FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(D) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                        QUARTERLY OR TRANSITIONAL REPORT


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


                                  FORM 10-QSB

(Mark One)
[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934


                  For the quarterly period ended June 30, 1998


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

               For the transition period from.........to.........

                         Commission file number 0-14483


                   DAVIDSON DIVERSIFIED REAL ESTATE II, L.P.
       (Exact name of small business issuer as specified in its charter)


           Delaware                                              62-1207077
(State or other jurisdiction of                                (IRS Employer
 incorporation or organization)                              Identification No.)

                  One Insignia Financial Plaza, P.O. Box 1089
                        Greenville, South Carolina 29602
                    (Address of principal executive offices)


                                 (864) 239-1000
                          (Issuer's telephone number)


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


                         PART I - FINANCIAL INFORMATION



ITEM 1.  FINANCIAL STATEMENTS


a)
                   DAVIDSON DIVERSIFIED REAL ESTATE II, L.P.

                           CONSOLIDATED BALANCE SHEET
                                  (Unaudited)

                                 June 30, 1998
                        (in thousands, except unit data)



Assets
  Cash and cash equivalents                            $    788
  Receivables and deposits, net of $42
     for doubtful accounts                                  625
  Restricted escrows                                        932
  Other assets                                              456
  Investment properties:
     Land                                    $  2,878
     Buildings and related personal property   42,415
                                               45,293
     Less accumulated depreciation            (22,142)   23,151
                                                       $ 25,952

Liabilities and Partners' Deficit

Liabilities
  Accounts payable                                     $    476
  Tenant security deposit liabilities                       186
  Accrued property taxes                                    528
  Other liabilities                                         326
  Mortgage notes payable                                 26,517

Partners' Deficit
  General partners'                          $   (476)
  Limited partners' (1,224.25 units issued
     and outstanding)                          (1,605)   (2,081)
                                                       $ 25,952

          See Accompanying Notes to Consolidated Financial Statements


b)
                   DAVIDSON DIVERSIFIED REAL ESTATE II, L.P.

                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (Unaudited)
                        (in thousands, except unit data)




                                Three Months Ended    Six Months Ended
                                     June 30,             June 30,
                                  1998      1997      1998      1997
Revenues:
  Rental income                 $  2,055  $  2,075  $  3,966  $  4,120
  Other income                       198       261       381       411
  Gain on casualty event             216        --       216        --

     Total revenues                2,469     2,336     4,563     4,531

Expenses:
  Operating                        1,147     1,078     2,108     2,025
  General and administrative          87        60       168       133
  Depreciation                       502       499       997       997
  Interest                           563       639     1,130     1,258
  Property taxes                     199       160       397       353
  Loss on disposal of property        17        --       181        --

     Total expenses                2,515     2,436     4,981     4,766

Net loss                        $    (46) $   (100) $   (418) $   (235)

Net loss allocated
  to general partners (2%)      $     (1) $     (2) $     (8) $     (5)
Net loss allocated
  to limited partners (98%)          (45)      (98)     (410)     (230)

                                $    (46) $   (100) $   (418) $   (235)

Net loss per limited
  partnership unit              $ (36.76) $ (80.05) $(334.90) $(187.87)

Distributions per limited
  partnership unit              $     --  $     --  $     --  $  80.05

          See Accompanying Notes to Consolidated Financial Statements

c)
                   DAVIDSON DIVERSIFIED REAL ESTATE II, L.P.

             CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
                                  (Unaudited)
                        (in thousands, except unit data)



                                  Limited
                                Partnership  General   Limited
                                   Units    Partners' Partners'   Total

Original capital contributions   1,224.25   $     1   $24,485   $24,486

Partners' deficit at
   December 31, 1997             1,224.25   $ (468)   $(1,195)  $(1,663)

Net loss for the six months
   ended June 30, 1998                 --       (8)      (410)     (418)

Partners' deficit at
   June 30, 1998                 1,224.25   $ (476)   $(1,605)  $(2,081)

          See Accompanying Notes to Consolidated Financial Statements

d)
                   DAVIDSON DIVERSIFIED REAL ESTATE II, L.P.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (Unaudited)
                                 (in thousands)



                                                     Six Months Ended
                                                         June 30,
                                                      1998      1997
Cash flows from operating activities:
  Net loss                                          $  (418)  $  (235)
  Adjustments to reconcile net loss to net
    cash provided by operating activities:
    Depreciation                                        997       997
    Amortization of discounts, loan costs
      and leasing commissions                           111       130
    Loss on disposal of property                        181        --
    Gain on casualty event                             (216)       --
    Change in accounts:
      Receivables and deposits                          304       (77)
      Other assets                                       29       (64)
      Accounts payable                                  250       (11)
      Tenant security deposit liabilities                (3)        6
      Accrued property taxes                           (163)      (84)
      Other liabilities                                  55         4

        Net cash provided by operating activities     1,127       666

Cash flows from investing activities:
  Property improvements and replacements             (1,048)     (257)
  Net deposits to restricted escrows                    (35)      (48)
  Net insurance proceeds from casualty event            225        --

        Net cash used in investing activities          (858)     (305)

Cash flows from financing activities:
  Payments on mortgage notes payable                   (366)     (250)
  Distributions to partners                              --      (100)

        Net cash used in financing activities          (366)     (350)

Net (decrease) increase in cash and cash equivalents    (97)       11

Cash and cash equivalents at beginning of period        885     1,004

Cash and cash equivalents at end of period          $   788   $ 1,015

Supplemental disclosure of cash flow information:
  Cash paid for interest                            $ 1,023   $ 1,104

          See Accompanying Notes to Consolidated Financial Statements


                   DAVIDSON DIVERSIFIED REAL ESTATE II, L.P.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


NOTE A - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Davidson
Diversified Real Estate II, L.P. (the "Partnership") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B.  Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.  In the opinion of Davidson Diversified Properties, Inc.
(the "Managing General Partner"), all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included.  Operating results for the three and six month periods ended June 30,
1998, are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 1998.  For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Partnership's annual report on Form 10-KSB for the fiscal year ended December
31, 1997.

Reclassifications

Certain reclassifications have been made to the 1997 balances to conform to the
1998 presentation.

Principles of Consolidation

The financial statements include all the accounts of the Partnership and the
lower tier partnerships that it owns a controlling interest in.  The Partnership
owns a 99.9% limited partner interest in Big Walnut, L.P. and a 99.99% limited
partner interest in The Trails, L.P.  The general partners of Big Walnut, L.P.
and The Trails, L.P. may be removed by the Partnership; therefore, Big Walnut,
L.P. and The Trails, L.P. are controlled and consolidated by the Partnership.
All significant interpartnership balances have been eliminated.

Effective July 28, 1997, LaFontenay, L.P. was restructured into a limited
liability company known as LaFontenay, L.L.C. ("LaFontenay").  The Partnership
owns 100% of the new entity.  As a result, the Partnership consolidates its
interest in LaFontenay (whereby all accounts of LaFontenay are included in the
consolidated financial statements of the Partnership with intercompany accounts
being eliminated).

Effective December 31, 1997, the general partner of Outlets Mall, L.P. was
restructured into a limited liability company known as Outlets GP, L.L.C.
("Outlets").  The Partnership owns 100% of the new entity, as well as all of the
limited partnership interest of Outlets.  As a result, the Partnership
consolidates its interest in Outlets (whereby all accounts of Outlets are
included in the consolidated financial statements of the Partnership with
intercompany accounts being eliminated).

NOTE B - TRANSACTIONS WITH AFFILIATED PARTIES

The Partnership has no employees and is dependent on the Managing General
Partner and its affiliates for the management and administration of all
partnership activities. Prior to February 25, 1998, the Managing General Partner
was wholly-owned by MAE GP Corporation ("MAE GP"), an affiliate of Insignia
Financial Group, Inc. ("Insignia"). Effective February 25, 1998, MAE GP was
merged into Insignia Properties Trust ("IPT"), which is an affiliate of
Insignia.  Thus, the Managing General Partner is now a wholly-owned subsidiary
of IPT.  The partnership agreement provides for payments to affiliates for
services and for reimbursement of certain expenses incurred by affiliates on
behalf of the Partnership. The following payments were paid to affiliates of the
Managing General Partner during the six month periods ended June 30, 1998 and
1997 (in thousands):


                                                     1998     1997

Property management fees
 (included in operating expense)                     $215     $220
Reimbursement for services of affiliates (included
 in general and administrative expenses)              117       87

In addition, the Partnership paid approximately $78,000 and $21,000 during the
six month periods ended June 30, 1998 and 1997, respectively, to an affiliate of
the Managing General Partner for construction oversight reimbursements related
to capital improvements and major repair projects.  These costs are included in
operating expenses and investment properties.  The Partnership also paid
approximately $2,000 during the six months ended June 30, 1998 to an affiliate
of the Managing General Partner for lease commissions at the Partnership's
commercial property.  No lease commissions were paid during the corresponding
period in 1997. These lease commissions are included in other assets and are
amortized over the terms of the respective leases.

For the period from January 1, 1997 to August 31, 1997, the Partnership insured
its properties under a master policy through an agency affiliated with the
Managing General Partner with an insurer unaffiliated with the Managing General
Partner.  An affiliate of the Managing General Partner acquired, in the
acquisition of a business, certain financial obligations from an insurance
agency which was later acquired by the agent who placed the master policy.  The
agent assumed the financial obligations to the affiliate of the Managing General
Partner which received payments on these obligations from the agent.  The amount
of the Partnership's insurance premiums that accrued to the benefit of the
affiliate of the Managing General Partner by virtue of the agent's obligations
was not significant.

On September 26, 1997, an affiliate of the Managing General Partner purchased
Lehman Brothers' class "D" subordinated bonds of SASCO, 1992-M1.  These bonds
are secured by 55 multi-family apartment mortgage loan pairs held in Trust,
including Big Walnut Apartments and Greensprings Manor Apartments owned by the
Partnership.

On March 17, 1998, Insignia entered into an agreement to merge its national
residential property management operations, and its controlling interest in IPT,
with Apartment Investment and Management Company ("AIMCO"), a publicly traded
real estate investment trust.  The closing, which is anticipated to happen in
September or October of 1998, is subject to customary conditions, including
government approvals and the approval of Insignia's shareholders.  If the
closing occurs, AIMCO will then control the Managing General Partner of the
Partnership.

NOTE C - DISTRIBUTION TO PARTNERS

In February 1997, the Partnership distributed approximately $100,000 to the
partners. The limited partners received approximately $98,000 ($80.05 per
limited partnership unit) and the general partners received approximately
$2,000.  There were no distributions to the partners during the six months ended
June 30, 1998.

NOTE D - CASUALTY EVENT

In December 1997, a fire destroyed one building at The Trails Apartments.  As a
result, the asset and related accumulated depreciation were written off in 1997.
At December 31, 1997, the proceeds received on the casualty approximated the
loss on write-off of the fire-damaged asset, with the difference of
approximately $9,000 being recorded as an insurance receivable.  Therefore, no
gain or loss relating to this fire was recognized in 1997.  At June 30, 1998,
reconstruction of the destroyed building was ongoing, with the costs reflected
in investment properties as construction-in-process.  The Partnership recognized
a casualty gain of approximately $216,000 in 1998, with insurance proceeds
received totaling $225,000.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The Partnership's investment properties consist of four apartment complexes and
one commercial property.  The following table sets forth the average occupancy
of the properties for the six month periods ended June 30, 1998 and 1997:


                                 Average Occupancy
                                  1998      1997

Big Walnut Apartments              94%       95%
  Columbus, Ohio

LaFontenay Apartments              90%       93%
  Louisville, Kentucky

The Trails Apartments              91%       92%
  Nashville, Tennessee

Greensprings Manor Apartments      84%       87%
  Indianapolis, Indiana

Shoppes At River Rock              66%       75%
(Formerly Outlet's Ltd. Mall)
  Murfreesboro, Tennessee

The Managing General Partner attributes the decrease in occupancy at LaFontenay
to ongoing construction at the property.  The Managing General Partner believes
once the construction is completed, occupancy will return to previous levels.
Occupancy at Greensprings Manor Apartments has decreased due to the soft local
market for one bedroom and studio apartments, which make up a large portion of
Greensprings Manor's units.  The staff at Greensprings is focusing on effective
marketing and tenant satisfaction to combat the competitive market.  Occupancy
at the Shoppes at River Rock has decreased due to increased competition from
newer shopping centers in its immediate vicinity.  The anchor tenant vacated the
Shoppes at River Rock in 1997. Certain tenants at the shopping center have
exercised the option to pay a reduced rental rate based on tenant sales due to
the decreased occupancy brought about when the anchor tenant vacated.  Rental
revenue for the six months ended June 30, 1998 was materially affected because
one of these tenants continued to pay its monthly base rent until the first
quarter of 1998, at which time it exercised the option to pay rent based on its
sales. This option was applied retroactively to the date the anchor tenant
vacated and resulted in a credit for the tenant, which had overpaid its rent.
The Managing General Partner has recently signed a lease with a new tenant for a
unit of approximately 10,000 square feet, effective August 10, 1998. Once this
newly leased space is occupied, total occupancy will increase above the
threshold which has allowed certain tenants to pay reduced rental rates.

The Partnership's net loss for the six months ended June 30, 1998, was
approximately $418,000 compared to a net loss of approximately $235,000 for the
corresponding period of 1997.  Net loss for the three months ended June 30, 1998
was $46,000 compared to a net loss of $100,000 for the three months ended June
30, 1997.  The increase in net loss for the six month period is primarily due to
decreased rental income and the loss on disposal of property incurred during the
six months ended June 30, 1998, which more than offset the gain on casualty
event recognized during the six months ended June 30, 1998.  The decrease in
rental income is primarily due to decreased occupancy at all of the
Partnership's properties, primarily the Shoppes at River Rock, as discussed
above.  Also contributing to the decrease was the retroactive rental adjustment
recorded at the Shoppes at River Rock during the first quarter of 1998, as
discussed above.  The loss on disposal of property was due to the write-off of
the undepreciated value of roofs that were replaced at LaFontenay and Big
Walnut.  In addition, general and administrative expenses increased due to an
increase in expense reimbursements.  The casualty gain of $216,000 relates to
fire damage at The Trails Apartments that was recorded in 1998 (see "Item 1.
Financial Statements - Note D").  Also partially offsetting the decreased rental
income and loss on disposal of property are decreased interest expense and major
repair and maintenance expense. Interest expense decreased primarily due to the
August 1997 refinancing of LaFontenay at a lower interest rate.  Included in
operating expense for the six months ended June 30, 1998, is approximately
$40,000 of major repairs and maintenance comprised primarily of exterior
building and parking lot repairs and landscaping.  During the corresponding
period in 1997, operating expense included approximately $92,000 of major
repairs and maintenance expenses consisting primarily of new gas service lines,
water saving devices, swimming pool repairs, and window coverings.

As part of the ongoing business plan of the Partnership, the Managing General
Partner monitors the rental market environment of each of its investment
properties 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, due to changing market conditions, which can result in the use of
rental concessions and rental reductions to offset softening market conditions,
there is no guarantee that the Managing General Partner will be able to sustain
such a plan.

At June 30, 1998, the Partnership had cash and cash equivalents of approximately
$788,000 compared to approximately $1,015,000 at June 30, 1997.  The net
decrease in cash and cash equivalents for the six months ended June 30, 1998 was
$97,000 compared to a net increase of $11,000 for the six months ended June 30,
1997.  Net cash provided by operating activities increased due to increased cash
provided by receivables and deposits due to the refund of a deposit on
LaFontenay's refinancing and to the timing of payments.  Accounts payable also
increased due to the timing of payments.  Partially offsetting these increases
to cash was the increased use of cash for property taxes due to the timing of
payments and decreased rental revenue, as discussed above.  Net cash used in
investing activities increased due to increased property improvements and
replacements.  Partially offsetting this increased use of cash were insurance
proceeds received in 1998.  Net cash used in financing activities remained
constant.  The distribution to partners during the six months ended June 30,
1997 was offset by an increase in mortgage principal payments due to the
modification of the mortgage on The Trails, as discussed below, and to the
refinancing of LaFontenay, whose debt balance increased approximately $600,000
in August of 1997.

On August 6, 1997, the Partnership refinanced the mortgage encumbering 
La-Fontenay Apartments.  The total indebtedness refinanced was approximately
$6,720,000.  The refinancing replaced the existing indebtedness which carried
stated interest rates of 9.25% with a maturity date of August 1, 1997.  The new
mortgage indebtedness of $7,325,000 carries a stated interest rate of 7.5% and
is amortized over 360 months with a balloon payment due on September 1, 2007.

The MultiFamily Housing Revenue Bonds and Note Agreement collateralized by The
Trails Apartments were called and, therefore, payable in full on February 1,
1997 in accordance with the terms of the agreements.  On June 30, 1997, the
Partnership entered into a Modification of Bond Documents with the issuer.
Pursuant to the modification, the call notice was rescinded.  The modification
converted the monthly payments from interest only to principal and interest
payments with an amortization period of twenty years.  The note and bond mature
on December 1, 2009 with a balloon payment.  Pursuant to the modified terms, the
bondholder shall not exercise the call right on the bond on a date prior to the
fifth anniversary of the modification.

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 various properties to adequately maintain the
physical assets and other operating needs of the Partnership. Such assets are
currently thought to be sufficient for any near-term needs of the Partnership.
The mortgage indebtedness of approximately $26,517,000, net of discount, matures
at various times with balloon payments due at maturity, at which time the
properties will either be refinanced or sold.  The Partnership distributed
$100,000 to the partners during the six months ended June 30, 1997.  No cash
distributions were made during the six months ended June 30, 1998.  Future cash
distributions will depend on the levels of net cash generated from operations,
refinancings, property sales and the availability of the cash reserves.
Currently, the Managing General Partner does not anticipate making any
distributions during 1998.

Year 2000

The Partnership is dependent upon the Managing General Partner and Insignia for
management and administrative services.  Insignia has completed an assessment
and will have to modify or replace portions of its software so that its computer
systems will function properly with respect to dates in the year 2000 and
thereafter (the "Year 2000 Issue").  The project is estimated to be completed
not later than December 31, 1998, which is prior to any anticipated impact on
its operating systems.  The Managing General Partner believes that with
modifications to existing software and conversions to new software, the Year
2000 Issue will not pose significant operational problems for its computer
systems. However, if such modifications and conversions are not made, or are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Partnership.

Other

Certain items discussed in this quarterly report may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 (the "Reform Act") and as such may involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Partnership to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements.  Such forward-looking statements speak only as of the date
of this quarterly report.  The Partnership expressly disclaims any obligation or
undertaking to release publicly any updates of revisions to any forward-looking
statements contained herein to reflect any change in the Partnership's
expectations with regard thereto or any change in events, conditions or
circumstances on which any such statement is based.


                          PART II - OTHER INFORMATION


ITEM 1.   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. in the Superior Court of the State of California
for the County of San Mateo.  The plaintiffs named as defendants, among others,
the Partnership, the Managing General Partner and several of their affiliated
partnerships and corporate entities.  The complaint purports to assert claims on
behalf of a class of limited partners and derivatively on behalf of a number of
limited partnerships (including the Partnership) which are named as nominal
defendants, challenging the acquisition by Insignia and its affiliates of
interests in certain general partner entities, past tender offers by Insignia
affiliates to acquire limited partnership units, the management of partnerships
by Insignia affiliates, as well as a recently announced agreement between
Insignia and AIMCO. The complaint seeks monetary damages and equitable relief,
including judicial dissolution of the Partnership.  On June 25, 1998, the
Managing General Partner filed a motion seeking dismissal of the action.  In
lieu of responding to the motion, the plaintiffs have filed an amended
complaint.  The Managing General Partner believes the action to be without
merit, and intends to vigorously defend it.

The Partnership is unaware of any other pending or outstanding litigation that
is not of a routine nature.  The Managing General Partner of the Partnership
believes that all such pending or outstanding litigation will be resolved
without a material adverse effect upon the business, financial condition or
operations of the Partnership.


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

      a)  Exhibits:

          Exhibit 27, Financial Data Schedule, is filed as an exhibit
          to this report.

     b)   Reports on Form 8-K:

          None filed during the three months ended June 30, 1998.


                                   SIGNATURES

In accordance with the requirements 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 II, L.P.

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



                       By:        /s/Carroll D. Vinson
                                  Carroll D. Vinson
                                  President and Director



                       By:        /s/Robert D. Long, Jr.
                                  Robert D. Long, Jr.
                                  Vice President
                                  and Chief Accounting Officer


                       Date:  August 12, 1998