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 March 31, 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)

                                 March 31, 2001
<TABLE>
<CAPTION>


Assets
<S>                                                                         <C>
   Cash and cash equivalents                                                $  1,056
   Receivables and deposits                                                      325
   Restricted escrows                                                            121
   Other assets                                                                  879
   Investment properties:
      Land                                                    $  2,603
      Buildings and related personal property                   39,584
                                                                42,187
      Less accumulated depreciation                            (23,832)       18,355

                                                                            $ 20,736
Liabilities and Partners' Deficit

Liabilities
   Accounts payable                                                          $   195
   Tenant security deposit liabilities                                           146
   Accrued property taxes                                                        458
   Other liabilities                                                             529
   Due to Managing General Partner                                             5,511
   Mortgage notes payable                                                     20,822

Partners' Deficit
   General partners                                            $ (574)
   Limited partners (1,224.25 units issued and
      outstanding)                                              (6,351)       (6,925)

                                                                            $ 20,736

            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 unit data)


<TABLE>
<CAPTION>

                                                                Three Months Ended
                                                                       March 31,
                                                                2001          2000
Revenues:
<S>                                                            <C>          <C>
   Rental income                                               $ 1,547      $ 1,779
   Other income                                                    174           112
      Total revenues                                             1,721         1,891

Expenses:
   Operating                                                       869         1,043
   General and administrative                                       88            62
   Depreciation                                                    493           474
   Interest                                                        534           535
   Property taxes                                                  113           137
      Total expenses                                             2,097         2,251

Loss before extraordinary item                                    (376)         (360)
Extraordinary loss from early extinguishment of debt              (554)           --

   Net loss                                                    $ (930)       $ (360)

Net loss allocated to general partners (2%)                     $ (19)        $ (7)
Net loss allocated to limited partners (98%)                      (911)         (353)

                                                               $ (930)       $ (360)
Per limited partnership unit:
   Loss before extraordinary item                             $(300.59)    $(288.34)
   Extraordinary item                                          (443.54)           --

Net loss                                                      $(744.13)     $(288.34)

            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 three months
   ended March 31, 2001                    --            (19)        (911)      (930)

Partners' deficit at
   March 31, 2001                     1,224.25        $ (574)     $(6,351)   $(6,925)

            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>

                                                                 Three Months Ended
                                                                       March 31,
                                                                   2001        2000
Cash flows from operating activities:
<S>                                                               <C>         <C>
  Net loss                                                        $ (930)     $ (360)
  Adjustments to reconcile net loss to net cash (used in)
   provided by operating activities:
     Depreciation                                                    493         474
     Amortization of discounts and loan costs                         62          55
     Extraordinary loss on early extinguishment of debt              554          --
     Loss on disposal of property                                     --          19
     Change in accounts:
      Receivables and deposits                                      (139)        296
      Other assets                                                  (144)        (80)
      Accounts payable                                              (197)       (179)
      Tenant security deposit liabilities                              4         (31)
      Accrued property taxes                                         (30)        (12)
      Other liabilities                                             (135)        (79)
        Net cash (used in) provided by operating activities         (462)        103

Cash flows from investing activities:
  Property improvements and replacements                            (237)       (287)
  Net withdrawals from restricted escrows                            308          64
        Net cash provided by (used in) investing activities           71        (223)

Cash flows from financing activities:
  Advances from Managing General Partner                           3,956         378
  Payments on mortgage notes payable                                (116)       (184)
  Proceeds from mortgage note payable                              5,065          --
  Repayment of mortgage note payable                              (7,812)         --
  Prepayment penalty                                                (359)         --
  Loan costs paid                                                   (417)         --
        Net cash provided by financing activities                    317         194

Net (decrease) increase in cash and cash equivalents                 (74)         74
Cash and cash equivalents at beginning of period                   1,130       1,398

Cash and cash equivalents at end of period                       $ 1,056     $ 1,472

Supplemental disclosure of cash flow information:
  Cash paid for interest                                          $ 338       $ 460
Supplemental disclosure of non-cash activity:
  Property improvements and replacements in accounts payable       $ 27        $ --

            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 month period ended March 31, 2001 are
not  necessarily  indicative  of the results  that may be expected  for the 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 a subsidiary 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
three months ended March 31, 2001 and 2000:

                                                         2001       2000
                                                          (in thousands)
         Property management fees (included in
           operating expenses)                           $  88       $ 97
         Reimbursement for services of affiliates
           (included in general and administrative
            expenses and investment properties)             65         48
         Due to Managing General Partner                 5,511        880


During  the three  months  ended  March 31,  2001 and  2000,  affiliates  of the
Managing  General Partner were entitled to receive 5% of gross receipts from all
of the Registrant's  properties for providing property management services.  The
Registrant  paid to such  affiliates  approximately  $88,000 and $97,000 for the
three months ended March 31, 2001 and 2000, respectively.

An  affiliate  of  the  Managing   General   Partner  was  entitled  to  receive
reimbursement of accountable  administrative expenses amounting to approximately
$65,000  and  $48,000  for the  three  months  ended  March  31,  2001 and 2000,
respectively.  A portion of both the  current  fees and the prior year fees were
not able to be paid due to the Partnership's cash flow. Accordingly, as of March
31, 2001, a liability of approximately $144,000 exists and is reflected in other
liabilities.

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 Greensprings Manor Apartments.  At March
31, 2001, the amount of the outstanding loans and accrued interest for the funds
to cover operational expenses was approximately $1,771,000 and the amount of the
outstanding  loan and accrued  interest for the funds to assist the  refinancing
was  approximately  $3,740,000  and  are  included  in Due to  Managing  General
Partner.  Interest  is charged at the prime rate plus 1%.  Interest  expense was
approximately $109,000 and $16,000 for the three months ended March 31, 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 at March 31, 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  currently  own 600 limited  partnership
units in the Partnership  representing 49.01% of the outstanding units. 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  49.01% 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   Greensprings  Manor  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.  On March 12,
2001,  the  lender  advanced   Greensprings   Manor  an  additional   amount  of
approximately $25,000. Subsequent advances of up to $8,535,000 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.  In addition,  monthly cash
flow payments will be made to the lender until the  anticipated  completion date
of the  renovations,  which is September  2002. 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 $417,000 during the three months ended March
31,  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  requires  that those  enterprises  report
selected  information about operating segments in interim financial reports.  It
also establishes  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 Insignia  Merger.  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.  The Court has also scheduled a hearing
on a motion for class  certification  for August 27, 2001.  Plaintiffs must file
their motion for class  certification  no later than June 15, 2001. The Managing
General Partner does not anticipate that 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.

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 three
months ended March 31, 2001 and 2000:

                                                 Average Occupancy
                                                 2001        2000
         Big Walnut Apartments
            Columbus, Ohio (1)                    82%         90%

         LaFontenay I & II Apartments
            Louisville, Kentucky (2)              89%         94%

         The Trails Apartments
            Nashville, Tennessee (3)              93%         96%

         Greensprings Manor Apartments
            Indianapolis, Indiana (4)             42%         61%

(1)   The Managing  General Partner  attributes the decrease in occupancy at Big
      Walnut Apartments to job relocations and the purchase of homes.

(2)   The  Managing  General  Partner  attributes  the  decrease in occupancy at
      LaFontenay I & II Apartments to an increase in competition in the area.

(3)   The Managing  General Partner  attributes the decrease in occupancy at The
      Trails  Apartments  to a  softening  market  and  competition  from  a new
      apartment complex in the area.

(4)   The  Managing  General  Partner  attributes  the  decrease in occupancy at
      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  months  ended  March 31,  2001,  was
approximately  $930,000 compared to a net loss of approximately $360,000 for the
three  months  ended  March 31,  2000.  The  increase in net loss was due to the
extraordinary  loss  from  the  early  extinguishment  of  debt  related  to the
refinancing of the mortgage note  encumbering  Greensprings  Manor Apartments in
January 2001 (see discussion  below).  The loss before the extraordinary loss on
the early extinguishment of debt was approximately $376,000 for the three months
ended March 31, 2001 as compared to approximately  $360,000 for the three months
ended March 31, 2000. The increase in loss before the extraordinary  item is due
to a  decrease  in  total  revenues  partially  offset  by a  decrease  in total
expenses.  Total revenues decreased primarily due to a decrease in rental income
partially offset by an increase in other income for the three month period ended
March 31, 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  reimbursements  income and to increases
in average cash balances held in interest bearing accounts.

Total  expenses  decreased due to a decrease in operating  expenses and property
tax  expenses  partially  offset by an increase  in general  and  administrative
expenses  and  depreciation  expenses.   Operating  expenses  decreased  due  to
decreases in property expenses.  Property expenses decreased  primarily due to a
decrease in contract  courtesy  patrol  costs.  Property tax expenses  decreased
primarily  due to a  decrease  in  the  assessed  value  of  Greensprings  Manor
Apartments  and a portion of the  property  tax being  capitalized.  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. 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 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  March  31,  2001,  the  Partnership   had  cash  and  cash   equivalents  of
approximately  $1,056,000 as compared to  approximately  $1,472,000 at March 31,
2000. Cash and cash equivalents  decreased  approximately  $74,000 for the three
months ended March 31, 2001 from the  Partnership's  year end,  primarily due to
approximately  $462,000 of cash used in operating activities partially offset by
approximately $71,000 of cash provided by investing activities and approximately
$317,000 of cash  provided by financing  activities.  Cash provided by investing
activities consisted of net withdrawals from escrow accounts partially offset by
property  improvements and replacements.  Cash provided by financing  activities
consisted  primarily of proceeds from  refinancing the mortgage note encumbering
Greensprings  Manor  Apartments and advances from the Managing  General  Partner
partially offset by repayment of the previous mortgages encumbering 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, and floor covering replacements,
cabinet enhancements and recreational facilities  improvements.  The Partnership
has  completed  approximately  $32,000  in  capital  expenditures  at Big Walnut
Apartments  as  of  March  31,  2001  consisting  primarily  of  floor  covering
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  $48,000 in capital expenditures at
LaFontenay  I & II  Apartments  as of March 31,  2001,  consisting  primarily of
structural,   HVAC  and  plumbing   fixtures   improvements   and  water  heater
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  $50,000 in capital expenditures at The
Trails Apartments as of March 31, 2001,  consisting primarily of floor covering,
water  heater,  and  appliance  replacements.  These  improvements  were  funded
primarily from operating cash flow.

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 $134,000 in capital
expenditures at Greensprings  Manor Apartments as of March 31, 2001,  consisting
primarily of floor covering replacements,  HVAC replacements,  office computers,
and structural and other building  improvements.  These improvements were funded
primarily from refinancing funds 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  $20,822,000,  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
property  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   Greensprings  Manor  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.  On March 12,
2001,  the  lender  advanced   Greensprings   Manor  an  additional   amount  of
approximately $25,000. Subsequent advances of up to $8,535,000 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.  In addition,  monthly cash
flow payments will be made to the lender until the  anticipated  completion date
of the  renovations,  which is September  2002. 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 $417,000 during the three months ended March
31,  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 three months ended March 31, 2001 or
2000. The  Registrant's  distribution  policy is reviewed on a quarterly  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 March 31,  2001,  the  account  balance  was  approximately
$114,000 for Big Walnut Apartments.

In addition to its  indirect  ownership of the general  partner  interest in the
Partnership,  AIMCO and its  affiliates  currently  own 600 limited  partnership
units in the Partnership  representing 49.01% of the outstanding units. 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  49.01% 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 Insignia  Merger.  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.  The Court has also scheduled a hearing
on a motion for class  certification  for August 27, 2001.  Plaintiffs must file
their motion for class  certification  no later than June 15, 2001. The Managing
General Partner does not anticipate that 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 March 31, 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: