years ended December 31, 2007 and 2006 are described below.



Audit Fees.  Fees for audit services totaled approximately $35,000 and $31,000 for the years 2007 and 2006, respectively. Fees for audit services also include fees for the reviews of the Partnerships Quarterly Reports on Form 10-QSB.



Tax Fees.  Fees for tax services totaled approximately $6,000 for each of the years 2007 and 2006.













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                       
| |                                             
| | By:   /s/Stephen B. Waters                  
| | Stephen B. Waters                           
| | Vice President                              
| |                                             
| | Date: March
	25, 2008                       



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



|                     |                        |                      
|-------------------- | ---------------------- | ---------------------
|/s/Harry G. Alcock   | Director and Executive | Date: March
	25, 2008
|Harry G. Alcock      | Vice President         |                      
|                     |                        |                      
|/s/Martha L. Long    | Director and Senior    | Date: March
	25, 2008
|Martha L. Long       | Vice President         |                      
|                     |                        |                      
|/s/Stephen B. Waters | Vice President         | Date: March
	25, 2008
|Stephen B. Waters    |                        |                      















|                                      
|--------------------------------------
|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.



3C

Amendment No. 2 dated December 28, 2007 to the Partnership Agreement.



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.



10X

Mortgage, Security Agreement and Fixture Filing, dated September 21, 2007, between Davidson Diversified Real Estate I, L.P., a Delaware limited partnership, and Transamerica Occidental Life Insurance Company, an Iowa corporation, incorporated by reference to the Partnerships Current Report on Form 8-K dated September 21, 2007.



10Y

Secured Promissory Note, dated September 21, 2007, between Davidson Diversified Real Estate I, L.P., a Delaware limited partnership, and Transamerica Occidental Life Insurance Company, an Iowa corporation, incorporated by reference to the Partnerships Current Report on Form 8-K dated September 21, 2007.



10Z

Carveout Guarantee and Indemnity Agreement, dated September 21, 2007, between AIMCO Properties, L.P., a Delaware limited partnership, and Transamerica Occidental Life Insurance Company, an Iowa corporation, incorporated by reference to the Partnerships Current Report on Form 8-K dated September 21, 2007.



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 of equivalent of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.