FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF
                        THE SECURITIES EXCHANGE ACT OF 1934
                        Quarterly or Transitional Report



                      U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

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

                   For the quarterly period ended March 31, 2002


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


                For the transition period from _________to _________

                         Commission file number 0-14530


                         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  preceding  12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days. Yes X No___


                         PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS

a)

                         DAVIDSON INCOME REAL ESTATE, L.P.

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

                                 March 31, 2002

<TABLE>
<CAPTION>


Assets
<S>                                                                          <C>
   Cash and cash equivalents                                                 $  626
   Receivables and deposits                                                     115
   Restricted escrows                                                           229
   Other assets                                                                 293
   Investment properties:
       Land                                                  $  4,120
       Buildings and related personal property                 22,957
                                                               27,077
       Less accumulated depreciation                          (14,394)       12,683
                                                                           $ 13,946
Liabilities and Partners' (Deficit) Capital
Liabilities
   Accounts payable                                                          $ 129
   Tenant security deposit liabilities                                           59
   Accrued property taxes                                                       171
   Other liabilities                                                            230
   Mortgage notes payable                                                    12,707

Partners' (Deficit) Capital
   General partners                                           $ (752)
   Limited partners (26,776 units issued and
      outstanding)                                              1,402           650
                                                                           $ 13,946

            See Accompanying Notes to Consolidated Financial Statements
</TABLE>


<PAGE>




b)

                         DAVIDSON INCOME REAL ESTATE, L.P.

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
                          (in thousands, except unit data)
<TABLE>
<CAPTION>


                                                               Three Months Ended
                                                                    March 31,
                                                               2002          2001
Revenues:
<S>                                                           <C>           <C>
   Rental income                                              $1,162        $1,168
   Other income                                                   69            63
      Total revenues                                           1,231         1,231

Expenses:
   Operating                                                     498           552
   General and administrative                                     65            58
   Depreciation                                                  274           267
   Interest                                                      258           259
   Property taxes                                                122           116
      Total expenses                                           1,217         1,252

Income (loss) before equity in (loss) income of
   joint venture                                                  14           (21)
Equity in (loss) income of joint venture                         (39)           29

Net (loss) income                                              $ (25)         $ 8

Net (loss) income allocated to general partners (3%)           $ (1)         $ --
Net (loss) income allocated to limited partners (97%)            (24)            8

                                                               $ (25)         $ 8

Net (loss) income per limited partnership unit                $ (.90)       $ 0.30

Distributions per limited partnership unit                     $ --         $ 6.76


            See Accompanying Notes to Consolidated Financial Statements
</TABLE>

<PAGE>


c)

                         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

Net loss for the three months
   ended March 31, 2002                   --          (1)         (24)         (25)

Partners' (deficit) capital
   at March 31, 2002                  26,776      $ (752)     $ 1,402       $ 650


            See Accompanying Notes to Consolidated Financial Statements
</TABLE>



<PAGE>



d)

                         DAVIDSON INCOME REAL ESTATE, L.P.

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

<TABLE>
<CAPTION>

                                                                 Three Months Ended
                                                                       March 31,
                                                                  2002        2001
Cash flows from operating activities:
<S>                                                              <C>           <C>
  Net (loss) income                                              $ (25)        $ 8
  Adjustments to reconcile net (loss) income to net cash
   provided by operating activities:
   Depreciation                                                     274         267
   Amortization of discounts and loan costs                          16          16
   Equity in loss (income) of joint venture                          39         (29)
   Change in accounts:
      Receivables and deposits                                       83          59
      Other assets                                                 (108)        (54)
      Accounts payable                                               25         (30)
      Tenant security deposit liabilities                             1          (3)
      Accrued property taxes                                       (206)       (107)
      Other liabilities                                              79          43
       Net cash provided by operating activities                    178         170

Cash flows from investing activities:
  Property improvements and replacements                           (142)       (128)
  Net withdrawals from restricted escrows                            41          22
  Distributions from joint venture                                   --          62
       Net cash used in investing activities                       (101)        (44)

Cash flows from financing activities:
  Payments on mortgage notes payable                                (45)        (37)
  Distributions to partners                                          --        (187)
  Loan costs paid                                                    --          (7)
       Net cash used in financing activities                        (45)       (231)

Net increase (decrease) in cash and cash equivalents                 32        (105)

Cash and cash equivalents at beginning of period                    594         573
Cash and cash equivalents at end of period                       $ 626        $ 468

Supplemental disclosure of cash flow information:
  Cash paid for interest                                         $ 242        $ 230


            See Accompanying Notes to Consolidated Financial Statements
</TABLE>

<PAGE>





e)

                         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 month period ended March 31, 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 a subsidiary 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 three  months  ended  March 31,  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
$64,000  for both the  three  months  ended  March 31,  2002 and 2001,  which is
included in operating expenses.

An  affiliate  of  the  Managing  General  Partner  received  reimbursements  of
accountable  administrative  expenses  amounting  to  approximately  $48,000 and
$56,000 for the three months ended March 31, 2002 and 2001, respectively,  which
is included in general and  administrative  expense 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 $6,000
and $17,000 for the three  months  ended March 31, 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 three months ended March 31,
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 - 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.

There were no  distributions  received from the joint  venture  during the three
months  ended March 31, 2002.  Subsequent  to March 31,  2002,  the  Partnership
received  approximately $785,000 for its portion of the excess proceeds received
from the refinancing of the joint venture's investment property in January 2002.
The Partnership received  distributions of approximately  $62,000 from the joint
venture during the three months ended March 31, 2001. For the three months ended
March 31, 2002, the Partnership  recognized  approximately  $39,000 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.  The Partnership's equity in the loss of the joint venture
completely  offset the  investment in the joint venture as of December 31, 2001.
Therefore,  the Partnership's  investment in the joint venture was zero at March
31, 2002. For the three months ended March 31, 2001, the Partnership  recognized
equity in the income of the joint venture of approximately $29,000.

The following table  represents net liabilities at March 31, 2002 and net (loss)
income for the three months ended March 31, 2002 and 2001:

                                              March 31, 2002

Total assets                                      $11,599
Total liabilities                                  11,602

Total venture equity                              $    (3)

                                                    Three Months Ended March 31,
                                                      2002                2001

Total revenues                                      $   651             $   673
Total expenses                                          875                 516
Net (loss) income                                      (224)                157

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 General Partner and several of
their  affiliated  partnerships and corporate  entities.  The action purports to
assert  claims on behalf of a class of  limited  partners  and  derivatively  on
behalf of a number of limited partnerships (including the Partnership) which are
named as nominal defendants, challenging, among other things, the acquisition of
interests in certain General Partner entities by Insignia  Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia;  past
tender offers by the Insignia  affiliates to acquire limited  partnership units;
management of the  partnerships  by the Insignia  affiliates;  and the series of
transactions  which  closed on October 1, 1998 and  February  26,  1999  whereby
Insignia and Insignia  Properties Trust,  respectively,  were merged into AIMCO.
The plaintiffs seek monetary damages and equitable  relief,  including  judicial
dissolution of the  Partnership.  On June 25, 1998, the General  Partner filed a
motion seeking dismissal of the action. In lieu of responding to the motion, the
plaintiffs  filed an amended  complaint.  The 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 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  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
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
General Partner and affiliated  defendants oppose the motion. On April 29, 2002,
the Court heard argument on the motion and ordered further  briefing after which
time the matter will be taken under submission. The Court has set the matter for
trial in January 2003.

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 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  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 three
months ended March 31, 2002 and 2001:

                                                   Average Occupancy
      Property                                      2002       2001

      Northsprings Apartments                       89%        85%
         Atlanta, Georgia (1)
      Lakeside Apartments                           91%        90%
         Charlotte, North Carolina
      Bexley House Apartments                       98%        93%
         Columbus, Ohio (1)
      Covington Pointe Apartments                   84%        92%
         Dallas, Texas (2)

(1)   The Managing  General  Partner  attributes the increase in occupancy to an
      increased marketing effort by the property's management.

(2)   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  $25,000  for the three
months  ended March 31, 2002 as compared to net income of  approximately  $8,000
for the three  months  ended  March 31,  2001.  The  decrease  in net  income is
primarily  attributable  to a  decrease  in  equity  in the  income of the joint
venture.  The Partnership  realized income before equity in income (loss) of the
joint venture of  approximately  $14,000 as compared to a loss of  approximately
$21,000 for the three months ended March 31, 2001. The increase in income before
equity  in joint  venture  is  primarily  attributable  to a  decrease  in total
expenses  partially  offset by a decrease in income from the joint venture while
total revenues remained relatively  constant.  The decrease in total expenses is
due to a decrease  in  operating  expense  partially  offset by an  increase  in
depreciation expense and general and administrative  expense.  Operating expense
decreased due to a decrease in advertising and rental expense,  property expense
and maintenance  expense  partially offset by an increase in insurance  expense.
Advertising  and  rental  expense  decreased  due to a  decrease  in  periodical
advertising  at  Bexley  House  Apartments  and  Northsprings  Apartments  and a
decrease in  newspaper  advertising  at Lakeside  Apartments.  Property  expense
decreased due to a decrease in employee  salaries and employee  related benefits
at Covington  Pointe  Apartments and a decrease in utility costs at Bexley House
Apartments  and Lakeside  Apartments.  Maintenance  expense  decreased  due to a
decrease in contract work at all of the Partnership's  investment properties and
a decrease in interior decorating at Northsprings Apartments.  Insurance expense
increased due to an increase in hazard  insurance  premiums at Covington  Pointe
Apartments  and  Lakeside  Apartments.  Depreciation  expense  increased  due to
capital improvements placed into service during the past twelve months.

General and administrative  expenses  increased  primarily due to an increase in
the cost of services  included in the management  reimbursements to the Managing
General Partner as allowed under the Partnership Agreement and to an increase in
professional  fees.  Also included in general and  administrative  expenses 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 three months ended March 31, 2002, the Partnership  recognized equity in
loss of the joint  venture  property  of  approximately  $39,000 as  compared to
equity in income of the joint venture property of approximately  $29,000 for the
three months  ended March 31, 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  March  31,  2002,  the  Partnership   had  cash  and  cash   equivalents  of
approximately $626,000 compared to approximately $468,000 at March 31, 2001. The
increase in cash and cash  equivalents for the three months ended March 31, 2002
from the Partnership's year ended December 31, 2001, was approximately  $32,000.
This  increase is due to  approximately  $178,000 of cash  provided by operating
activities partially offset by approximately  $101,000 of cash used in investing
activities and approximately $45,000 of cash used in financing activities.  Cash
used in investing activities consisted of property improvements and replacements
partially  offset by net withdrawals from restricted  escrows  maintained by the
mortgage  lenders.  Cash used in financing  activities  consisted of payments of
principal  made  on  the  mortgages  encumbering  the  Partnership's  investment
properties.  The Partnership  invests its working  capital  reserves in interest
bearing accounts.

Subsequent to March 31, 2002, the Partnership  received  approximately  $785,000
for its portion of the excess  proceeds  received  from the  refinancing  of the
joint venture's investment property in January 2002.

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  three  months  ended  March 31,  2002,  the  Partnership  completed
approximately  $51,000  of  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 $51,000 for capital improvements for the year 2002 at Northsprings
Apartments consisting primarily of appliance and floor covering replacements.

Lakeside Apartments

During  the  three  months  ended  March 31,  2002,  the  Partnership  completed
approximately $36,000 of capital improvements at Lakeside Apartments, consisting
primarily of appliance and 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  $117,000 for capital  improvements for the
year  2002  at  Lakeside   Apartments   consisting   primarily  of  HVAC,  water
submetering,   structural   improvements   and  appliance  and  floor   covering
replacements.

Bexley House Apartments

During  the  three  months  ended  March 31,  2002,  the  Partnership  completed
approximately  $39,000 of budgeted and unbudgeted capital improvements at Bexley
House,  consisting  primarily of HVAC, door replacements and appliance and floor
covering replacements.  These improvements were funded from operating cash flow.
The Partnership has budgeted,  but is not limited to, approximately  $35,000 for
capital  improvements  for the year 2002 at Bexley House  Apartments  consisting
primarily of fire safety enhancements, door replacements,  HVAC, light fixtures,
and appliance and floor covering replacements.

Covington Pointe Apartments

During  the  three  months  ended  March 31,  2002,  the  Partnership  completed
approximately  $16,000 of capital  improvements at Covington Pointe  Apartments,
consisting primarily of swimming pool improvements, appliance and floor covering
replacements,  structural improvements, and office computers. These improvements
were funded  primarily from operating cash flow. The  Partnership  has budgeted,
but is not limited  to,  approximately  $61,000  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.

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  $12,707,000,  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 three months ended
March 31, 2002 and 2001 (in thousands, except per unit data):

<TABLE>
<CAPTION>

                     Three Months     Per Limited      Three Months     Per Limited
                        Ended         Partnership         Ended         Partnership
                    March 31, 2002        Unit        March 31, 2001        Unit

<S>                    <C>              <C>              <C>               <C>
Operations             $   --           $   --           $  120            $ 4.33
Refinancing (1)            --               --               67              2.43
                       $   --           $   --           $  187            $ 6.76
</TABLE>

(1)   From the refinance of Bexley House Apartments.

Subsequent  to  March  31,  2002,  the   Partnership   paid  a  distribution  of
approximately $293,000 (approximately $284,000 to the limited partners or $10.60
per  limited  partnership  unit)  from  operations  and  approximately  $708,000
(approximately   $687,000  to  the  limited   partners  or  $25.66  per  limited
partnership  unit)  from the  refinancing  of the joint  venture  property.  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 March 31, 2002 was
approximately $116,000.

In addition to its  indirect  ownership of the general  partner  interest in the
Partnership,  AIMCO and its affiliates owned 11,581 limited partnership units in
the Partnership  representing 43.25% of the outstanding units at March 31, 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 make one or
more additional offers to acquire  additional limited  partnership  interests in
the Partnership  for cash or in exchange for units in the operating  partnership
of  AIMCO  either  through  private  purchases  or  tender  offers.   Under  the
Partnership Agreement,  unitholders holding a majority of the Units are entitled
to take action with respect to a variety of matters,  which would include voting
on certain  amendments  to the  Partnership  Agreement  and voting to remove the
Managing  General  Partner.  As a  result  of its  ownership  of  43.25%  of the
outstanding units, AIMCO is in a position to influence all such voting decisions
with  respect to the  Registrant.  When  voting on  matters,  AIMCO would in all
likelihood  vote the Units it acquired in a manner  favorable to the interest of
the  Managing  General  Partner  because of its  affiliation  with the  Managing
General Partner.



<PAGE>


                           PART II - OTHER INFORMATION


ITEM 1.     LEGAL PROCEEDINGS


In March 1998, several putative unit holders of limited partnership units of the
Partnership  commenced an action  entitled  Rosalie  Nuanes,  et al. v. Insignia
Financial Group, Inc., et al. (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 General Partner and several of
their  affiliated  partnerships and corporate  entities.  The action purports to
assert  claims on behalf of a class of  limited  partners  and  derivatively  on
behalf of a number of limited partnerships (including the Partnership) which are
named as nominal defendants, challenging, among other things, the acquisition of
interests in certain General Partner entities by Insignia  Financial Group, Inc.
("Insignia") and entities which were, at one time, affiliates of Insignia;  past
tender offers by the Insignia  affiliates to acquire limited  partnership units;
management of the  partnerships  by the Insignia  affiliates;  and the series of
transactions  which  closed on October 1, 1998 and  February  26,  1999  whereby
Insignia and Insignia  Properties Trust,  respectively,  were merged into AIMCO.
The plaintiffs seek monetary damages and equitable  relief,  including  judicial
dissolution of the  Partnership.  On June 25, 1998, the General  Partner filed a
motion seeking dismissal of the action. In lieu of responding to the motion, the
plaintiffs  filed an amended  complaint.  The 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 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  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
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
General Partner and affiliated  defendants oppose the motion. On April 29, 2002,
the Court heard argument on the motion and ordered further  briefing after which
time the matter will be taken under submission. The Court has set the matter for
trial in January 2003.

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 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  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:

                  None.

            b)    Reports on Form 8-K:

                  None filed during the quarter ended March 31, 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/Martha L. Long
                                          Martha L. Long
                                          Senior Vice President
                                          and Controller


                                    Date: May 15, 2002