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

                                   Form 10-QSB

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

              For the quarterly period ended September 30, 2004


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


             For the transition period from _________to _________

                         Commission file number 0-14530


                        DAVIDSON INCOME REAL ESTATE, L.P.
        (Exact Name of Small Business Issuer as Specified in Its Charter)



         Delaware                                           62-1242144
(State or other jurisdiction of                          (I.R.S. Employer
 incorporation or organization)                         Identification No.)

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

                                 (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



                        DAVIDSON INCOME REAL ESTATE, L.P.

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

                               September 30, 2004

<TABLE>
<CAPTION>


Assets
<S>                                                                          <C>
   Cash and cash equivalents                                                 $ 397
   Receivables and deposits                                                     126
   Restricted escrows                                                            60
   Other assets                                                                 310
   Investment properties:
       Land                                                  $ 3,523
       Buildings and related personal property                 19,921
                                                               23,444
       Less accumulated depreciation                          (13,147)       10,297
                                                                           $ 11,190
Liabilities and Partners' Deficit
Liabilities
   Accounts payable                                                          $ 225
   Tenant security deposit liabilities                                           71
   Accrued property taxes                                                       311
   Other liabilities                                                            137
   Due to affiliates (Note B)                                                 1,296
   Deficit in joint venture (Note C)                                            864
   Mortgage notes payable                                                    10,782

Partners' Deficit
   General partners                                           $ (847)
   Limited partners (26,776 units issued and
      outstanding)                                             (1,649)       (2,496)
                                                                           $ 11,190

         See Accompanying Notes to Consolidated Financial Statements
</TABLE>



                        DAVIDSON INCOME REAL ESTATE, L.P.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                      (in thousands, except per unit data)

<TABLE>
<CAPTION>

                                         Three Months Ended        Nine Months Ended
                                           September 30,             September 30,
                                         2004          2003         2004        2003

Revenues:
<S>                                      <C>          <C>         <C>         <C>
  Rental income                          $ 745        $ 804       $ 2,175     $ 2,439
  Other income                               74           63          205         194
  Casualty gain (Note D)                     --          459          390         540
     Total revenues                         819        1,326        2,770       3,173
Expenses:
  Operating                                 449          388        1,254       1,066
  General and administrative                 42           58          145         147
  Depreciation                              248          214          744         658
  Interest                                  138          184          422         632
  Property taxes                            112           94          305         283
  Loss on early extinguishment
    of debt (Note F)                         --           --           --          57
     Total expenses                         989          938        2,870       2,843
(Loss) income before equity in
  (loss) income of joint venture           (170)         388         (100)        330
Equity in (loss) income of joint
  venture                                   (10)           1          (26)          3
(Loss) income from continuing
  operations                               (180)         389         (126)        333
Income (loss) from discontinued
  operations                                 --           17           --        (209)
Gain on sale of discontinued
  operations (Note E)                        --           --           --       3,472
Net (loss) income                       $ (180)       $ 406        $ (126)    $ 3,596

Net (loss) income  allocated to
  general partners (3%)                  $ (6)         $ 12         $ (4)      $ 108
Net (loss) income allocated to
  limited partners (97%)                   (174)         394         (122)      3,488
                                        $ (180)       $ 406        $ (126)    $ 3,596
Net (loss) income per limited partnership unit:
(Loss) income from continuing
  operations                            $ (6.50)     $ 14.09      $ (4.56)    $ 12.06
Income (loss) from discontinued
  operations                                 --         0.62           --       (7.57)
Gain on sale of discontinued
  operations                                 --           --           --      125.78
                                        $ (6.50)     $ 14.71      $ (4.56)    $130.27
Distributions per limited
  partnership unit                       $ --        $ 61.44        $ --      $189.80

         See Accompanying Notes to Consolidated Financial Statements
</TABLE>


                        DAVIDSON INCOME REAL ESTATE, 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          26,776       $ 1        $26,776      $26,777

Partners' deficit at
  December 31, 2003                     26,776      $ (843)    $(1,527)      $(2,370)

Net loss for the nine months
  ended September 30, 2004                  --          (4)        (122)        (126)

Partners' deficit at
  September 30, 2004                    26,776      $ (847)    $(1,649)      $(2,496)

         See Accompanying Notes to Consolidated Financial Statements
</TABLE>


                        DAVIDSON INCOME REAL ESTATE, L.P.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                 (in thousands)
<TABLE>
<CAPTION>

                                                                 Nine Months Ended
                                                                   September 30,
                                                                   2004        2003
Cash flows from operating activities:
<S>                                                              <C>         <C>
  Net (loss) income                                              $ (126)     $ 3,596
  Adjustments to reconcile net (loss) income to net cash
     provided by (used in) operating activities:
     Gain on sale of discontinued operations                         --       (3,472)
     Casualty gain                                                 (390)        (540)
     Loss on early extinguishment of debt                            --           73
     Depreciation                                                   744          736
     Amortization of loan costs and discounts                        27           40
     Equity in loss (income) of joint venture                        26           (3)
     Change in accounts:
      Receivables and deposits                                      261         (737)
      Other assets                                                  (74)         (56)
      Accounts payable                                                1          (75)
      Tenant security deposit liabilities                            --          (23)
      Accrued property taxes                                          8          (10)
      Other liabilities                                              31          (30)
      Due to affiliate                                                3           --
       Net cash provided by (used in) operating activities          511         (501)

Cash flows from investing activities:
  Net proceeds from sale of discontinued operations                  --        5,735
  Property improvements and replacements                           (663)        (704)
  Net (deposits to) withdrawals from restricted escrows             (30)         102
  Insurance proceeds from casualties                                329          843
  Distributions from joint venture                                   --           33
       Net cash (used in) provided by investing activities         (364)       6,009

Cash flows from financing activities:
  Payments on mortgage notes payable                               (252)        (141)
  Loan costs paid                                                    --          (95)
  Payment on advances from affiliate                                (83)         (71)
  Repayments of mortgage notes payable                               --       (6,122)
  Proceeds from mortgage note payable                                --        6,000
  Distributions to partners                                          --       (5,239)
       Net cash used in financing activities                       (335)      (5,668)

Net decrease in cash and cash equivalents                          (188)        (160)
Cash and cash equivalents at beginning of period                    585          576

Cash and cash equivalents at end of period                       $ 397        $ 416

Supplemental disclosure of cash flow information:
  Cash paid for interest                                         $ 358        $ 671

At December  31,  2003,  accounts  payable  included  approximately  $405,000 of
property  improvements  and  replacements.   At  September  30,  2004,  property
improvements  and  replacements  of  approximately  $110,000  were  included  in
accounts payable.

         See Accompanying Notes to Consolidated Financial Statements
</TABLE>

                        DAVIDSON INCOME REAL ESTATE, L.P.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note A - Basis of Presentation

The accompanying  unaudited consolidated financial statements of Davidson Income
Real Estate,  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 nine months ended  September 30,
2004, are not necessarily indicative of the results that may be expected for the
fiscal year ending  December 31,  2004.  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, 2003. The Managing  General Partner is a subsidiary of Apartment  Investment
and  Management  Company  ("AIMCO"),  a publicly  traded real estate  investment
trust.

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the  accompanying  statements of operations  for the three and nine months ended
September 30, 2003 reflect the operations of North Springs  Apartments as income
(loss) from discontinued operations due to its sale in April 2003.

Note B - Transactions with Affiliated Parties

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

Affiliates of the Managing  General  Partner are entitled to receive 5% of gross
receipts from all of the Partnership's  properties as compensation for providing
property   management   services.   The  Partnership  paid  to  such  affiliates
approximately $115,000 and $130,000 for the nine months ended September 30, 2004
and 2003,  respectively,  which is included  in  operating  expenses  and income
(loss) from discontinued operations.

An  affiliate  of  the  Managing  General  Partner  received  reimbursements  of
accountable  administrative  expenses  amounting to  approximately  $147,000 and
$92,000 for the nine months  ended  September  30, 2004 and 2003,  respectively,
which  is  included  in  general  and  administrative  expenses  and  investment
properties.   Included  in  these  amounts  are  fees  related  to  construction
management  services provided by an affiliate of the Managing General Partner of
approximately  $55,000 and $8,000 for the nine months ended  September  30, 2004
and 2003, respectively.  The construction management service fees are based on a
percentage of current  additions to investment  properties.  As of September 30,
2004,  the  Partnership  owed  approximately   $32,000  of  accrued  accountable
administrative  expenses to an affiliate of the Managing General Partner,  which
is included in other liabilities on the accompanying consolidated balance sheet.

During the nine months ended  September 30, 2004 and 2003, the  Partnership  did
not receive any advances  from an affiliate  of the  Managing  General  Partner.
During the nine months ended September 30, 2004 and 2003, the Partnership repaid
previous  advances of  approximately  $105,000  and $73,000,  including  accrued
interest of  approximately  $22,000 and $2,000,  respectively.  At September 30,
2004, the amount of outstanding  advances and accrued interest was approximately
$1,296,000  and is shown as due to affiliates on the  accompanying  consolidated
balance  sheet.  Interest  on  advances is accrued at prime plus 2%, or 6.75% at
September 30, 2004, in accordance  with the  Partnership  Agreement.  During the
nine months  ended  September  30,  2004 and 2003,  the  Partnership  recognized
interest expense of approximately $51,000 and $2,000, respectively,  relative to
obligations due to affiliates. Subsequent to September 30, 2004, the Partnership
received an advance of approximately $30,000 to pay operating expenses at one of
the investment properties.

For  acting  as real  estate  broker in  connection  with the 2003 sale of North
Springs  Apartments,  the  Managing  General  Partner  was  paid a  real  estate
commission of approximately  $183,000 during the nine months ended September 30,
2003. When the Partnership terminates, the Managing General Partner will have to
return this  commission if the limited  partners do not receive  their  original
invested capital plus a 12% per annum cumulative non-compounded return.

The  Partnership  insures its properties up to certain  limits through  coverage
provided by AIMCO which is  generally  self-insured  for a portion of losses and
liabilities  related to workers  compensation,  property  casualty  and  vehicle
liability. The Partnership insures its properties above the AIMCO limits through
insurance  policies  obtained  by  AIMCO  from  insurers  unaffiliated  with the
Managing  General  Partner.  During the nine months ended September 30, 2004 and
2003,  the  Partnership  was charged by AIMCO and its  affiliates  approximately
$52,000 and $66,000,  respectively,  for insurance  coverage and fees associated
with policy claims administration.

Note C - Investment in Joint Venture

The  Partnership  owns a 17.5% interest in the Sterling Crest Joint Venture with
Davidson Growth Plus, L.P., an affiliate of the Managing General Partner,  which
owns the remaining 82.5% of the joint venture.

During the nine months  ended  September  30,  2003,  the  Partnership  received
distributions  of  approximately  $33,000 from  operations of the joint venture.
There were no such distributions received during the nine months ended September
30,  2004.  For the nine  months  ended  September  30,  2004,  the  Partnership
recognized approximately $26,000 of equity in loss of the joint venture. For the
nine months ended September 30, 2003, the Partnership  recognized  approximately
$3,000 of equity in income of the joint  venture.  At September  30,  2004,  the
Partnership had received  distributions  and recognized  equity in losses of the
joint  venture  in  excess  of  its  general  partnership  interest  and  has an
investment deficiency of approximately $864,000.

The following table represents the net (loss) income of the Sterling Crest Joint
Venture for the nine months ended September 30, 2004 and 2003 (in thousands):

<TABLE>
<CAPTION>


                                                   Nine months Ended September 30,
                                                      2004                2003
<S>                                                 <C>                <C>
Total revenues                                      $ 1,705            $ 1,815
Total expenses                                       (1,854)            (1,796)
Net (loss) income                                   $  (149)           $    19
</TABLE>

Note D - Casualty Event

In December 2002, Bexley House Apartments  experienced a fire, causing damage to
32 units. Property damages totaled  approximately  $1,452,000 and reconstruction
of the units was completed  during 2003.  During the nine months ended September
30, 2003,  the  Partnership  recorded a partial  casualty gain of  approximately
$540,000.  The gain was the  result of the  receipt  of  insurance  proceeds  of
approximately  $843,000  offset by the write off of  approximately  $303,000  of
undepreciated fixed assets. In addition, the Partnership recognized revenue from
lost rents of approximately  $288,000 during the nine months ended September 30,
2003. During the nine months ended September 30, 2004, the Partnership  recorded
a casualty gain of approximately  $390,000 due to the receipt of final insurance
proceeds of approximately  $393,000 and the write off of approximately $3,000 of
remaining undepreciated fixed assets.

Note E - Sale of Investment Property

On April 15, 2003,  the  Partnership  sold North  Springs  Apartments to a third
party for a gross  sales price of  approximately  $6,100,000.  The net  proceeds
received by the  Partnership  were  approximately  $5,735,000  after  payment of
closing costs,  including a commission  paid to the Managing  General Partner as
permitted under the terms of the  Partnership  Agreement.  The Partnership  used
approximately  $1,779,000 of the net proceeds to repay the mortgages encumbering
the  property.  As a result  of the sale,  the  Partnership  realized  a gain of
approximately  $3,472,000  during the nine months ended  September 30, 2003. The
property's operations,  loss of approximately $209,000 for the nine months ended
September  30,  2003,  are shown as loss  from  discontinued  operations  on the
accompanying  consolidated  statements  of  operations  and include  revenues of
approximately  $229,000.  In addition,  the Partnership recorded a loss on early
extinguishment  of debt of  approximately  $16,000  for the  nine  months  ended
September 30, 2003 due to the write off of  unamortized  loan costs and mortgage
discounts, which is included in income (loss) from discontinued operations.

Note F - Refinancing of Mortgage Note Payable

In June 2003, the  Partnership  refinanced the mortgages  encumbering  Covington
Pointe   Apartments.   The  refinancing   replaced   mortgage   indebtedness  of
approximately  $4,343,000 with a new mortgage of approximately  $6,000,000.  The
new  mortgage  carries a stated  interest  rate of 3.81%  compared  to the 7.83%
interest  rate on the old  mortgages.  Payments  of  principal  and  interest of
approximately  $36,000  are due on the first  day of each  month  commencing  in
August  2003 until  July 2010 at which  time a balloon  payment in the amount of
approximately  $4,416,000 is due.  Capitalized loan costs, which are included in
other assets,  incurred with the refinancing were approximately $95,000, and are
being  amortized  over the life of the mortgage  note payable.  The  Partnership
wrote off unamortized loan costs of approximately $51,000 and mortgage discounts
of approximately  $6,000 resulting in a loss on early  extinguishment of debt of
approximately $57,000.

Note G - Contingencies

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

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

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

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

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

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

On August 8, 2003 AIMCO  Properties  L.P., an affiliate of the Managing  General
Partner,  was served  with a  complaint  in the United  States  District  Court,
District of Columbia alleging that AIMCO Properties L.P.  willfully violated the
Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime
for all  hours  worked  in  excess  of forty  per  week.  On  March 5,  2004 the
Plaintiffs filed an amended complaint also naming NHP Management Company,  which
is also an affiliate of the Managing General Partner. The complaint is styled as
a Collective  Action  under the FLSA and seeks to certify  state  subclasses  in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate  maintenance workers for
time  that they were  required  to be  "on-call".  Additionally,  the  complaint
alleges AIMCO  Properties  L.P.  failed to comply with the FLSA in  compensating
maintenance  workers  for time that they  worked in  responding  to a call while
"on-call".  The defendants have filed an answer to the amended complaint denying
the  substantive  allegations.  Some  discovery  has taken place and  settlement
negotiations  continue.  Although the outcome of any  litigation  is  uncertain,
AIMCO  Properties,  L.P. does not believe that the ultimate  outcome will have a
material  adverse  effect on its financial  condition or results of  operations.
Similarly,  the  Managing  General  Partner  does not believe  that the ultimate
outcome will have a material  adverse effect on the  Partnership's  consolidated
financial condition or results of operations.

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

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

<PAGE>

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

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

The Partnership's  investment  properties consist of three apartment  complexes.
The following  table sets forth the average  occupancy of the properties for the
nine months ended September 30, 2004 and 2003:

                                                   Average Occupancy
      Property                                      2004       2003

      Lakeside Apartments                           95%        89%
         Charlotte, North Carolina (1)
      Bexley House Apartments                       68%        49%
         Columbus, Ohio (2)
      Covington Pointe Apartments                   84%        93%
         Dallas, Texas (3)

(1)      The Managing  General  Partner  attributes the increase in occupancy at
         Lakeside Apartments to increased marketing efforts by management.

(2)      The Managing  General  Partner  attributes the increase in occupancy at
         Bexley House  Apartments  to the completed  reconstruction  of 32 units
         that were destroyed by a fire in December 2002.  Occupancy continues to
         stabilize and was approximately 76% at September 30, 2004.

   (3)   The Managing  General  Partner  attributes the decrease in occupancy at
         Covington Pointe  Apartments to the decline in the market conditions in
         the  Dallas  area and an  increased  effort to  attract  a more  stable
         customer base.

The  Partnership's  financial  results depend upon a number of factors including
the  ability to attract  and  maintain  tenants  at the  investment  properties,
interest  rates on mortgage  loans,  costs  incurred  to operate the  investment
properties,  general  economic  conditions  and weather.  As part of the ongoing
business plan of the  Partnership,  the Managing  General  Partner  monitors the
rental market  environment  of 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,  the Managing  General Partner may use
rental  concessions  and  rental  rate  reductions  to offset  softening  market
conditions, accordingly, there is no guarantee that the Managing General Partner
will be able to  sustain  such a plan.  Further,  a number of  factors  that are
outside the control of the  Partnership  such as the local economic  climate and
weather can adversely or positively affect the Partnership's financial results.

Results of Operations

For the three and nine months ended  September 30, 2004, the  Partnership  had a
net loss of approximately $180,000 and $126,000,  respectively,  compared to net
income of approximately $406,000 and $3,596,000 for the corresponding periods in
2003.  The decrease in net income for the three months ended  September 30, 2004
is due to a decrease in total  revenues and an increase in total  expenses.  The
decrease in net income for the nine months  ended  September  30, 2004 is due to
the gain on sale of North  Springs  Apartments  in 2003  partially  offset  by a
decrease in loss from discontinued operations.

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
the  accompanying  consolidated  statements of operations for the three and nine
months  ended  September  30,  2003  reflect  the  operations  of North  Springs
Apartments  as income  (loss) from  discontinued  operations  due to its sale in
April 2003.

On April 15, 2003,  the  Partnership  sold North  Springs  Apartments to a third
party for a gross  sales price of  approximately  $6,100,000.  The net  proceeds
received by the  Partnership  were  approximately  $5,735,000  after  payment of
closing costs,  including a commission  paid to the Managing  General Partner as
permitted under the terms of the  Partnership  Agreement.  The Partnership  used
approximately  $1,779,000 of the net proceeds to repay the mortgages encumbering
the  property.  As a result  of the sale,  the  Partnership  realized  a gain of
approximately  $3,472,000  during the nine months ended  September 30, 2003. The
property's operations,  loss of approximately $209,000 for the nine months ended
September  30,  2003,  are shown as loss  from  discontinued  operations  on the
accompanying  consolidated  statements  of  operations  and include  revenues of
approximately  $229,000.  In addition,  the Partnership recorded a loss on early
extinguishment  of debt of  approximately  $16,000  for the  nine  months  ended
September 30, 2003 due to the write off of  unamortized  loan costs and mortgage
discounts, which is included in income (loss) from discontinued operations.

Excluding the gain on sale and income (loss) from discontinued  operations,  the
Partnership had loss from continuing  operations of  approximately  $180,000 and
$126,000 for the three and nine months ended  September 30, 2004,  respectively,
compared to income from  continuing  operations  of  approximately  $389,000 and
$333,000  for the  corresponding  periods in 2003.  The  decrease in income from
continuing  operations for both periods is due to a decrease in total  revenues,
an  increase in total  expenses  and a decrease in equity in income of the joint
venture.

The  decrease in total  revenues  for both periods is due to decreases in rental
income  and in  casualty  gains  recognized.  Rental  income  for  both  periods
decreased due to decreases in occupancy at Covington Pointe Apartments,  average
rental rates at all of the investment  properties and lost rents at Bexley House
Apartments  partially  offset by an increase in occupancy  and a decrease in bad
debt expense at Bexley House and Lakeside Apartments.

In December 2002, Bexley House Apartments  experienced a fire, causing damage to
32 units. Property damages totaled  approximately  $1,452,000 and reconstruction
of the units was completed  during 2003.  During the nine months ended September
30, 2003,  the  Partnership  recorded a partial  casualty gain of  approximately
$540,000.  The gain was the  result of the  receipt  of  insurance  proceeds  of
approximately  $843,000  offset by the write off of  approximately  $303,000  of
undepreciated fixed assets. In addition, the Partnership recognized revenue from
lost rents of approximately  $288,000 during the nine months ended September 30,
2003. During the nine months ended September 30, 2004, the Partnership  recorded
a casualty gain of approximately  $390,000 due to the receipt of final insurance
proceeds of approximately  $393,000 and the write off of approximately $3,000 of
remaining undepreciated fixed assets.

Total  expenses for the three months ended  September 30, 2004  increased due to
increases in operating,  depreciation and property tax expense  partially offset
by decreases in general and administrative and interest expenses. Total expenses
for the nine months  ended  September  30, 2004  increased  due to  increases in
operating,  depreciation and property tax expenses partially offset by decreases
in interest  expense and loss on early  extinguishment  of debt, as discussed in
Liquidity and Capital  Resources.  Operating expenses for both periods increased
due to increases in advertising,  property and maintenance expenses. Advertising
expense  increased  due to an  increase in  internet  advertising  at all of the
investment  properties and in leasing  promotions and referral fees at Covington
Pointe and Lakeside  Apartments.  Property expense increased due to increases in
salary and related benefits at all of the investment properties and in utilities
at Covington Pointe and Bexley House Apartments.  Maintenance  expense increased
due to  increases  in  contract  labor and  maintenance  parts and  supplies  at
Covington Pointe and Bexley House  Apartments  partially offset by a decrease in
contract labor at Lakeside  Apartments.  Depreciation  expense  increased due to
fixed  assets  placed into  service  over the past twelve  months,  primarily at
Bexley House  Apartments.  Property tax expense  increased due to an increase in
the tax rate at Covington Pointe Apartments. Interest expense decreased due to a
decrease in the interest rates on the mortgages at Covington Pointe and Lakeside
Apartments as a result of the  refinancing of the mortgages in June and November
2003, respectively.

The  decrease in general and  administrative  expense for the three months ended
September  30,  2004 is due to a decrease  in the  estimated  cost of the annual
audit,  as required by the Partnership  Agreement.  Also included in general and
administrative expense for the nine months ended September 30, 2004 and 2003 are
management  reimbursements  to the Managing General Partner as allowed under the
Partnership  Agreement,  and costs  associated  with the  quarterly  and  annual
communications with investors and regulatory agencies.

The  Partnership  owns a 17.5%  interest in Sterling  Crest Joint  Venture  (the
"Joint Venture"). The Partnership recognized equity in loss of the joint venture
of  approximately  $26,000 for the nine months ended September 30, 2004 compared
to equity in income of the joint  venture of  approximately  $3,000 for the nine
months ended September 30, 2003.

Liquidity and Capital Resources

At  September  30,  2004,  the  Partnership  had cash and  cash  equivalents  of
approximately $397,000 compared to approximately $416,000 at September 30, 2003.
Cash and cash equivalents  decreased  approximately  $188,000 since December 31,
2003 due to  approximately  $364,000 of cash used in  investing  activities  and
approximately  $335,000 of cash used in financing activities partially offset by
approximately  $511,000 of cash provided by operating  activities.  Cash used in
investing activities consisted of property improvements and replacements and net
deposits to  restricted  escrows  maintained by the mortgage  lenders  partially
offset  by  insurance  proceeds  received  from the  casualty  at  Bexley  House
Apartments. Cash used in financing activities consisted of payments of principal
made on the mortgages  encumbering the Partnership's  investment  properties and
payment on advances  from an  affiliate  of the Managing  General  Partner.  The
Partnership invests its working capital reserves in interest bearing accounts.

In June 2003, the  Partnership  refinanced the mortgages  encumbering  Covington
Pointe   Apartments.   The  refinancing   replaced   mortgage   indebtedness  of
approximately  $4,343,000 with a new mortgage of approximately  $6,000,000.  The
new  mortgage  carries a stated  interest  rate of 3.81%  compared  to the 7.83%
interest  rate on the old  mortgages.  Payments  of  principal  and  interest of
approximately  $36,000  are due on the first  day of each  month  commencing  in
August  2003 until  July 2010 at which  time a balloon  payment in the amount of
approximately  $4,416,000 is due.  Capitalized loan costs, which are included in
other assets,  incurred with the refinancing were approximately $95,000, and are
being  amortized  over the life of the mortgage  note payable.  The  Partnership
wrote off unamortized loan costs of approximately $51,000 and mortgage discounts
of approximately  $6,000 resulting in a loss on early  extinguishment of debt of
approximately $57,000.

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 investment  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.  The  Managing
General  Partner  monitors  developments  in the  area of legal  and  regulatory
compliance.  For example,  the  Sarbanes-Oxley  Act of 2002 mandates or suggests
additional compliance measures with regard to governance,  disclosure, audit and
other areas.  In light of these changes,  the  Partnership  expects that it will
incur higher expenses related to compliance.  Capital  improvements  planned for
the Partnership's properties are detailed below.

Lakeside Apartments

During the nine months ended  September  30,  2004,  the  Partnership  completed
approximately $67,000 of capital improvements at Lakeside Apartments, consisting
primarily of major landscaping,  and appliance and floor covering  replacements.
These  improvements  were  funded  from  operating  cash flow.  The  Partnership
evaluates  the capital  improvement  needs of the  property  during the year and
currently  expects to complete  an  additional  $52,000 in capital  improvements
during the remainder of 2004.  Additional capital improvements may be considered
and  will  depend  on the  physical  condition  of the  property  as well as the
anticipated cash flow generated by the property.

Bexley House Apartments

During the nine months ended  September  30,  2004,  the  Partnership  completed
approximately  $87,000  of  capital  improvements  at Bexley  House  Apartments,
consisting  primarily  of HVAC and  building  improvements,  floor  covering and
appliance  replacements,  and heating upgrades.  These  improvements were funded
from insurance  proceeds and operating cash flow. The Partnership  evaluates the
capital  improvement needs of the property during the year and currently expects
to complete an additional $4,000 in capital improvements during the remainder of
2004.  Additional capital  improvements may be considered and will depend on the
physical  condition  of the  property  as  well  as the  anticipated  cash  flow
generated by the property.

Covington Pointe Apartments

During the nine months ended  September  30,  2004,  the  Partnership  completed
approximately  $214,000 of capital  improvements at Covington Pointe Apartments,
consisting  primarily of interior  lighting  upgrades,  parking area resurfacing
costs and appliance and floor covering  replacements.  These  improvements  were
funded  from  operating  cash  flow.  The  Partnership   evaluates  the  capital
improvement  needs of the  property  during  the year and  currently  expects to
complete an additional $75,000 in capital  improvements  during the remainder of
2004.  Additional capital  improvements may be considered and will depend on the
physical  condition  of the  property  as  well  as the  anticipated  cash  flow
generated by the property.

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 Partnership's  distributable cash flow,
if any, may be adversely affected at least in the short term.

The  Partnership's  assets are thought to be sufficient for any near-term  needs
(exclusive  of  capital   improvements)   of  the   Partnership.   The  mortgage
indebtedness    encumbering   the   Partnership's   investment   properties   of
approximately  $10,782,000  is  amortized  over  varying  periods,  with balloon
payments  of  approximately  $4,416,000  due in July 2010 for  Covington  Pointe
Apartments  and   approximately   $2,606,000  in  September  2007  for  Lakeside
Apartments.  The Managing  General Partner has the option to extend the maturity
of the mortgage  encumbering  Lakeside  Apartments for an additional five years.
The  Managing  General  Partner  will  attempt  to  refinance  and/or  sell  the
properties prior to such maturity dates. If the properties  cannot be refinanced
or sold for a sufficient amount, the Partnership may risk losing such properties
through foreclosure.

The Partnership  distributed the following  amounts during the nine months ended
September 30, 2004 and 2003 (in thousands, except per unit data):

<TABLE>
<CAPTION>

                    Nine Months Ended    Per Limited   Nine Months Ended  Per Limited
                      September 30,      Partnership     September 30,    Partnership
                           2004              Unit             2003            Unit

<S>         <C>          <C>               <C>               <C>            <C>
Refinancing (1)          $   --            $    --           $1,515         $ 54.90
Sale (2)                     --                 --            3,724          134.90
                         $   --            $    --           $5,239         $189.80
</TABLE>

(1)   Proceeds  from the refinance at Covington  Pointe  Apartments in June 2003
      and the joint venture property in January 2002.
(2)   Proceeds from the sale of North Springs Apartments in April 2003.

The  Partnership's  cash  available  for  distribution  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,  refinancings  and/or  property  sales.  There can be no  assurance,
however,  that the Partnership  will generate  sufficient  funds from operations
after required capital  improvements to permit any distributions to its partners
during the remainder of 2004 or subsequent periods.

Other

In addition to its indirect  ownership of the general  partner  interests in the
Partnership,  AIMCO and its affiliates owned 12,340.50 limited partnership units
(the "Units") in the Partnership representing 46.09% of the outstanding Units at
September  30,  2004. A number of these Units were  acquired  pursuant to tender
offers  made by  AIMCO  or its  affiliates.  It is  possible  that  AIMCO or its
affiliates will acquire  additional  Units in exchange for cash or a combination
of cash and units in AIMCO Properties, L.P., the operating partnership of AIMCO,
either through private  purchases or tender offers.  Pursuant to the Partnership
Agreement,  unitholders  holding a majority  of the Units are  entitled  to take
action with  respect to a variety of matters that  include,  but are not limited
to,  voting on certain  amendments  to the  Partnership  Agreement and voting to
remove the Managing General  Partner.  As a result of its ownership of 46.09% of
the outstanding  Units,  AIMCO and its affiliates are in a position to influence
all voting  decisions  with  respect to the  Partnership.  Although the Managing
General  Partner  owes  fiduciary   duties  to  the  limited   partners  of  the
Partnership, the Managing General Partner also owes fiduciary duties to AIMCO as
its sole stockholder.  As a result,  the duties of the Managing General Partner,
as managing  general  partner,  to the Partnership and its limited  partners may
come into conflict with the duties of the Managing  General  Partner to AIMCO as
it sole stockholder.

Critical Accounting Policies and Estimates

The consolidated financial statements are prepared in accordance with accounting
principles   generally  accepted  in  the  United  States,   which  require  the
Partnership to make estimates and assumptions.  The Partnership believes that of
its significant  accounting policies,  the following may involve a higher degree
of judgment and complexity.

Impairment of Long-Lived Assets

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

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

Revenue Recognition

The Partnership generally leases apartment units for twelve-month terms or less.
Rental income  attributable to leases is recognized monthly as it is earned. The
Partnership  evaluates all accounts receivable from residents and establishes an
allowance, after the application of security deposits, for accounts greater than
30 days past due on current tenants and all receivables due from former tenants.
The Partnership will offer rental concessions during particularly slow months or
in response to heavy  competition from other similar  complexes in the area. Any
concessions  given at the inception of the lease are amortized  over the life of
the lease.

ITEM 3.     CONTROLS AND PROCEDURES

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

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

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

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

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

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

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

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

On August 8, 2003 AIMCO  Properties  L.P., an affiliate of the Managing  General
Partner,  was served  with a  complaint  in the United  States  District  Court,
District of Columbia alleging that AIMCO Properties L.P.  willfully violated the
Fair Labor Standards Act ("FLSA") by failing to pay maintenance workers overtime
for all  hours  worked  in  excess  of forty  per  week.  On  March 5,  2004 the
Plaintiffs filed an amended complaint also naming NHP Management Company,  which
is also an affiliate of the Managing General Partner. The complaint is styled as
a Collective  Action  under the FLSA and seeks to certify  state  subclasses  in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate  maintenance workers for
time  that they were  required  to be  "on-call".  Additionally,  the  complaint
alleges AIMCO  Properties  L.P.  failed to comply with the FLSA in  compensating
maintenance  workers  for time that they  worked in  responding  to a call while
"on-call".  The defendants have filed an answer to the amended complaint denying
the  substantive  allegations.  Some  discovery  has taken place and  settlement
negotiations  continue.  Although the outcome of any  litigation  is  uncertain,
AIMCO  Properties,  L.P. does not believe that the ultimate  outcome will have a
material  adverse  effect on its financial  condition or results of  operations.
Similarly,  the  Managing  General  Partner  does not believe  that the ultimate
outcome will have a material  adverse effect on the  Partnership's  consolidated
financial condition or results of operations.

ITEM 6.     EXHIBITS

            See Exhibit Index.

                                   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 INCOME REAL ESTATE, L.P.


                                    By:   DAVIDSON DIVERSIFIED PROPERTIES,INC.
                                          Managing General Partner


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


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


                                    Date: November 12, 2004

                         DAVIDSON INCOME REAL ESTATE, LP
                                  EXHIBIT INDEX


Exhibit

 3                Agreement of Limited  Partnership is incorporated by reference
                  to Exhibit A to the  Prospectus of the  Registrant  dated July
                  26, 1985 as filed with the Commission  pursuant to Rule 424(b)
                  under the Act.

 3A               Amendment to  Partnership  Agreement  dated October 1, 1985 is
                  incorporated  by reference  to Exhibit 3A to the  Registrant's
                  Annual Report on Form 10-K for the fiscal year ended  December
                  31, 1987.

 4                Certificate  of Limited  Partnership  dated  April 29, 1985 is
                  incorporated  by  reference  to Exhibit 4 to the  Registrant's
                  Registration Statement on Form S-11 dated May 7, 1985.

 4A               Certificate   of   Amendment  to   Certificate   of  Limited
                  Partnership   dated  July  16,  1985  is   incorporated   by
                  reference to Exhibit 4B in Amendment  No. 1 to  Registration
                  Statement No. 2-97539, dated July 24, 1985.

10C               Acquisition  and Disposition  Services  Agreement dated July
                  1, 1985 between the Registrant and Criswell  Freeman Company
                  is  incorporated  by  reference  to Exhibit 10D in Amendment
                  No. 1 to  Registration  Statement No. 2-97539 dated July 24,
                  1985.

10H               Purchase Agreement for Lakeside Apartments dated April 4, 1986
                  between Lakeside  Apartments Venture, a North Carolina general
                  partnership   and  Tennessee   Trust   Company,   a  Tennessee
                  corporation,  is incorporated by reference to Exhibit 10(a) to
                  the  Registrant's  Current  Report  on Form 8-K  dated May 20,
                  1986.

10L               Contract  for Sale of Real  Estate for The Bexley  House dated
                  July 16, 1986 between Bexley House,  Limited,  an Ohio limited
                  partnership  and Tennessee  Trust Company is  incorporated  by
                  reference to Exhibit 10(a) to the Registrant's  Current Report
                  on Form 8-K dated September 30, 1986.

10M               Reinstatement  and  Amendment  of Contract  for Sale of Real
                  Estate for The Bexley House dated  September 4, 1986 between
                  Bexley  House,  Limited,  an Ohio  limited  partnership  and
                  Tennessee  Trust  Company,  a  Tennessee   corporation,   is
                  incorporated   by   reference   to  Exhibit   10(b)  to  the
                  Registrant's  Current Report on Form 8-K dated September 30,
                  1986.

10N               Amendment to Reinstated  and Amended for Sale of Real Estate
                  for The  Bexley  House  dated  September  19,  1986  between
                  Bexley  House,  Limited,  an Ohio  limited  partnership  and
                  Tennessee  Trust  Company,  a  Tennessee   corporation,   is
                  incorporated   by   reference   to  Exhibit   10(c)  to  the
                  Registrant's  Current Report on Form 8-K dated September 30,
                  1986.

10O               Assignment of Contract for Sale of Real Estate dated September
                  30, 1986 between Tennessee Trust Company and the Registrant is
                  incorporated by reference to Exhibit 10(d) to the Registrant's
                  Current Report on Form 8-K dated September 30, 1986.

10P               Limited  Warranty Deed dated September 28, 1986 between Bexley
                  House, Ltd., an Ohio limited partnership and the Registrant is
                  incorporated by reference to Exhibit 10(e) to the Registrant's
                  Current Report on Form 8-K dated September 30, 1986.

10Q               Contract  for  Sale  of  Real  Estate  for  Covington   Pointe
                  Apartments dated January 20, 1987 between F.G.M.C.  Investment
                  Corp.,  a  Texas  corporation   Tennessee  Trust  Company,   a
                  Tennessee corporation, is incorporated by reference to Exhibit
                  10(a) to the  Registrant's  Current  Report  on Form 8-K dated
                  March 10, 1987.

10R               Amendment   to  Contract  for  Purchase  of  Real  Estate  for
                  Covington  Pointe  Apartments  dated  January 23, 1987 between
                  F.G.M.C. Investment Corp., a Texas corporation Tennessee Trust
                  Company, a Tennessee corporation, is incorporated by reference
                  to Exhibit 10(b) to the  Registrant's  Current  Report on Form
                  8-K dated March 10, 1987.

10S               Assignment  of  Contract  for  Purchase  of  Real  Estate  for
                  Covington  Pointe  Apartments  dated  March  2,  1987  between
                  Tennessee  Trust Company and the Registrant is incorporated by
                  reference to Exhibit 10(c) to the Registrant's  Current Report
                  on Form 8-K dated March 10, 1987.

10T               Contract  for  Purchase  of  Real  Estate  for  Phase  I  of
                  Sterling  Crest  Apartments  dated  March 10,  1987  between
                  Sterling  Crest  Development   Partners,   Ltd.,  a  Georgia
                  limited   partnership,   and  Tennessee  Trust  Company,   a
                  Tennessee  corporation,  is  incorporated  by  reference  to
                  Exhibit  10(d) to the  Registrant's  Current  Report on Form
                  8-K dated March 10, 1987.

10Y               Sterling  Crest Joint  Venture  Agreement  dated June 29, 1987
                  between the Registrant and Freeman Georgia  Ventures,  Inc. is
                  incorporated by reference to Exhibit 10(b) to the Registrant's
                  Current Report on Form 8-K dated June 30, 1987.

10Z               Assignment of Contract for Purchase of Real Estate for Phase I
                  of  Sterling   Crest   Apartments   dated  June  29,  1987  is
                  incorporated by reference to Exhibit 10(c) to the Registrant's
                  Current Report on Form 8-K dated June 30, 1987.

10AA              Warranty  Deed  dated June 30,  1987  between  Sterling  Crest
                  Development  Partners,  Ltd. and Sterling Crest Joint Venture,
                  is   incorporated   by  reference  to  Exhibit  10(d)  to  the
                  Registrant's Current Report on Form 8-K dated June 30, 1987.

10DD              Contract  for Purchase of Real Estate for Phase II of Sterling
                  Crest  Apartments  dated March 10, 1987 between Sterling Crest
                  Development  Partners,  Ltd. and  Tennessee  Trust  Company is
                  incorporated by reference to Exhibit 10(a) to the Registrant's
                  Report on Form 8 dated December 29, 1987.

10FF              Assignment  of  Contract  for  Purchase  of  Real  Estate  and
                  Tri-Party  Agreement dated November 4, 1987 between  Tennessee
                  Trust  Company and Sterling  Crest Joint  Venture  relating to
                  Sterling Crest  Apartments,  is  incorporated  by reference to
                  Exhibit  10(c)  to the  Registrant's  Report  on  Form 8 dated
                  December 29, 1987.

10GG              Amended and Restated  Sterling Crest Joint Venture Agreement
                  dated June 29, 1987 among the  Registrant,  Freeman  Georgia
                  Ventures,   Inc.,   and  Freeman   Growth  Plus,   L.P.,  is
                  incorporated   by   reference   to  Exhibit   10(d)  to  the
                  Registrant's Report on Form 8 dated December 29, 1987.

10RR              Multifamily  Note dated  December 15, 2000,  between  Davidson
                  Income Real Estate,  L.P., a Delaware limited  partnership and
                  Reilly   Mortgage   Group,   Inc.,   a  District  of  Columbia
                  corporation,   related   to  Bexley   House   Apartments,   is
                  incorporated by reference to the Registrant's Annual Report on
                  Form 10-KSB for the fiscal year ended December 31, 2000.

10SS              Contracts  related to the sale of North Springs  Apartments is
                  incorporated by reference to Exhibit 10SS to the  Registrant's
                  Current Report on Form 8-K dated April 25, 2003:

                  (a)   Purchase  and  Sale   Contract   between   Davidson  IRE
                        Associates,  L.P., as Seller and Capital City  Holdings,
                        L.L.C., as Purchaser, effective February 11, 2003.

                  (b)   First  Amendment of Purchase and Sale  Contract  between
                        Davidson  IRE  Associates,  L.P.,  as Seller and Capital
                        City Holdings, L.L.C., as Purchaser, effective March 13,
                        2003.

(c)                     Reinstatement  and Second Amendment of Purchase and Sale
                        Contract  between  Davidson  IRE  Associates,  L.P.,  as
                        Seller and Capital City Holdings,  L.L.C., as Purchaser,
                        effective March 26, 2003.

                  (d)   Assignment and  Assumption of Sales  Contract  effective
                        April 15, 2003 between Capital City Holdings, L.L.C., as
                        assignor and Wingservice Holdings, L.L.C., as assignee.

10TT              Contracts  related to refinancing of debt of Covington  Pointe
                  Apartments is incorporated by reference to Exhibit 10TT to the
                  Registrant's Current Report on Form 8-K dated July 7, 2003:

                  (a)   Multifamily  Note  dated  June 26,  2003  between  AIMCO
                        Covington Pointe,  L.P., a Delaware limited partnership,
                        and Keycorp Real Estate Capital  Markets,  Inc., an Ohio
                        corporation.

                  (b)   Multifamily Deed of Trust, Assignment of Rents, Security
                        Agreement and Fixture Filing dated June 26, 2003 between
                        AIMCO  Covington   Pointe,   L.P.,  a  Delaware  limited
                        partnership,  and Keycorp Real Estate  Capital  Markets,
                        Inc., an Ohio corporation.

                  (c)   Replacement  Reserve and Security  Agreement  dated June
                        26,  2003  between  AIMCO  Covington  Pointe,   L.P.,  a
                        Delaware  limited  partnership,  and Keycorp Real Estate
                        Capital Markets, Inc., an Ohio corporation.

10UU              Contracts   related  to   refinancing   of  debt  of  Lakeside
                  Apartments is incorporated by reference to Exhibit 10UU to the
                  Registrant's  Annual Report on Form 10-KSB for the fiscal year
                  ended December 31, 2003:

                  (a)   Multifamily Note dated November 3, 2003 between Davidson
                        Income   Real   Estate,   L.P.,   a   Delaware   limited
                        partnership, and GMAC Commercial Mortgage Corporation, a
                        California corporation.

b)                   Guaranty dated November 3, 2003 by AIMCO Properties,  L.P.,
                     a Delaware  limited  partnership,  for the  benefit of GMAC
                     Commercial Mortgage Corporation, a California corporation.

                  c)    Multifamily  Deed of  Trust,  Assignment  of  Rents  and
                        Security   Agreement  dated  November  3,  2003  between
                        Davidson Income Real Estates,  L.P., a Delaware  limited
                        partnership, and GMAC Commercial Mortgage Corporation, a
                        California corporation.

                  d)    Replacement   Reserve  and  Security   Agreement   dated
                        November 3, 2003 between  Davidson  Income Real Estates,
                        L.P.,   a  Delaware   limited   partnership,   and  GMAC
                        Commercial    Mortgage    Corporation,    a   California
                        corporation.

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

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

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

99A               Agreement  of  Limited   Partnership  for  Davidson  IRE  GP
                  Limited    Partnership    between    Davidson    Diversified
                  Properties,  Inc.  and  Davidson  Income Real  Estate,  L.P.
                  entered  into  on  September  15,  1993 is  incorporated  by
                  reference  to  Exhibit  99A  to the  Registrant's  Quarterly
                  Report on Form 10-QSB for the quarter  ended  September  30,
                  1993.

99B               Agreement of Limited  Partnership for Davidson IRE Associates,
                  L.P. between Davidson IRE GP Limited  Partnership and Davidson
                  Income Real  Estate,  L.P. is  incorporated  by  reference  to
                  Exhibit  99B to the  Registrant's  Quarterly  Report  on  Form
                  10-QSB for the quarter ended September 30, 1993.

99C               Agreement  of  Limited  Partnership  for  Bexley  House L.P.
                  between Davidson Income GP Limited  Partnership and Davidson
                  Income Real  Estate,  L.P.  entered into on October 13, 1993
                  is   incorporated   by  reference  to  Exhibit  99C  to  the
                  Registrant's  Annual  Report on Form  10-KSB  for the fiscal
                  year ended December 31, 1992.

Exhibit 31.1

                                  CERTIFICATION


I, Martha L. Long, certify that:


1.    I have reviewed this  quarterly  report on Form 10-QSB of Davidson  Income
      Real Estate, L.P.;

2.    Based on my knowledge,  this report does not contain any untrue  statement
      of a material fact or omit to state a material fact  necessary to make the
      statements made, in light of the circumstances under which such statements
      were made,  not  misleading  with  respect  to the period  covered by this
      report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  report,  fairly  present  in all  material
      respects the financial condition,  results of operations and cash flows of
      the small  business  issuer as of, and for, the periods  presented in this
      report;

4.    The  small  business  issuer's  other  certifying  officer(s)  and  I  are
      responsible  for  establishing  and  maintaining  disclosure  controls and
      procedures (as defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) for
      the small business issuer and have:

      (a)   Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            small business issuer, including its consolidated  subsidiaries,  is
            made  known to us by  others  within  those  entities,  particularly
            during the period in which this report is being prepared;

      (b)   Evaluated  the   effectiveness   of  the  small  business   issuer's
            disclosure  controls and procedures and presented in this report our
            conclusions about the  effectiveness of the disclosure  controls and
            procedures, as of the end of the period covered by this report based
            on such evaluation; and

      (c)   Disclosed in this report any change in the small  business  issuer's
            internal  control over financial  reporting that occurred during the
            small  business  issuer's  most  recent  fiscal  quarter  (the small
            business  issuer's  fourth  fiscal  quarter in the case of an annual
            report) that has  materially  affected,  or is reasonably  likely to
            materially affect, the small business issuer's internal control over
            financial reporting; and

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

      (a)   All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely  affect the small business  issuer's
            ability  to  record,   process,   summarize  and  report   financial
            information; and

      (b)   Any fraud,  whether or not  material,  that  involves  management or
            other  employees who have a significant  role in the small  business
            issuer's internal control over financial reporting.


Date: November 12, 2004

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

Exhibit 31.2

                                  CERTIFICATION


I, Stephen B. Waters, certify that:


1.    I have reviewed this  quarterly  report on Form 10-QSB of Davidson  Income
      Real Estate, L.P.;

2.    Based on my knowledge,  this report does not contain any untrue  statement
      of a material fact or omit to state a material fact  necessary to make the
      statements made, in light of the circumstances under which such statements
      were made,  not  misleading  with  respect  to the period  covered by this
      report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
      information  included  in this  report,  fairly  present  in all  material
      respects the financial condition,  results of operations and cash flows of
      the small  business  issuer as of, and for, the periods  presented in this
      report;

4.    The  small  business  issuer's  other  certifying  officer(s)  and  I  are
      responsible  for  establishing  and  maintaining  disclosure  controls and
      procedures (as defined in Exchange Act Rules  13a-15(e) and 15d-15(e)) for
      the small business issuer and have:

      (a)   Designed such  disclosure  controls and  procedures,  or caused such
            disclosure   controls  and  procedures  to  be  designed  under  our
            supervision,  to ensure that  material  information  relating to the
            small business issuer, including its consolidated  subsidiaries,  is
            made  known to us by  others  within  those  entities,  particularly
            during the period in which this report is being prepared;

      (b)   Evaluated  the   effectiveness   of  the  small  business   issuer's
            disclosure  controls and procedures and presented in this report our
            conclusions about the  effectiveness of the disclosure  controls and
            procedures, as of the end of the period covered by this report based
            on such evaluation; and

      (c)   Disclosed in this report any change in the small  business  issuer's
            internal  control over financial  reporting that occurred during the
            small  business  issuer's  most  recent  fiscal  quarter  (the small
            business  issuer's  fourth  fiscal  quarter in the case of an annual
            report) that has  materially  affected,  or is reasonably  likely to
            materially affect, the small business issuer's internal control over
            financial reporting; and

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

      (a)   All significant  deficiencies and material  weaknesses in the design
            or operation of internal control over financial  reporting which are
            reasonably  likely to adversely  affect the small business  issuer's
            ability  to  record,   process,   summarize  and  report   financial
            information; and

      (b)   Any fraud,  whether or not  material,  that  involves  management or
            other  employees who have a significant  role in the small  business
            issuer's internal control over financial reporting.


Date: November 12, 2004

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

Exhibit 32.1


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



In connection  with the Quarterly  Report on Form 10-QSB of Davidson Income Real
Estate, L.P. (the  "Partnership"),  for the quarterly period ended September 30,
2004 as filed with the  Securities  and Exchange  Commission  on the date hereof
(the "Report"), Martha L. Long, as the equivalent of the chief executive officer
of the  Partnership,  and  Stephen B.  Waters,  as the  equivalent  of the chief
financial  officer of the  Partnership,  each hereby  certifies,  pursuant to 18
U.S.C.  Section 1350, as adopted  pursuant to Section 906 of the  Sarbanes-Oxley
Act of 2002, that, to the best of his knowledge:

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

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


                                           /s/Martha L. Long
                                    Name:  Martha L. Long
                                    Date:  November 12, 2004


                                           /s/Stephen B. Waters
                                    Name:  Stephen B. Waters
                                    Date:  November 12, 2004


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