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 June 30, 2002


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


                For the transition period from _________to _________

                         Commission file number 0-14530


                         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)



                         PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS



                         DAVIDSON INCOME REAL ESTATE, L.P.

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

                                  June 30, 2002

<TABLE>
<CAPTION>


Assets
<S>                                                                          <C>
   Cash and cash equivalents                                                 $ 544
   Receivables and deposits                                                     146
   Restricted escrows                                                           207
   Other assets                                                                 265
   Investment properties:
       Land                                                  $ 4,120
       Buildings and related personal property                 23,023
                                                               27,143
       Less accumulated depreciation                          (14,674)       12,469
                                                                           $ 13,631
Liabilities and Partners' (Deficit) Capital
Liabilities
   Accounts payable                                                          $ 73
   Tenant security deposit liabilities                                           71
   Accrued property taxes                                                       238
   Other liabilities                                                            173
   Deficit in joint venture                                                     802
   Mortgage notes payable                                                    12,663

Partners' (Deficit) Capital
   General partners                                           $ (783)
   Limited partners (26,776 units issued and
      outstanding)                                                394          (389)
                                                                           $ 13,631

            See Accompanying Notes to Consolidated Financial Statements
</TABLE>


<PAGE>






                         DAVIDSON INCOME REAL ESTATE, L.P.

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

<TABLE>
<CAPTION>

                                       Three Months Ended        Six Months Ended
                                            June 30,                 June 30,
                                       2002          2001        2002        2001
Revenues:
<S>                                   <C>          <C>          <C>         <C>
  Rental income                       $ 1,102      $ 1,162      $ 2,264     $ 2,330
  Other income                             69           61          138         124
     Total revenues                     1,171        1,223        2,402       2,454

Expenses:
  Operating                               518          506        1,016       1,058
  General and administrative               45           60          110         118
  Depreciation                            280          272          554         539
  Interest                                255          260          513         519
  Property taxes                          116          128          238         244
     Total expenses                     1,214        1,226        2,431       2,478

Loss before equity in income
  (loss) of joint venture                 (43)          (3)         (29)        (24)
Equity in income (loss) of
   joint venture                            5           22          (34)         51

Net (loss) income                      $ (38)        $ 19        $ (63)      $ 27

Net (loss) income allocated to
  general partners (3%)                $ (1)         $ 1         $ (2)        $ 1
Net (loss) income allocated to
  limited partners (97%)                  (37)          18          (61)         26
                                       $ (38)        $ 19        $ (63)      $ 27
Net (loss) income per limited
  partnership unit                    $ (1.38)      $ 0.67      $ (2.28)    $ 0.97

Distributions per limited
  partnership unit                    $ 36.26       $ 7.51      $ 36.26     $ 14.27
            See Accompanying Notes to Consolidated Financial Statements
</TABLE>

<PAGE>




                         DAVIDSON INCOME REAL ESTATE, L.P.

          CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL
                                   (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) capital at
   December 31, 2001                  26,776      $ (751)     $ 1,426       $ 675

Distributions to partners                 --         (30)        (971)      (1,001)

Net loss for the six months
   ended June 30, 2002                    --          (2)         (61)         (63)

Partners' (deficit) capital
   at June 30, 2002                   26,776      $ (783)      $ 394       $ (389)

            See Accompanying Notes to Consolidated Financial Statements
</TABLE>

<PAGE>



                         DAVIDSON INCOME REAL ESTATE, L.P.

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


<TABLE>
<CAPTION>


                                                                  Six Months Ended
                                                                        June 30,
                                                                  2002        2001
Cash flows from operating activities:
<S>                                                              <C>          <C>
  Net (loss) income                                              $ (63)       $ 27
  Adjustments to reconcile net (loss) income to net cash
   provided by operating activities:
   Depreciation                                                     554          539
   Amortization of discounts and loan costs                          31           32
   Equity in loss (income) of joint venture                          34          (51)
   Change in accounts:
      Receivables and deposits                                       52           51
      Other assets                                                  (93)         (34)
      Accounts payable                                              (31)         (25)
      Tenant security deposit liabilities                            13           (3)
      Accrued property taxes                                       (139)         (27)
      Other liabilities                                              22           56
       Net cash provided by operating activities                    380          565

Cash flows from investing activities:
  Property improvements and replacements                           (208)        (263)
  Net withdrawals from restricted escrows                            63           37
  Distributions from joint venture                                  807          124
       Net cash provided by (used in) investing activities          662         (102)

Cash flows from financing activities:
  Payments on mortgage notes payable                                (91)         (80)
  Distributions to partners                                      (1,001)        (394)
  Loan cost paid                                                     --           (6)
       Net cash used in financing activities                     (1,092)        (480)

Net decrease in cash and cash equivalents                           (50)         (17)

Cash and cash equivalents at beginning of period                    594          573
Cash and cash equivalents at end of period                       $ 544        $ 556

Supplemental disclosure of cash flow information:
  Cash paid for interest                                         $ 483        $ 475

            See Accompanying Notes to Consolidated Financial Statements
</TABLE>


<PAGE>





                         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 six months  ended June 30, 2002,
are not  necessarily  indicative  of the results  that may be  expected  for the
fiscal year ending  December 31,  2002.  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, 2001. The Managing  General Partner is an affiliate of Apartment  Investment
and  Management  Company  ("AIMCO"),  a publicly  traded real estate  investment
trust.

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) payments to
affiliates for services and (ii)  reimbursement of certain expenses  incurred by
affiliates on behalf of the Partnership.

During the six months ended June 30, 2002 and 2001,  affiliates  of the Managing
General  Partner were  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  $123,000 and
$127,000 for the six months ended June 30, 2002 and 2001, respectively, which is
included in operating expenses.

An  affiliate  of  the  Managing  General  Partner  received  reimbursements  of
accountable  administrative  expenses  amounting  to  approximately  $83,000 and
$90,000 for the six months ended June 30, 2002 and 2001, respectively, which are
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 $7,000
and $18,000 for the six months ended June 30, 2002 and 2001,  respectively.  The
construction  management  service fees are based on a percentage of current year
additions to investment properties.

Beginning in 2001, the  Partnership  began insuring 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 General Partner. During the six months ended June 30, 2002
and 2001, the Partnership was charged by AIMCO and its affiliates  approximately
$59,000 and $33,000,  respectively,  for insurance  coverage and fees associated
with policy claims administration.


<PAGE>




Note C - Deficit 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  six  months  ended  June  30,  2002,   the   Partnership   received
distributions  of  approximately  $807,000 from the joint venture  consisting of
approximately  $785,000 for its portion of the excess proceeds received from the
refinancing  of the joint  venture's  investment  property  in January  2002 and
approximately  $22,000 from  operations of the joint  venture.  The  Partnership
received  distributions of  approximately  $124,000 from operations at the joint
venture during the six months ended June 30, 2001. For the six months ended June
30, 2002, the Partnership recognized approximately $34,000 of equity in the loss
of the joint  venture,  which was net of  approximately  $54,000 due to the loss
incurred on the early  extinguishment of debt at the joint venture's  investment
property.  For the six months ended June 30, 2001,  the  Partnership  recognized
equity in the income of the joint venture of approximately $51,000.

The following table  represents the net liabilities of the joint venture at June
30, 2002 and net (loss)  income for the six months  ended June 30, 2002 and 2001
(in thousands):

                                               June 30, 2002

Total assets                                      $ 7,044
Total liabilities                                  11,655

Net deficiency                                    $(4,611)

                                                      Six Months Ended June 30,
                                                      2002                2001

Total revenues                                      $ 1,298             $ 1,344
Total expenses                                        1,492               1,047
Net operating (loss) income                         $  (194)                297

Note D - 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
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  Managing  General  Partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities which were,
at one  time,  affiliates  of  Insignia;  past  tender  offers  by the  Insignia
affiliates to acquire limited partnership units;  management of the partnerships
by the  Insignia  affiliates;  and the series of  transactions  which  closed on
October 1, 1998 and February 26, 1999 whereby  Insignia and Insignia  Properties
Trust,  respectively,  were merged  into AIMCO.  The  plaintiffs  seek  monetary
damages and equitable relief, including judicial dissolution of the Partnership.
On June 25, 1998, the Managing General Partner filed a motion seeking  dismissal
of the action.  In lieu of responding  to the motion,  the  plaintiffs  filed an
amended  complaint.  The Managing General Partner filed demurrers to the amended
complaint which were heard February 1999.

Pending the ruling on such  demurrers,  settlement  negotiations  commenced.  On
November 2, 1999,  the parties  executed and filed a Stipulation  of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the  settlement  was obtained on November 3, 1999 from the Court,  at which time
the Court set a final  approval  hearing for  December  10,  1999.  Prior to the
December  10,  1999  hearing,  the  Court  received  various  objections  to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement.  On
December 14, 1999, the Managing  General  Partner and its affiliates  terminated
the  proposed  settlement.  In  February  2000,  counsel  for some of the  named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated  the  settlement.  On June  27,  2000,  the  Court  entered  an order
disqualifying  them  from the case and an  appeal  was  taken  from the order on
October 5, 2000. On December 4, 2000, the Court  appointed the law firm of Lieff
Cabraser  Heimann & Bernstein  LLP as new lead  counsel for  plaintiffs  and the
putative class.  Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001,  the  Managing  General  Partner  and its  affiliates  filed a
demurrer to the third amended  complaint.  On May 14, 2001,  the Court heard the
demurrer to the third amended  complaint.  On July 10, 2001, the Court issued an
order  sustaining  defendants'  demurrer on certain  grounds.  On July 20, 2001,
Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order
granting in part and denying in part defendants' demurrer. On September 7, 2001,
Plaintiffs  filed a fourth amended class and  derivative  action  complaint.  On
September 12, 2001, the Court denied Plaintiffs' motion for reconsideration.  On
October 5, 2001, the Managing General Partner and affiliated  defendants filed a
demurrer to the fourth amended complaint,  which was heard on December 11, 2001.
On February 2, 2002,  the Court served its order  granting in part the demurrer.
The  Court has  dismissed  without  leave to amend  certain  of the  plaintiffs'
claims.  On February 11, 2002,  plaintiffs  filed a motion  seeking to certify a
putative  class  comprised of all  non-affiliated  persons who own or have owned
units  in  the  partnerships.   The  Managing  General  Partner  and  affiliated
defendants  oppose the motion.  On April 29,  2002,  the Court held a hearing on
plaintiffs' motion for class  certification and took the matter under submission
after further briefing,  as order by the court, was submitted by the parties. On
July 10, 2002,  the Court  entered an order  vacating the current  trial date of
January 13, 2003 (as well as the  pre-trial  and  discovery  cut-off  dates) and
stayed the case in its entirety through November 7, 2002 so that the parties can
have an opportunity to discuss settlement.

During the third  quarter of 2001, a complaint  (the "Heller  action") was filed
against  the same  defendants  that are named in the  Nuanes  action,  captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended  complaint.  The first amended complaint in the Heller action is
brought as a purported  derivative  action,  and asserts  claims for among other
things  breach  of  fiduciary  duty;  unfair  competition;   conversion,  unjust
enrichment;  and judicial  dissolution.  Plaintiffs in the Nuanes action filed a
motion to  consolidate  the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed  without  leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the Managing  General  Partner and affiliated
defendants  moved to strike the first  amended  complaint  in its  entirety  for
violating  the Court's July 10, 2001 order  granting in part and denying in part
defendants'  demurrer in the Nuanes action, or alternatively,  to strike certain
portions of the complaint based on the statute of limitations.  Other defendants
in the action  demurred to the fourth  amended  complaint,  and,  alternatively,
moved to strike the complaint. On December 11, 2001, the court heard argument on
the motions  and took the matters  under  submission.  On February 4, 2002,  the
Court  served  notice of its order  granting  defendants'  motion to strike  the
Heller complaint as a violation of its July 10, 2001 order in the Nuanes action.
On March 27, 2002,  the plaintiffs  filed a notice  appealing the order striking
the complaint. The parties are currently in the midst of briefing that appeal.

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

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


<PAGE>




ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR 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 the  other  filings  with the
Securities and Exchange  Commission made by the  Partnership  from time to time.
The  discussion  of  the  Partnership'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  Partnership's  business  and
results of operations.  Accordingly, actual results could differ materially from
those  projected in the  forward-looking  statements  as a result of a number of
factors, including those identified herein.

The Partnership's investment properties consist of four apartment complexes. The
following  table sets forth the average  occupancy of the properties for the six
months ended June 30, 2002 and 2001:

                                                   Average Occupancy
      Property                                      2002       2001

      Northsprings Apartments                       88%        89%
         Atlanta, Georgia
      Lakeside Apartments                           89%        88%
         Charlotte, North Carolina
      Bexley House Apartments                       99%        92%
         Columbus, Ohio
      Covington Pointe Apartments                   87%        90%
         Dallas, Texas

The  Managing  General  Partner  attributes  the increase in occupancy at Bexley
House Apartments to an increased marketing effort by the property's  management.
The Managing  General Partner  attributes the decrease in occupancy at Covington
Pointe  Apartments to the eviction of several  delinquent  tenants and increased
market competition in the Dallas area.

Results of Operations

The Partnership realized a net loss of approximately  $63,000 for the six months
ended June 30, 2002 as compared to net income of  approximately  $27,000 for the
six  months  ended  June  30,  2001.  The  Partnership  realized  a net  loss of
approximately  $38,000 for the three  months  ended June 30, 2002 as compared to
net income of  approximately  $19,000 for the three  months ended June 30, 2001.
The  decrease  in income  for the three and six months  ended  June 30,  2002 is
primarily  due to a decrease in equity in income of the joint  venture and total
revenues  partially  offset by a  decrease  in total  expenses.  Total  revenues
decreased  for the three and six months ended June 30, 2002 due to a decrease in
rental  income  slightly  offset by an increase in other  income.  Rental income
decreased due to an increase in bad debt expense at Covington Pointe  Apartments
and  Northsprings  Apartments.  Other  income  increased  due to an  increase in
utilities  reimbursements at Bexley House Apartments and Northsprings Apartments
partially  offset by a  decrease  in  interest  income as a result of lower cash
balances  maintained in interest  bearing  accounts by the  Partnership  and its
investment properties.

Total  expenses  decreased  for the six  months  ended  June  30,  2002 due to a
decrease in operating  expense  partially  offset by an increase in depreciation
expense.  Operating  expense decreased due to a decrease in property expense and
advertising  expense  partially  offset by an  increase  in  insurance  expense.
Property  expense  decreased  due to a decrease  in utility  bills and  contract
courtesy patrol at Bexley House Apartments and employee  salaries and apartments
at Covington Pointe Apartments.  Advertising expense decreased due to a decrease
in  periodical  advertising  at  Bexley  House  Apartments.   Insurance  expense
increased  due  to  an  increase  in  insurance  premiums  at  Covington  Pointe
Apartments.  Depreciation  expense increased due to capital  improvements placed
into service during the past twelve months.

Total  expenses  for the three  months  ended June 30, 2002  decreased  due to a
decrease  in general and  administrative  expense.  General  and  administrative
expense decreased due to a decrease in professional and administrative expenses.
Included in general  and  administrative  expenses  for the three and six months
ended  June  30,  2002  are  costs  of  services   included  in  the  management
reimbursements  to the Managing General Partner as allowed under the Partnership
Agreement.  Also  included were costs  associated  with the quarterly and annual
communications  with the investors and regulatory  agencies and the annual audit
required by the Partnership Agreement.

For the six months ended June 30, 2002,  the  Partnership  recognized  equity in
loss of the joint  venture  property  of  approximately  $34,000 as  compared to
equity in income of the joint venture property of approximately  $51,000 for the
six months  ended June 30, 2001.  For the three months ended June 30, 2002,  the
Partnership  recognized  equity  in  income of the  joint  venture  property  of
approximately  $5,000 as  compared  to  equity  in  income of the joint  venture
property of approximately  $22,000 for the three months ended June 30, 2001. The
Partnership  owns a 17.5%  interest in Sterling  Crest Joint Venture (the "Joint
Venture").  Equity in income from the joint venture decreased due primarily to a
loss on early  extinguishment  of debt related to the  refinancing  of the joint
venture  property in January  2002.  The  Partnership's  equity in this loss was
approximately $54,000.

As part of the ongoing  business plan of the  Partnership,  the Managing General
Partner  monitors  the  rental  market  environment  of each  of its  investment
properties  to assess  the  feasibility  of  increasing  rents,  maintaining  or
increasing  occupancy  levels and protecting the  Partnership  from increases in
expenses. As part of this plan, the Managing General Partner attempts to protect
the Partnership  from the burden of  inflation-related  increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market  conditions,  which can result in the use of rental  concessions
and  rental  reductions  to  offset  softening  market  conditions,  there is no
guarantee that the Managing General Partner will be able to sustain such a plan.

Liquidity and Capital Resources

At June 30, 2002, the Partnership had cash and cash equivalents of approximately
$544,000 compared to approximately $556,000 at June 30, 2001. For the six months
ended June 30, 2002 cash and cash equivalents decreased by approximately $50,000
from the  Partnership's  year ended  December 31, 2001. The decrease in cash and
cash  equivalents is due to  approximately  $1,092,000 of cash used in financing
activities  partially  offset by  approximately  $662,000  of cash  provided  by
investing  activities and  approximately  $380,000 of cash provided by operating
activities.   Cash  used  in  financing   activities   consisted   primarily  of
distributions  paid  to the  partners  and,  to a  lesser  extent,  payments  of
principal  made  on  the  mortgages  encumbering  the  Partnership's  investment
properties.  Cash provided by investing  activities  consisted of  distributions
received  from  the  Partnership's   joint  venture  and  net  withdrawals  from
restricted  escrows maintained by the mortgage lenders which was slightly offset
by property  improvements and replacements.  The Partnership invests its working
capital reserves in interest bearing accounts.

The Partnership received  distributions of approximately $807,000 from the joint
venture  consisting  of  approximately  $785,000  for its  portion of the excess
proceeds  received  from  the  refinancing  of the  joint  venture's  investment
property in January 2002 and approximately  $22,000 from operations at the joint
venture.

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.   Capital
improvements planned for the Partnership's properties are detailed below.

Northsprings Apartments

During  the  six  months  ended  June  30,  2002,  the   Partnership   completed
approximately  $75,000  of  budgeted  and  unbudgeted  capital  improvements  at
Northsprings  Apartments,  consisting  primarily of plumbing  improvements,  air
conditioning  unit  replacements,  parking lot upgrades and  appliance and floor
covering  replacements.  These improvements were funded from operating cash flow
and replacement reserves.  The Partnership has budgeted,  but is not limited to,
approximately $61,000 for capital improvements for the year 2002 at Northsprings
Apartments  consisting  primarily of structural  improvements and floor covering
replacements.  Additional  improvements may be considered and will depend on the
physical  condition  of  the  property  as  well  as  replacement  reserves  and
anticipated cash flow generated by the property.

Lakeside Apartments

During  the  six  months  ended  June  30,  2002,  the   Partnership   completed
approximately $85,000 of capital improvements at Lakeside Apartments, consisting
primarily of office computers, floor covering replacements, wall covering, water
submetering,  and plumbing  upgrades.  These  improvements were funded primarily
from operating cash flow and replacement reserves. The Partnership has budgeted,
but is not limited to,  approximately  $132,000 for capital improvements for the
year 2002 at Lakeside  Apartments  consisting  primarily  of HVAC  replacements,
water  submetering,  structural  improvements  and appliance and floor  covering
replacements.  Additional  improvements may be considered and will depend on the
physical  condition  of  the  property  as  well  as  replacement  reserves  and
anticipated cash flow generated by the property.

Bexley House Apartments

During  the  six  months  ended  June  30,  2002,  the   Partnership   completed
approximately  $15,000  of  capital  improvements  at Bexley  House,  consisting
primarily  of HVAC and floor  covering  replacements.  These  improvements  were
funded from operating cash flow and  replacement  reserves.  The Partnership has
budgeted,  but is not limited to, approximately $32,000 for capital improvements
for the year 2002 at Bexley House Apartments consisting primarily of fire safety
enhancements,  light  fixtures,  and  floor  covering  replacements.  Additional
improvements may be considered and will depend on the physical  condition of the
property as well as replacement  reserves and anticipated cash flow generated by
the property.

Covington Pointe Apartments

During  the  six  months  ended  June  30,  2002,  the   Partnership   completed
approximately  $33,000 of capital  improvements at Covington Pointe  Apartments,
consisting  primarily of appliance and floor covering  replacements,  structural
improvements,  and HVAC  replacements.  These improvements were funded primarily
from operating cash flow. The Partnership  has budgeted,  but is not limited to,
approximately   $55,000  for  the  year  2002  at  Covington  Pointe  Apartments
consisting primarily of swimming pool improvements, HVAC replacements,  interior
decoration,  structural upgrades, and appliance and floor covering replacements.
Additional  improvements  may be  considered  and will  depend  on the  physical
condition of the property as well as replacement  reserves and anticipated  cash
flow generated by the property.

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

The Partnership's  current assets are thought to be sufficient for any near-term
needs  (exclusive  of capital  improvements)  of the  Partnership.  The mortgage
indebtedness of approximately  $12,663,000,  net of discounts, is amortized over
varying  periods.  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 six months ended
June 30, 2002 and 2001 (in thousands, except per unit data):

<TABLE>
<CAPTION>

                      Six Months      Per Limited       Six Months      Per Limited
                        Ended         Partnership         Ended         Partnership
                    June 30, 2002         Unit        June 30, 2001         Unit

<S>                    <C>              <C>              <C>               <C>
Operations             $  293           $10.60           $  327            $11.84
Refinancing (1)           708            25.66               67              2.43
                       $1,001           $36.26           $  394            $14.27
</TABLE>

(1)   From the refinance of the joint venture  property for the six months ended
      June 30, 2002 and Bexley  House  Apartments  for the six months ended June
      30, 2001.

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 further  distributions  to its
partners during the remainder of 2002 or subsequent  periods.  Distributions may
be restricted by the requirement to deposit net operating  income into a reserve
account until it is funded a minimum of $200 and a maximum of $400 per apartment
unit at Northsprings  Apartments and Covington Pointe  Apartments for a total of
approximately  $60,000 to  $120,000.  The  reserve  account at June 30, 2002 was
approximately $121,000.

Other

In addition to its indirect  ownership of the general  partner  interests in the
Partnership,  AIMCO and its affiliates  owned 11,631 limited  partnership  units
(the "Units") in the Partnership representing 43.44% of the outstanding Units at
June 30, 2002. 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 of limited partnership interest in the Partnership
in  exchange  for  cash or a  combination  of cash and  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
voting on certain  amendments to the Partnership  Agreement and voting to remove
the  Managing  General  Partner.  As a result of its  ownership of 43.44% of the
outstanding Units, AIMCO is in a position to influence all voting decisions with
respect to the Registrant.  Although the Managing General Partner owes fiduciary
duties to the limited partners of the Partnership,  the Managing General Partner
also owed fiduciary duties to AIMCO as its sole  Stockholder.  As a result,  the
duties of the Managing  General Partner,  as managing  general  partner,  to the
Partnerships  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  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 an impairment in 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 will offer rental concessions during  particularly slow months or in
response  to  heavy  competition  from  other  similar  complexes  in the  area.
Concessions are charged to income as incurred.


<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
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  Managing  General  Partner
entities by Insignia Financial Group, Inc. ("Insignia") and entities which were,
at one  time,  affiliates  of  Insignia;  past  tender  offers  by the  Insignia
affiliates to acquire limited partnership units;  management of the partnerships
by the  Insignia  affiliates;  and the series of  transactions  which  closed on
October 1, 1998 and February 26, 1999 whereby  Insignia and Insignia  Properties
Trust,  respectively,  were merged  into AIMCO.  The  plaintiffs  seek  monetary
damages and equitable relief, including judicial dissolution of the Partnership.
On June 25, 1998, the Managing General Partner filed a motion seeking  dismissal
of the action.  In lieu of responding  to the motion,  the  plaintiffs  filed an
amended  complaint.  The Managing General Partner filed demurrers to the amended
complaint which were heard February 1999.

Pending the ruling on such  demurrers,  settlement  negotiations  commenced.  On
November 2, 1999,  the parties  executed and filed a Stipulation  of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the  settlement  was obtained on November 3, 1999 from the Court,  at which time
the Court set a final  approval  hearing for  December  10,  1999.  Prior to the
December  10,  1999  hearing,  the  Court  received  various  objections  to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement.  On
December 14, 1999, the Managing  General  Partner and its affiliates  terminated
the  proposed  settlement.  In  February  2000,  counsel  for some of the  named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated  the  settlement.  On June  27,  2000,  the  Court  entered  an order
disqualifying  them  from the case and an  appeal  was  taken  from the order on
October 5, 2000. On December 4, 2000, the Court  appointed the law firm of Lieff
Cabraser  Heimann & Bernstein  LLP as new lead  counsel for  plaintiffs  and the
putative class.  Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001,  the  Managing  General  Partner  and its  affiliates  filed a
demurrer to the third amended  complaint.  On May 14, 2001,  the Court heard the
demurrer to the third amended  complaint.  On July 10, 2001, the Court issued an
order  sustaining  defendants'  demurrer on certain  grounds.  On July 20, 2001,
Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order
granting in part and denying in part defendants' demurrer. On September 7, 2001,
Plaintiffs  filed a fourth amended class and  derivative  action  complaint.  On
September 12, 2001, the Court denied Plaintiffs' motion for reconsideration.  On
October 5, 2001, the Managing General Partner and affiliated  defendants filed a
demurrer to the fourth amended complaint,  which was heard on December 11, 2001.
On February 2, 2002,  the Court served its order  granting in part the demurrer.
The  Court has  dismissed  without  leave to amend  certain  of the  plaintiffs'
claims.  On February 11, 2002,  plaintiffs  filed a motion  seeking to certify a
putative  class  comprised of all  non-affiliated  persons who own or have owned
units  in  the  partnerships.   The  Managing  General  Partner  and  affiliated
defendants  oppose the motion.  On April 29,  2002,  the Court held a hearing on
plaintiffs' motion for class  certification and took the matter under submission
after further briefing,  as order by the court, was submitted by the parties. On
July 10, 2002,  the Court  entered an order  vacating the current  trial date of
January 13, 2003 (as well as the  pre-trial  and  discovery  cut-off  dates) and
stayed the case in its entirety through November 7, 2002 so that the parties can
have an opportunity to discuss settlement.

During the third  quarter of 2001, a complaint  (the "Heller  action") was filed
against  the same  defendants  that are named in the  Nuanes  action,  captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended  complaint.  The first amended complaint in the Heller action is
brought as a purported  derivative  action,  and asserts  claims for among other
things  breach  of  fiduciary  duty;  unfair  competition;   conversion,  unjust
enrichment;  and judicial  dissolution.  Plaintiffs in the Nuanes action filed a
motion to  consolidate  the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed  without  leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the Managing  General  Partner and affiliated
defendants  moved to strike the first  amended  complaint  in its  entirety  for
violating  the Court's July 10, 2001 order  granting in part and denying in part
defendants'  demurrer in the Nuanes action, or alternatively,  to strike certain
portions of the complaint based on the statute of limitations.  Other defendants
in the action  demurred to the fourth  amended  complaint,  and,  alternatively,
moved to strike the complaint. On December 11, 2001, the court heard argument on
the motions  and took the matters  under  submission.  On February 4, 2002,  the
Court  served  notice of its order  granting  defendants'  motion to strike  the
Heller complaint as a violation of its July 10, 2001 order in the Nuanes action.
On March 27, 2002,  the plaintiffs  filed a notice  appealing the order striking
the complaint. The parties are currently in the midst of briefing that appeal.

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


<PAGE>



ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            a)    Exhibits:

                  3.1   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 July 424(b) under the Act.

                  3.2   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.

                  4.1   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.

                  4.2   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.

                  99.1  Certification of Chief  Executive   Officer   and  Chief
                        Financial Officer

            b)    Reports on Form 8-K:

                  None filed during the quarter ended June 30, 2002.




<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 INCOME REAL ESTATE, L.P.


                                    By:   DAVIDSON DIVERSIFIED PROPERTIES, INC.
                                          Managing General Partner


                                    By:   /s/Patrick J. Foye
                                          Patrick J. Foye
                                          Executive Vice President


                                    By:   /s/Thomas C. Novosel
                                          Thomas C. Novosel
                                          Senior Vice President
                                          and Chief Accounting Officer


                                    Date: August 14, 2002


<PAGE>


Exhibit 99


                          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 June 30, 2002
as filed with the  Securities  and Exchange  Commission  on the date hereof (the
"Report"),  Patrick J. Foye, as the equivalent of the Chief Executive Officer of
the Partnership, and Paul J. McAuliffe, 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/Patrick J. Foye
                                    Name:  Patrick J. Foye
                                    Date:  August 14, 2002


                                           /s/Paul J. McAuliffe
                                    Name:  Paul J. McAuliffe
                                    Date:  August 14, 2002



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