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, 2001


[ ] TRANSITION REPORT PURSUANT TO SECTION 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                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)

                          55 Beattie Place, 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___


<PAGE>



                         PART I - FINANCIAL INFORMATION


ITEM 1.     FINANCIAL STATEMENTS

a)

                    Davidson Diversified Real Estate II, L.P.

                           CONSOLIDATED BALANCE SHEET
                                   (Unaudited)
                          (in thousands, except unit data)

                                  June 30, 2001
<TABLE>
<CAPTION>


Assets
<S>                                                                          <C>
   Cash and cash equivalents                                                 $   570
   Receivables and deposits                                                      252
   Restricted escrows                                                            268
   Other assets                                                                  874
   Investment properties:
      Land                                                    $  2,603
      Buildings and related personal property                   40,992
                                                                43,595
      Less accumulated depreciation                            (24,334)       19,261
                                                                            $ 21,225

Liabilities and Partners' Deficit

Liabilities
   Accounts payable                                                          $ 981
   Tenant security deposit liabilities                                           111
   Accrued property taxes                                                        401
   Other liabilities                                                             370
   Due to Managing General Partner                                             5,317
   Mortgage notes payable                                                     21,215

Partners' Deficit
   General partners                                            $ (578)
   Limited partners (1,224.25 units issued and
      outstanding)                                              (6,592)       (7,170)
                                                                            $ 21,225

            See Accompanying Notes to Consolidated Financial Statements
</TABLE>


<PAGE>

b)


                    Davidson Diversified Real Estate II, L.P.

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


<TABLE>
<CAPTION>

                                             Three Months Ended        Six Months Ended
                                                  June 30,                 June 30,
                                              2001        2000         2001         2000
Revenues:
<S>                                         <C>          <C>         <C>          <C>
  Rental income                             $ 1,561      $ 1,672     $ 3,108      $ 3,451
  Other income                                   158         139          332          251
       Total revenues                          1,719       1,811        3,440        3,702

Expenses:
  Operating                                      781         916        1,650        1,959
  General and administrative                     119          74          207          136
  Depreciation                                   502         486          995          960
  Interest                                       510         545        1,044        1,080
  Property taxes                                  52          67          165          204
       Total expenses                          1,964       2,088        4,061        4,339

Loss before extraordinary item                  (245)       (277)        (621)        (637)
Extraordinary loss on early
  extinguishment of debt                          --          --         (554)          --

       Net loss                              $ (245)     $ (277)     $ (1,175)     $ (637)

Net loss allocated to general
  partners (2%)                               $ (5)       $ (6)       $ (23)       $ (13)
Net loss allocated to limited
  partners (98%)                                (240)       (271)      (1,152)        (624)

                                             $ (245)     $ (277)     $ (1,175)     $ (637)
Per limited partnership unit:
  Loss before extraordinary item            $(196.04)   $(221.36)    $(497.44)    $(509.70)
  Extraordinary item                              --          --      (443.54)          --

Net loss                                    $(196.04)   $(221.36)    $(940.98)    $(509.70)

            See Accompanying Notes to Consolidated Financial Statements
</TABLE>


<PAGE>

c)

                    Davidson Diversified Real Estate II, L.P.

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



                                     Limited
                                     Partnership     General      Limited
                                        Units        Partners    Partners     Total

<S>                                   <C>              <C>        <C>        <C>
Original capital contributions        1,224.25         $ 1        $24,485    $24,486

Partners' deficit at
   December 31, 2000                  1,224.25        $ (555)     $(5,440)   $(5,995)

Net loss for the six months
   ended June 30, 2001                      --           (23)      (1,152)    (1,175)

Partners' deficit at
   June 30, 2001                      1,224.25        $ (578)     $(6,592)   $(7,170)

            See Accompanying Notes to Consolidated Financial Statements

</TABLE>

<PAGE>


d)

                    Davidson Diversified Real Estate II, L.P.

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

<TABLE>
<CAPTION>

                                                                   Six Months Ended
                                                                        June 30,
                                                                   2001        2000
Cash flows from operating activities:
<S>                                                               <C>         <C>
  Net loss                                                        $(1,175)    $ (637)
  Adjustments to reconcile net loss to net cash provided by
   operating activities:
     Depreciation                                                     995        960
     Amortization of discounts and loan costs                         127        110
     Extraordinary loss on early extinguishment of debt               554         --
     Loss on disposal of property                                      --         19
     Change in accounts:
      Receivables and deposits                                        (66)       252
      Other assets                                                   (123)       (45)
      Accounts payable                                                574         --
      Tenant security deposit liabilities                             (31)       (31)
      Accrued property taxes                                          (87)      (122)
      Other liabilities                                              (294)       (63)
         Net cash provided by operating activities                    474        443

Cash flows from investing activities:
  Property improvements and replacements                           (1,630)      (910)
  Net withdrawals from restricted escrows                             161         81
         Net cash used in investing activities                     (1,469)      (829)

Cash flows from financing activities:
  Advances from Managing General Partner                            3,762        451
  Payments on mortgage notes payable                                 (235)      (368)
  Proceeds from mortgage note payable                               5,554         --
  Repayment of mortgage note payable                               (7,812)        --
  Prepayment penalty                                                 (359)        --
  Loan costs paid                                                    (475)        --
         Net cash provided by financing activities                    435         83

Net decrease in cash and cash equivalents                            (560)      (303)
Cash and cash equivalents at beginning of period                    1,130      1,398

Cash and cash equivalents at end of period                         $ 570     $ 1,095

Supplemental disclosure of cash flow information:
  Cash paid for interest                                          $ 1,033     $ 925
Supplemental disclosure of non-cash activity:
  Property improvements and replacements in accounts payable       $ 42        $ --

            See Accompanying Notes to Consolidated Financial Statements
</TABLE>


<PAGE>

e)

                    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" or "Registrant")  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,
2001 are not necessarily  indicative of the results that may be expected for the
fiscal year ending  December 31,  2001.  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, 2000. The Managing  General Partner is an affiliate of Apartment  Investment
and  Management  Company  ("AIMCO"),  a publicly  traded real estate  investment
trust.

Principles of Consolidation

The  Registrant's   financial   statements  include  all  the  accounts  of  the
Partnership  and  its  three  99.9%  owned  partnerships  and one  wholly  owned
partnership.  The general partner of the  consolidated  partnerships is Davidson
Diversified  Properties,  Inc.  Davidson  Diversified  Properties,  Inc.  may be
removed  as  the  general  partner  of  the  consolidated  partnerships  by  the
Registrant;   therefore,  the  consolidated   partnerships  are  controlled  and
consolidated by the Registrant.  All significant  interpartnership balances have
been 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.  The  Partnership  Agreement  provides  for (i) certain
payments to affiliates for services and (ii)  reimbursement  of certain expenses
incurred by affiliates on behalf of the Partnership.  The following amounts were
paid or accrued to the Managing  General  Partner and its affiliates  during the
six months ended June 30, 2001 and 2000:

                                                         2001       2000
                                                          (in thousands)
         Property management fees (included in
           operating expenses)                           $ 177     $ 189
         Reimbursement for services of affiliates
           (included in general and administrative
           expenses and investment properties)             135         91
         Due to affiliates (included in other
           liabilities)                                     --        243
         Due to Managing General Partner                 5,317        995

During the six months ended June 30, 2001 and 2000,  affiliates  of the Managing
General  Partner were  entitled to receive 5% of gross  receipts from all of the
Registrant's  residential properties for providing property management services.
The Registrant paid to such affiliates  approximately  $177,000 and $189,000 for
the six months ended June 30, 2001 and 2000, respectively.

An  affiliate  of  the  Managing   General   Partner  was  entitled  to  receive
reimbursement of accountable  administrative expenses amounting to approximately
$135,000  and  $91,000  for the  six  months  ended  June  30,  2001  and  2000,
respectively.

In accordance with the Partnership  Agreement,  the Managing General Partner has
loaned the Partnership funds to cover operational  expenses and to assist in the
closing  of  the  refinancing  required  at  Reflections   Apartments  (formerly
Greensprings Manor Apartments).  At June 30, 2001, the amount of the outstanding
loans and  accrued  interest  for the funds to cover  operational  expenses  was
approximately  $1,619,000  and the amount of the  outstanding  loan and  accrued
interest for the funds to assist the  refinancing was  approximately  $3,698,000
and are included in Due to Managing General Partner.  Interest is charged at the
prime rate plus 1%. Interest expense was approximately  $226,000 and $42,000 for
the six months  ended June 30, 2001 and 2000,  respectively,  and is included in
interest expense.

The  Partnership  accrued a real estate  commission  of $48,000 upon the sale of
Shoppes at River Rock due to the Managing General Partner during the year ending
December  31,  1999.  During the year ended  December  31,  2000,  approximately
$30,000 of this commission was paid to an outside party for brokerage  services.
Therefore, approximately $18,000 is accrued and included in other liabilities in
the accompanying  consolidated  balance sheet at June 30, 2001.  Payment of this
commission is  subordinate  to the limited  partners  receiving  their  original
invested capital plus a cumulative  non-compounded  annual return of 8% on their
adjusted invested capital.

In addition to its  indirect  ownership of the general  partner  interest in the
Partnership,  AIMCO and its affiliates owned 608.50 limited partnership units in
the Partnership representing 49.70% of the outstanding units at June 30, 2001. 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  limited  partnership  interests  in the  Partnership  for cash or in
exchange for units in the operating  partnership of AIMCO either through private
purchases or tender offers. Under the Partnership Agreement, unitholders holding
a majority of the Units are entitled to take action with respect to a variety of
matters, which would include without limitation, voting on certain amendments to
the Partnership  Agreement and voting to remove the Managing General Partner. As
a result of its  ownership  of 49.70% of the  outstanding  units,  AIMCO is in a
position to  significantly  influence all voting  decisions  with respect to the
Registrant. When voting on matters, AIMCO would in all likelihood vote the Units
it acquired  in a manner  favorable  to the  interest  of the  Managing  General
Partner because of its affiliation with the Managing General Partner.

Note C - Refinancing of Mortgage Note Payable

On January 16, 2001, the mortgages encumbering  Reflections Apartments (formerly
Greensprings  Manor  Apartments)  were  refinanced  in  order  to  pay  for  the
rehabilitation  project  at  the  property.  The  maximum  new  loan  amount  is
$13,600,000.  Effective  January 16, 2001, the lender made an initial advance of
$5,040,000.  Prior to the initial  advance,  the Managing General Partner loaned
the Partnership  approximately  $3,673,000 in order for the Partnership to close
the  refinancing  of the  property.  This amount will be repaid from the further
refinancing that will occur after the completion of the rehabilitation  project,
estimated to be September  2002.  During the six months ended June 30, 2001, the
lender  advanced  Reflections   Apartments  (formerly   Greensprings  Manor)  an
additional  amount  of  approximately  $514,000.  Subsequent  advances  of up to
$8,046,000  will  also be made to cover  renovation  work  that is needed at the
property.  The new loan  matures in  January  2004,  with 2  one-year  extension
options.  Interest  payments  started in  February  2001 based on LIBOR plus 280
basis points (7.26% for June 2001). In addition, monthly cash flow payments will
be made to the lender until the anticipated  completion date of the renovations,
which is September  2002. Due to the  rehabilitation  project,  a portion of the
interest expense is being capitalized. If any amount remains from these advances
on the completion  date of the  renovation,  it will be applied to the principal
balance.  Principal  payments will begin in February 2003, and monthly  deposits
into a replacement reserve will be required. In connection with the refinancing,
the Partnership incurred loan costs of approximately  $90,000 as of December 31,
2000 and approximately $475,000 during the six months ended June 30, 2001. These
loan costs are included in other assets in the accompanying consolidated balance
sheet and are being amortized over the life of the mortgage.  In connection with
the  refinancing,  the assets and  liabilities of the property were  transferred
from one  subsidiary,  Big Walnut  L.P.,  to a newly  formed  subsidiary,  AIMCO
Greensprings  L.P. The partners of AIMCO  Greensprings L.P. are the Partnership,
with 99.9%  interest,  and  Davidson  Diversified  Properties,  Inc.,  with 0.1%
ownership. The loan is collateralized by the property as well as the interest of
both  the  Partnership  and  Davidson  Diversified  Properties,  Inc.  in  AIMCO
Greensprings  L.P. The new mortgage  replaced a first mortgage of  approximately
$7,518,000 and a second  mortgage of  approximately  $294,000.  The  Partnership
recognized  an  extraordinary  loss  on the  early  extinguishment  of  debt  of
approximately  $554,000  consisting  of a  prepayment  penalty of  approximately
$359,000 and the write off of unamortized  loan costs and mortgage  discounts of
approximately $195,000.

Note D - Segment Reporting

Statement of Financial  Accounting Standards ("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.  It
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.  The  Managing  General  Partner
believes that  segment-based  disclosures  will not result in a more  meaningful
presentation than the consolidated financial statements as currently presented.

Note E - 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,  its Managing  General Partner and several of their affiliated
partnerships  and corporate  entities.  The action  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,  among other things,  the  acquisition of interests in
certain general partner entities by Insignia Financial Group, Inc.  ("Insignia")
and entities which 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
seek 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  filed an amended  complaint.  The  Managing  General  Partner  filed
demurrers to the amended complaint which were heard February 1999.

Pending the ruling on such  demurrers,  settlement  negotiations  commenced.  On
November 2, 1999,  the parties  executed and filed a Stipulation  of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the  settlement  was obtained on November 3, 1999 from the Court,  at which time
the Court set a final  approval  hearing for  December  10,  1999.  Prior to the
December  10,  1999  hearing,  the  Court  received  various  objections  to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement.  On
December 14, 1999, the Managing  General  Partner and its affiliates  terminated
the  proposed  settlement.  In  February  2000,  counsel  for some of the  named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated  the  settlement.  On June  27,  2000,  the  Court  entered  an order
disqualifying  them  from the case and an  appeal  was  taken  from the order on
October 5, 2000. On December 4, 2000, the Court  appointed the law firm of Lieff
Cabraser  Heimann & Bernstein  LLP as new lead  counsel for  plaintiffs  and the
putative class.  Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001,  the  Managing  General  Partner  and its  affiliates  filed a
demurrer to the third amended  complaint.  On May 14, 2001,  the Court heard the
demurrer to the third amended  complaint.  On July 10, 2001, the Court issued an
order sustaining defendants' demurrer on certain grounds.  Plaintiffs have until
August 16, 2001 to file a fourth amended complaint. The Managing General Partner
does  not  anticipate  that  any  costs,  whether  legal  or  settlement  costs,
associated  with  this  case  will  be  material  to the  Partnership's  overall
operations.

The  Partnership is unaware of any other pending or outstanding  litigation that
is not of a routine nature arising in the ordinary course of business.



<PAGE>




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

The  matters  discussed  in this Form  10-QSB  contain  certain  forward-looking
statements  and  involve  risks and  uncertainties  (including  changing  market
conditions,   competitive  and  regulatory   matters,   etc.)  detailed  in  the
disclosures  contained in this Form 10-QSB and other filings with the Securities
and Exchange Commission made by the Registrant from time to time. The discussion
of  the   Registrant's   business   and   results   of   operations,   including
forward-looking  statements  pertaining  to such  matters,  does not  take  into
account the effects of any changes to the  Registrant's  business and results of
operation.  Accordingly,  actual  results  could  differ  materially  from those
projected in the forward-looking  statements as a result of a number of factors,
including those identified herein.

The Partnership's investment properties consist of four apartment complexes. The
following  table sets forth the average  occupancy of the properties for the six
months ended June 30, 2001 and 2000:

                                                     Average Occupancy
                                                      2001       2000
      Big Walnut Apartments
         Columbus, Ohio (1)                           82%         91%
      LaFontenay I & II Apartments
         Louisville, Kentucky                         92%         94%
      The Trails Apartments
         Nashville, Tennessee (2)                     93%         96%
      Reflections Apartments (formerly
         Greensprings Manor Apartments)
         Indianapolis, Indiana (3)                    41%         56%

(1)   The Managing  General Partner  attributes the decrease in occupancy at Big
      Walnut Apartments to an economic change and beneficial home buyer's market
      in the area and rent concessions by competitors.

(2)   The Managing  General Partner  attributes the decrease in occupancy at The
      Trails Apartments to new construction in the area and rent concessions and
      special promotional rates offered by competitors.

(3)   The  Managing  General  Partner  attributes  the  decrease in occupancy at
      Reflections   Apartments  (formerly   Greensprings  Manor  Apartments)  to
      construction at the property. The property is currently undergoing a major
      renovation  project to enhance the  appearance  of the property to attract
      additional tenants.

Results of Operations

The  Registrant's  net loss for the three and six months ended June 30, 2001 was
approximately $245,000 and $1,175,000,  respectively,  as compared to a net loss
for the three and six months ended June 30, 2000 of  approximately  $277,000 and
$637,000,  respectively.  The increase in net loss for the six months ended June
30,  2001  was  primarily  due  to  the   extraordinary   loss  from  the  early
extinguishment  of  debt  related  to  the  refinancing  of  the  mortgage  note
encumbering  Reflections  Apartments (formerly Greensprings Manor Apartments) in
January 2001 (see discussion  below). The loss before the extraordinary item was
approximately  $621,000  for the six months  ended June 30,  2001 as compared to
$637,000 for the six months ended June 30, 2000. The decrease in loss before the
extraordinary item for the three and six months ended June 30, 2001 was due to a
decrease in total  expenses  partially  offset by a decrease in total  revenues.
Total revenues decreased  primarily due to a decrease in rental income partially
offset by an  increase in other  income for the three and six months  ended June
30, 2001.  Rental income  decreased  primarily due to a decrease in occupancy at
all the  investment  properties  as  discussed  above.  Other  income  increased
primarily  due to an  increase  in  utility  reimbursement  income  at  all  the
investment properties.

Total  expenses  decreased  due to a decrease in  operating  expenses,  interest
expense and property tax expense  partially offset by an increase in general and
administrative  expenses and depreciation expense.  Operating expenses decreased
primarily due to a decrease in security patrol expense at Reflections Apartments
(formerly  Greensprings Manor  Apartments).  The decrease in interest expense is
primarily  due to the new  financing at  Reflections  Apartments in January 2001
with a lower  debt  balance  and a  portion  of the  interest  expense  is being
capitalized.  The  decrease in  property  tax  expense  was  primarily  due to a
decrease  in the  assessed  value of  Reflections  Apartments,  a refund of 1999
property tax resulting  from the decrease in the assessed  value of  Reflections
Apartments,  and a portion of the property tax being  capitalized at Reflections
Apartments.  General and administrative  expenses increased  primarily due to an
increase in the cost of services  included in the management  reimbursements  to
the Managing  General Partner as allowed under the Partnership  Agreement and an
increase in state  license fees and taxes,  expecially  in  Tennessee  where The
Trails  Apartments  is located.  Also  included  in general  and  administrative
expenses were costs associated with the quarterly and annual communications with
investors  and  regulatory  agencies  and  the  annual  audit  required  by  the
Partnership  Agreement.  Depreciation expense increased primarily due to capital
improvements placed into service during the prior twelve months.

As part of the ongoing  business plan of the  Partnership,  the Managing General
Partner monitors the rental market  environment of the investment  properties to
assess the feasibility of increasing rents,  maintaining or increasing occupancy
levels and protecting the Partnership from increases in expense. 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.

Liquidity and Capital Resources

At June 30, 2001, the Partnership had cash and cash equivalents of approximately
$570,000 as compared to approximately $1,095,000 at June 30, 2000. Cash and cash
equivalents decreased  approximately  $560,000 for the six months ended June 30,
2001 from the Partnership's year end, primarily due to approximately  $1,469,000
of cash used in investing activities which was partially offset by approximately
$435,000 of cash provided by financing activities and approximately  $474,000 of
cash  provided  by  operating  activities.  Cash  used in  investing  activities
consisted of property  improvements  and  replacements,  partially offset by net
withdrawals  from  escrow  accounts  maintained  by the  mortgage  lender.  Cash
provided  by  financing   activities   consisted   primarily  of  proceeds  from
refinancing  the mortgage  note  encumbering  Reflections  Apartments  (formerly
Greensprings  Manor  Apartments) and advances from the Managing  General Partner
largely offset by repayment of the previous  mortgages  encumbering  Reflections
Apartments  (formerly  Greensprings Manor Apartments),  a prepayment penalty and
loan costs paid in relation to the  refinancing  and  principal  payments on the
mortgages encumbering the Partnership's properties.  The Partnership invests its
working capital reserves in interest bearing accounts.

The sufficiency of existing  liquid assets to meet future  liquidity and capital
expenditure   requirements   is  directly   related  to  the  level  of  capital
expenditures  required at the various  properties  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.   Capital
improvements planned for each of the Registrant's properties are detailed below.

Big Walnut Apartments: The property has budgeted, but is not limited to, capital
improvements of approximately $103,000 during the current year which consists of
structural  improvements,  maintenance  equipment,  floor covering replacements,
cabinet enhancements,  and recreational facilities improvements. The Partnership
has  completed  approximately  $5,000 in budgeted  capital  expenditures  at Big
Walnut  Apartments as of June 30, 2001  consisting  primarily of floor  covering
replacements,   appliance   replacements,   plumbing  fixtures,  and  structural
improvements. These improvements were funded primarily from operating cash flow.

LaFontenay I & II Apartments:  The property has budgeted, but is not limited to,
capital  improvements  of  approximately  $73,000  during the current year which
consists of floor covering and appliance  replacements,  and HVAC  replacements.
The Partnership has completed  approximately  $96,000 in budgeted and unbudgeted
capital  expenditures  at  LaFontenay  I & II  Apartments  as of June 30,  2001,
consisting  primarily of structural  improvements,  HVAC replacements,  plumbing
fixtures, water heater replacements,  appliances and floor covering replacements
and roof  replacements.  These improvements were funded primarily from operating
cash flow.

The  Trails:  The  property  has  budgeted,  but  is  not  limited  to,  capital
improvements of approximately $146,000 during the current year which consists of
lighting and other  building  improvements  and water heater  replacements.  The
Partnership has completed  approximately $135,000 in capital expenditures at The
Trails Apartments as of June 30, 2001,  consisting  primarily of floor covering,
water  heater  and  appliance   replacements   and  major   landscaping.   These
improvements were funded primarily from operating cash flow.

Reflections (formerly Greensprings Manor): In January 2001, the Managing General
Partner refinanced the mortgage encumbering this property.  The proceeds will be
used to fund the rehabilitation project that is planned for this property.  This
project is expected to cost approximately $7,645,000 with anticipated completion
in September  2002. The Partnership  has completed  approximately  $1,436,000 in
capital  expenditures at Reflections  Apartments  (formerly  Greensprings  Manor
Apartments)  as of  June  30,  2001,  consisting  primarily  of  floor  covering
replacements, HVAC replacements, office computers, structural and other building
improvements, cabinet and appliance replacements,  interior decoration and major
landscaping.  These improvements were funded primarily from refinancing proceeds
and operating cash flow.

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

The  Registrant's  current assets are thought to be sufficient for any near-term
needs  (exclusive  of capital  improvements)  of the  Registrant.  The  mortgage
indebtedness of approximately  $21,215,000,  net of discount,  is amortized over
periods  with  required  balloon  payments  ranging  from  November  15, 2002 to
December 1, 2009.  The Managing  General  Partner will attempt to refinance such
indebtedness  and/or sell the properties  prior to such maturity  dates.  If the
properties cannot be refinanced or sold for a sufficient  amount, the Registrant
will risk losing such properties through foreclosure.

On January 16, 2001, the mortgages encumbering  Reflections Apartments (formerly
Greensprings  Manor  Apartments)  were  refinanced  in  order  to  pay  for  the
rehabilitation  project  at  the  property.  The  maximum  new  loan  amount  is
$13,600,000.  Effective  January 16, 2001, the lender made an initial advance of
$5,040,000.  Prior to the initial  advance,  the Managing General Partner loaned
the Partnership  approximately  $3,673,000 in order for the Partnership to close
the  refinancing  of the  property.  This amount will be repaid from the further
refinancing that will occur after the completion of the rehabilitation  project,
estimated to be September  2002.  During the six months ended June 30, 2001, the
lender  advanced  Reflections   Apartments  (formerly   Greensprings  Manor)  an
additional  amount  of  approximately  $514,000.  Subsequent  advances  of up to
$8,046,000  will  also be made to cover  renovation  work  that is needed at the
property.  The new loan  matures in  January  2004,  with 2  one-year  extension
options.  Interest  payments  started in  February  2001 based on LIBOR plus 280
basis points (7.26% for June 2001). In addition, monthly cash flow payments will
be made to the lender until the anticipated  completion date of the renovations,
which is September  2002. Due to the  rehabilitation  project,  a portion of the
interest expense is being capitalized. If any amount remains from these advances
on the completion  date of the  renovation,  it will be applied to the principal
balance.  Principal  payments will begin in February 2003, and monthly  deposits
into a replacement reserve will be required. In connection with the refinancing,
the Partnership incurred loan costs of approximately  $90,000 as of December 31,
2000 and approximately $475,000 during the six months ended June 30, 2001. These
loan costs are included in other assets in the accompanying consolidated balance
sheet and are being amortized over the life of the mortgage.  In connection with
the  refinancing,  the assets and  liabilities of the property were  transferred
from one  subsidiary,  Big Walnut  L.P.,  to a newly  formed  subsidiary,  AIMCO
Greensprings  L.P. The partners of AIMCO  Greensprings L.P. are the Partnership,
with 99.9%  interest,  and  Davidson  Diversified  Properties,  Inc.,  with 0.1%
ownership. The loan is collateralized by the property as well as the interest of
both  the  Partnership  and  Davidson  Diversified  Properties,  Inc.  in  AIMCO
Greensprings  L.P. The new mortgage  replaced a first mortgage of  approximately
$7,518,000 and a second  mortgage of  approximately  $294,000.  The  Partnership
recognized  an  extraordinary  loss  on the  early  extinguishment  of  debt  of
approximately  $554,000  consisting  of a  prepayment  penalty of  approximately
$359,000 and the write off of unamortized  loan costs and mortgage  discounts of
approximately $195,000.

No cash  distributions  were made  during the six months  ended June 30, 2001 or
2000.  The  Registrant's  distribution  policy is reviewed  on a monthly  basis.
Future cash  distributions  will depend on the levels of net cash generated from
operations,   the  availability  of  cash  reserves,  and  the  timing  of  debt
maturities,  refinancing  and/or  property  sales.  There  can be no  assurance,
however,  that the Registrant  will generate  sufficient  funds from  operations
after required capital  expenditures to permit  distributions to its partners in
2001 or subsequent periods. In addition,  the Partnership may be restricted from
making  distributions  by the  requirement  to deposit net operating  income (as
defined in the mortgage note) into the reserve account until the reserve account
is funded in an amount  equal to a minimum  of $400 and a maximum  of $1,000 per
apartment unit for Big Walnut  Apartments for a total of approximately  $100,000
to $251,000. As of June 30, 2001, the account balance was approximately $251,000
for Big Walnut Apartments.

In addition to its  indirect  ownership of the general  partner  interest in the
Partnership,  AIMCO and its affiliates owned 608.50 limited partnership units in
the Partnership representing 49.70% of the outstanding units at June 30, 2001. 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  limited  partnership  interests  in the  Partnership  for cash or in
exchange for units in the operating  partnership of AIMCO either through private
purchases or tender offers. Under the Partnership Agreement, unitholders holding
a majority of the Units are entitled to take action with respect to a variety of
matters, which would include without limitation, voting on certain amendments to
the Partnership  Agreement and voting to remove the Managing General Partner. As
a result of its  ownership  of 49.70% of the  outstanding  units,  AIMCO is in a
position to  significantly  influence all voting  decisions  with respect to the
Registrant. When voting on matters, AIMCO would in all likelihood vote the Units
it acquired  in a manner  favorable  to the  interest  of the  Managing  General
Partner because of its affiliation with the Managing General Partner.


<PAGE>


                           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,  its Managing  General Partner and several of their affiliated
partnerships  and corporate  entities.  The action  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,  among other things,  the  acquisition of interests in
certain general partner entities by Insignia Financial Group, Inc.  ("Insignia")
and entities which 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
seek 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  filed an amended  complaint.  The  Managing  General  Partner  filed
demurrers to the amended complaint which were heard February 1999.

Pending the ruling on such  demurrers,  settlement  negotiations  commenced.  On
November 2, 1999,  the parties  executed and filed a Stipulation  of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the  settlement  was obtained on November 3, 1999 from the Court,  at which time
the Court set a final  approval  hearing for  December  10,  1999.  Prior to the
December  10,  1999  hearing,  the  Court  received  various  objections  to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement.  On
December 14, 1999, the Managing  General  Partner and its affiliates  terminated
the  proposed  settlement.  In  February  2000,  counsel  for some of the  named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated  the  settlement.  On June  27,  2000,  the  Court  entered  an order
disqualifying  them  from the case and an  appeal  was  taken  from the order on
October 5, 2000. On December 4, 2000, the Court  appointed the law firm of Lieff
Cabraser  Heimann & Bernstein  LLP as new lead  counsel for  plaintiffs  and the
putative class.  Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001,  the  Managing  General  Partner  and its  affiliates  filed a
demurrer to the third amended  complaint.  On May 14, 2001,  the Court heard the
demurrer to the third amended  complaint.  On July 10, 2001, the Court issued an
order sustaining defendants' demurrer on certain grounds.  Plaintiffs have until
August 16, 2001 to file a fourth amended complaint. The Managing General Partner
does  not  anticipate  that  any  costs,  whether  legal  or  settlement  costs,
associated  with  this  case  will  be  material  to the  Partnership's  overall
operations.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            a)    Exhibits

                  None.

            b)    Reports on Form 8-K:

                  None filed during the quarter ended June 30, 2001.


<PAGE>


                                   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/Patrick J. Foye
                                          Patrick J. Foye
                                          Executive Vice President


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


                                    Date: