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

                                   Form 10-QSB

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

                    For the quarterly period ended June 30, 2003


[ ] 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 Registrant 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)

<PAGE>

                         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, 2003
<TABLE>
<CAPTION>

Assets
<S>                                                                         <C>
   Cash and cash equivalents                                                $ 1,997
   Receivables and deposits                                                     684
   Restricted escrows                                                           162
   Other assets                                                                 267
   Investment properties:
       Land                                                  $ 3,523
       Buildings and related personal property                 17,864
                                                               21,387
       Less accumulated depreciation                          (12,028)        9,359
                                                                           $ 12,469
Liabilities and Partners' Deficit
Liabilities
   Accounts payable                                                          $ 103
   Tenant security deposit liabilities                                           65
   Accrued property taxes                                                       198
   Other liabilities                                                             91
   Deficit in joint venture                                                     821
   Mortgage notes payable                                                    12,383

Partners' Deficit
   General partners                                           $ (808)
   Limited partners (26,776 units issued and
      outstanding)                                               (384)       (1,192)
                                                                           $ 12,469


            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,
                                         2003          2002         2003        2002
                                                    (Restated)               (Restated)
Revenues:
<S>                                      <C>          <C>         <C>         <C>
  Rental income                          $ 787        $ 866       $ 1,635     $ 1,761
  Other income                               69           56          131         113
  Casualty gain                              81           --           81          --
     Total revenues                         937          922        1,847       1,874

Expenses:
  Operating                                 320          354          678         704
  General and administrative                 47           45           89         110
  Depreciation                              224          222          444         440
  Interest                                  232          216          448         435
  Property taxes                             95           94          189         194
  Loss on early extinguishment
    of debt                                  57           --           57          --
     Total expenses                         975          931        1,905       1,883

Loss before equity in income (loss)
  of joint venture                          (38)          (9)         (58)         (9)
Equity in income (loss) of joint
  venture                                    --            5            2         (34)
Loss from continuing operations             (38)          (4)         (56)        (43)
Loss from discontinued operations          (120)         (34)        (226)        (20)
Gain on sale of discontinued
  operations                              3,472           --        3,472          --
Net income (loss)                       $ 3,314       $ (38)      $ 3,190      $ (63)

Net income (loss) allocated to
  general partners (3%)                  $ 99          $ (1)        $ 96        $ (2)
Net income (loss) allocated to
  limited partners (97%)                  3,215          (37)       3,094         (61)
                                        $ 3,314       $ (38)      $ 3,190      $ (63)
Net income (loss) per limited partnership unit:
Loss from continuing operations         $ (1.38)     $ (0.15)     $ (2.03)    $ (1.56)
Loss from discontinued operations         (4.35)       (1.23)       (8.19)      (0.72)
Gain on sale of discontinued
  operations                             125.78           --       125.78           --
                                        $120.05      $ (1.38)     $115.56     $ (2.28)
Distributions per limited
  partnership unit                      $128.36      $ 36.26      $128.36     $ 36.26

            See Accompanying Notes to Consolidated Financial Statements

</TABLE>

<PAGE>
                        DAVIDSON INCOME REAL ESTATE, L.P.

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

                                     Limited
                                     Partnership   General      Limited
                                        Units      Partners    Partners       Total

<S>                                     <C>          <C>        <C>          <C>
Original capital contributions          26,776       $ 1        $26,776      $26,777

Partners' deficit at
  December 31, 2002                     26,776      $ (797)     $ (41)       $ (838)

Distributions                               --        (107)      (3,437)      (3,544)

Net income for the six months
  ended June 30, 2003                       --          96        3,094        3,190

Partners' deficit at
  June 30, 2003                         26,776      $ (808)     $ (384)      $(1,192)

            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,
                                                                 2003          2002
Cash flows from operating activities:
<S>                                                             <C>           <C>
  Net income (loss)                                             $ 3,190       $ (63)
  Adjustments to reconcile net income (loss) to net cash
   (used in) provided by operating activities:
     Gain on sale of discontinued operations                     (3,472)          --
     Casualty gain                                                  (81)          --
     Loss on early extinguishment of debt                            73           --
     Depreciation                                                   523          554
     Amortization of loan costs and discounts                        31           31
     Equity in (income) loss of joint venture                        (2)          34
     Change in accounts:
      Receivables and deposits                                     (249)          52
      Other assets                                                  (79)         (93)
      Accounts payable                                              (55)         (31)
      Tenant security deposit liabilities                           (24)          13
      Accrued property taxes                                       (104)        (139)
      Other liabilities                                             (27)          22
       Net cash (used in) provided by operating activities         (276)         380

Cash flows from investing activities:
  Net proceeds from sale of discontinued operations               5,735           --
  Property improvements and replacements                           (285)        (208)
  Net withdrawals from restricted escrows                            21           63
  Insurance proceeds from casualty                                  126           --
  Distributions from joint venture                                   24          807
       Net cash provided by investing activities                  5,621          662

Cash flows from financing activities:
  Payments on mortgage notes payable                                (92)         (91)
  Loan costs paid                                                   (95)          --
  Payment on advances from affiliates                               (71)          --
  Repayments of mortgage notes payable                           (6,122)          --
  Proceeds from mortgage note payable                             6,000           --
  Distributions to partners                                      (3,544)      (1,001)
       Net cash used in financing activities                     (3,924)      (1,092)

Net increase (decrease) in cash and cash equivalents              1,421          (50)
Cash and cash equivalents at beginning of period                    576          594

Cash and cash equivalents at end of period                      $ 1,997       $ 544

Supplemental disclosure of cash flow information:
  Cash paid for interest                                         $ 457        $ 483

            See Accompanying Notes to Consolidated Financial Statements

</TABLE>

<PAGE>

                        DAVIDSON INCOME REAL ESTATE, L.P.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)
                                  June 30, 2003

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, 2003,
are not  necessarily  indicative  of the results  that may be  expected  for the
fiscal year ending  December 31,  2003.  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, 2002. The Managing  General Partner is a subsidiary of Apartment  Investment
and  Management  Company  ("AIMCO"),  a publicly  traded real estate  investment
trust.

Effective  January 1, 2002,  the  Partnership  adopted  Statement  of  Financial
Accounting  Standards  ("SFAS")  No.  144,  "Accounting  for the  Impairment  or
Disposal of Long-Lived  Assets",  which  established  standards for the way that
public business  enterprises report information about long-lived assets that are
either  being held for sale or have  already  been  disposed of by sale or other
means.  The standard  requires that results of operations for a long-lived asset
that is being held for sale or has  already  been  disposed  of be  reported  as
discontinued  operations  on the  statement  of  operations.  As a  result,  the
accompanying  consolidated  statements  of  operations  have been restated as of
January 1, 2002 to reflect the operations of North Springs Apartments, which was
sold in April 2003, as loss from discontinued operations.

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, 2003 and 2002,  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  $92,000 and
$123,000 for the six months ended June 30, 2003 and 2002, respectively, which is
included in operating expenses and loss from discontinued operations.

An  affiliate  of  the  Managing  General  Partner  received  reimbursements  of
accountable  administrative  expenses  amounting  to  approximately  $57,000 and
$83,000 for the six months ended June 30, 2003 and 2002, respectively,  which is
included in general and administrative  expense,  investment properties and loss
from  discontinued  operations.  Included in these  amounts are fees  related to
construction  management  services  provided  by an  affiliate  of the  Managing
General Partner of approximately $4,000 and $7,000 for the six months ended June
30, 2003 and 2002,  respectively.  The construction  management service fees are
based on a percentage of current year additions to investment properties.

During the six months  ended June 30, 2003 the  Partnership  repaid  advances of
approximately $71,000 to an affiliate of the Managing General Partner.  Interest
on the  advances  was  charged  at the prime  rate plus 2%, or 6.00% at June 30,
2003,  in  accordance  with the  Partnership  Agreement.  The  Partnership  paid
approximately  $2,000 in  interest  during the six months  ended June 30,  2003.
There were no such  repayments  made or interest  charged  during the six months
ended June 30, 2002.

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

The  Partnership  insures its properties up to certain  limits through  coverage
provided by AIMCO which is  generally  self-insured  for a portion of losses and
liabilities  related to workers  compensation,  property  casualty  and  vehicle
liability. The Partnership insures its properties above the AIMCO limits through
insurance  policies  obtained  by  AIMCO  from  insurers  unaffiliated  with the
Managing  General  Partner.  During the six months ended June 30, 2003 and 2002,
the  Partnership was charged by AIMCO and its affiliates  approximately  $66,000
and $80,000,  respectively,  for  insurance  coverage and fees  associated  with
policy claims administration.

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,  2003,   the   Partnership   received
distributions  of  approximately  $24,000 from  operations 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 its
portion  of the  excess  proceeds  received  from the  refinancing  of the joint
venture's  investment  property in January 2002 and from operations of the joint
venture.  For the six months ended June 30,  2003,  the  Partnership  recognized
approximately  $2,000 of equity  in  income  of the joint  venture.  For the six
months ended June 30, 2002, the Partnership recognized  approximately $34,000 of
equity in 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.   At  June  30,  2003,  the   Partnership   had  received
distributions  in  excess  of  its  general  partnership  interest  and  has  an
investment deficiency of approximately $821,000.

The following table represents the joint venture's net income (loss) for the six
months ended June 30, 2003 and 2002 (in thousands):

                                                      Six Months Ended June 30,
                                                      2003                2002

Total revenues                                      $ 1,200             $ 1,298
Total expenses                                       (1,186)             (1,492)
Net income (loss)                                   $    14             $  (194)

Note D - Casualty Event

In December 2002, Bexley House Apartments  experienced a fire, causing damage to
32 units. As of June 30, 2003 the Partnership  estimates the property damages to
be  approximately  $1,300,000 and lost rents to be  approximately  $300,000 as a
result of the fire.  Reconstruction  of the units is in  progress.  The expected
date for  completion of  reconstruction  is October 2003.  During the six months
ended June 30,  2003,  a partial  casualty  gain of  approximately  $81,000  was
recorded at Bexley House  Apartments.  The gain was the result of the receipt of
insurance  proceeds  of  approximately  $126,000  offset  by  the  write  off of
approximately  $45,000 of  undepreciated  fixed  assets.  The  Managing  General
Partner  expects  that the  damage  and lost  rents  will be  fully  covered  by
insurance proceeds to be received during 2003. The Managing General Partner does
not anticipate a casualty loss will be recognized.

Note E - Sale of Investment Property

On April 15, 2003, the Partnership sold North Springs Apartments to an unrelated
third  party  for a gross  sales  price  of  approximately  $6,100,000.  The net
proceeds received by the Partnership were approximately $5,735,000 after payment
of closing costs, including a commission paid to the Managing General Partner as
permitted under the terms of the  Partnership  Agreement.  The Partnership  used
approximately  $1,779,000 of the net proceeds to repay the mortgages encumbering
the  property.  As a result  of the sale,  the  Partnership  realized  a gain of
approximately  $3,472,000  during  the six  months  ended  June  30,  2003.  The
property's  operations,  loss of approximately  $226,000 and $20,000 for the six
months  ended June 30, 2003 and 2002,  respectively,  are  included in loss from
discontinued   operations  on  the  accompanying   consolidated   statements  of
operations  and  include  revenues  of  approximately   $229,000  and  $528,000,
respectively.   In  addition,   the   Partnership   recorded  a  loss  on  early
extinguishment  of debt of  approximately  $16,000 for the six months ended June
30, 2003 due to the write off of unamortized loan costs and mortgage  discounts,
which is also included in loss from discontinued operations.

Note F - Refinancing of Mortgage Note Payable

In June 2003, the  Partnership  refinanced the mortgages  encumbering  Covington
Pointe   Apartments.   The  refinancing   replaced   mortgage   indebtedness  of
approximately  $4,343,000 with a new mortgage of approximately  $6,000,000.  The
new  mortgage  carries a stated  interest  rate of 3.81%  compared  to the 7.83%
interest  rate on the old  mortgages.  Payments  of  principal  and  interest of
approximately  $36,000  are due on the first  day of each  month  commencing  in
August  2003 until  July 2010 at which  time a balloon  payment in the amount of
approximately  $4,416,000 is due.  Capitalized loan costs, which are included in
other assets,  incurred with the refinancing were approximately $95,000, and are
being  amortized  over the life of the mortgage  note payable.  The  Partnership
wrote off unamortized loan costs of approximately $51,000 and mortgage discounts
of approximately  $6,000 resulting in a loss on early  extinguishment of debt of
approximately $57,000.  Subsequent to June 30, 2003, the Partnership distributed
approximately  $1,515,000  (approximately  $1,470,000 to the limited partners or
$54.90 per limited  partnership  unit) from the proceeds of the  refinancing  of
Covington Pointe Apartments.

Note G - Legal Proceedings

In March 1998, several putative unit holders of limited partnership units of the
Partnership  commenced an action  entitled  Rosalie  Nuanes,  et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of  California  for the  County  of San  Mateo.  The  plaintiffs  named as
defendants,  among others,  the  Partnership,  its Managing  General Partner and
several of their  affiliated  partnerships  and corporate  entities.  The action
purported  to  assert  claims  on  behalf  of a class of  limited  partners  and
derivatively  on behalf  of a number  of  limited  partnerships  (including  the
Partnership)  that are named as nominal  defendants,  challenging,  among  other
things,  the  acquisition  of  interests  in certain  Managing  General  Partner
entities by Insignia Financial Group, Inc.  ("Insignia") and entities that were,
at one  time,  affiliates  of  Insignia;  past  tender  offers  by the  Insignia
affiliates to acquire limited partnership units;  management of the partnerships
by the  Insignia  affiliates;  and the series of  transactions  which  closed on
October 1, 1998 and February 26, 1999 whereby  Insignia and Insignia  Properties
Trust,  respectively,  were merged into AIMCO.  The plaintiffs  sought  monetary
damages and equitable relief, including judicial dissolution of the Partnership.
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 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 opposed 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 ordered by the court,  was  submitted by the parties.  On July 10, 2002,  the
Court  entered an order  vacating the 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  could  have an  opportunity  to
discuss  settlement.  On October 30, 2002, the court entered an order  extending
the stay in effect through January 10, 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  Heller  action  was  brought  as a  purported
derivative  action,  and  asserted  claims for,  among other  things,  breach of
fiduciary duty, unfair competition,  conversion, unjust enrichment, and judicial
dissolution.  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.  Before  completing
briefing on the appeal, the parties stayed further  proceedings in the appeal in
light of a settlement.

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

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

On June 13, 2003, the Court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions.

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

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

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

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

The Partnership's  investment  properties consist of three apartment  complexes.
The following  table sets forth the average  occupancy of the properties for the
six months ended June 30, 2003 and 2002:

                                                   Average Occupancy
      Property                                      2003       2002

      Lakeside Apartments                           89%        89%
         Charlotte, North Carolina
      Bexley House Apartments                       49%        99%
         Columbus, Ohio (1)
      Covington Pointe Apartments                   95%        87%
         Dallas, Texas (2)

      (1)   The Managing General Partner attributes the decrease in occupancy at
            Bexley House Apartments to a fire that destroyed  approximately half
            of the  apartment  units.  The units are currently in the process of
            being rebuilt.

      (2)   The Managing General Partner attributes the increase in occupancy at
            Covington Pointe  Apartments to the lowering of average rental rates
            to be competitive in the Dallas area.

Results of Operations

The  Partnership's  net income for the three and six months  ended June 30, 2003
was  approximately   $3,314,000  and  $3,190,000  compared  to  a  net  loss  of
approximately  $38,000 and  $63,000 for the three and six months  ended June 30,
2002,  respectively.  The increase in net income is due to the  recognition of a
gain on sale of discontinued  operations partially offset by an increase in loss
from discontinued operations.

On April 15, 2003, the Partnership sold North Springs Apartments to an unrelated
third  party  for a gross  sales  price  of  approximately  $6,100,000.  The net
proceeds received by the Partnership were approximately $5,735,000 after payment
of closing costs, including a commission paid to the Managing General Partner as
permitted under the terms of the  Partnership  Agreement.  The Partnership  used
approximately  $1,779,000 of the net proceeds to repay the mortgages encumbering
the  property.  As a result  of the sale,  the  Partnership  realized  a gain of
approximately  $3,472,000  during  the six  months  ended  June  30,  2003.  The
property's operations,  a loss of approximately $226,000 and $20,000 for the six
months  ended June 30, 2003 and 2002,  respectively,  are  included in loss from
discontinued   operations  on  the  accompanying   consolidated   statements  of
operations  and  include  revenues  of  approximately   $229,000  and  $528,000,
respectively.   In  addition,   the   Partnership   recorded  a  loss  on  early
extinguishment  of debt of  approximately  $16,000 for the six months ended June
30, 2003 due to the write off of unamortized loan costs and mortgage  discounts,
which is also included in loss from discontinued operations.

The Partnership's  loss from continuing  operations for the three and six months
ended June 30, 2003 was  approximately  $38,000  and $56,000  compared to a loss
from continuing operations of approximately $4,000 and $43,000 for the three and
six  months  ended  June 30,  2002,  respectively.  The  increase  in loss  from
continuing  operations  for the three  months  ended June 30,  2003 is due to an
increase in total expenses  partially  offset by an increase in total  revenues.
The increase in loss from  continuing  operations  for the six months ended June
30,  2003 is due to an  increase  in  total  expenses  and a  decrease  in total
revenues  partially  offset by an  increase in equity in the income of the joint
venture.  Total  revenues for the three months ended June 30, 2003 increased due
to the  recognition of a casualty gain partially  offset by a decrease in rental
income. Total revenues for the six months ended June 30, 2003 decreased due to a
decrease in rental  income  partially  offset by the  recognition  of a casualty
gain. Rental income for both periods decreased due to a significant  decrease in
occupancy at Bexley House  Apartments  and decreases in the average rental rates
at Covington Pointe Apartments and Lakeside  Apartments,  partially offset by an
increase in occupancy at Covington Pointe Apartments.

In December 2002, Bexley House Apartments  experienced a fire, causing damage to
32 units. As of June 30, 2003, the Partnership estimates the property damages to
be  approximately  $1,300,000 and lost rents to be  approximately  $300,000 as a
result of the fire.  Reconstruction  of the units is in  progress.  The expected
date for  completion of  reconstruction  is October 2003.  During the six months
ended June 30,  2003,  a partial  casualty  gain of  approximately  $81,000  was
recorded at Bexley House  Apartments.  The gain was the result of the receipt of
insurance  proceeds  of  approximately  $126,000  offset  by  the  write  off of
approximately  $45,000 of  undepreciated  fixed  assets.  The  Managing  General
Partner  expects  that the  damages  and lost  rents  will be fully  covered  by
insurance proceeds to be received during 2003. The Managing General Partner does
not anticipate a casualty loss will be recognized.

The  Partnership  owns a 17.5%  interest in Sterling  Crest Joint  Venture  (the
"Joint  Venture").  For the six months  ended  June 30,  2003,  the  Partnership
recognized  equity  in  income  of the joint  venture  of  approximately  $2,000
compared to equity in loss of the joint venture of approximately $34,000 for the
six months ended June 30, 2002.  Equity in income of the joint venture increased
due primarily to an increase in revenues partially offset by a decrease in total
expenses.

Total expenses for the six months ended June 30, 2003 increased due to a loss on
early  extinguishment  of debt and an  increase in  interest  expense  partially
offset by a decrease in general and administrative  expense.  Total expenses for
the  three  months  ended  June  30,  2003  increased  due  to a loss  on  early
extinguishment  of debt and an increase in interest  expense.  Interest  expense
increased  due to payments of  interest  associated  with the pay off of the old
mortgages for Covington Pointe Apartments.

General  and  administrative  expense  for the six months  ended  June 30,  2003
decreased due to a decrease in management reimbursements to the Managing General
Partner as allowed under the Partnership Agreement. Also included in general and
administrative  expenses  are costs  associated  with the  quarterly  and annual
communications  with  investors  and  regulatory  agencies  and the annual audit
required by the Partnership Agreement.

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

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, 2003, the Partnership had cash and cash equivalents of approximately
$1,997,000 compared to approximately  $544,000 at June 30, 2002. The increase in
cash  and  cash  equivalents  for  the  six  months  ended  June  30,  2003  was
approximately  $1,421,000.  The increase in cash and cash  equivalents is due to
approximately  $5,621,000  of cash  provided by investing  activities  partially
offset by  approximately  $3,924,000  of cash used in financing  activities  and
approximately  $276,000 of cash used in operating  activities.  Cash provided by
investing  activities  consisted  of  proceeds  from the  sale of North  Springs
Apartments,  insurance  proceeds  from the casualty at Bexley House  Apartments,
distributions  received from the  Partnership's  joint venture and the refund of
restricted  escrows maintained by the former mortgage lender partially offset by
property  improvements  and  replacements.  Cash  used in  financing  activities
consisted  of  payments  of  principal  made on the  mortgages  encumbering  the
Partnership's  investment  properties,  repayments of the mortgages  encumbering
North Springs  Apartments and Covington Pointe  Apartments,  payment on advances
from an affiliate of the Managing General Partner, distributions to the partners
and new loan costs paid with the  refinancing  of  Covington  Pointe  Apartments
partially   offset  by  proceeds  from  the  refinancing  of  Covington   Pointe
Apartments.  The Partnership  invests its working  capital  reserves in interest
bearing accounts.

The sufficiency of existing  liquid assets to meet future  liquidity and capital
expenditure   requirements   is  directly   related  to  the  level  of  capital
expenditures  required at the investment  properties to adequately  maintain the
physical  assets and other operating needs of the Partnership and to comply with
Federal,  state,  and local  legal and  regulatory  requirements.  The  Managing
General  Partner  monitors  developments  in the  area of legal  and  regulatory
compliance and is studying new federal laws, including the Sarbanes-Oxley Act of
2002. The Sarbanes-Oxley Act of 2002 mandates or suggests additional  compliance
measures with regard to governance,  disclosure, audit and other areas. In light
of these changes,  the  Partnership  expects that it will incur higher  expenses
related  to  compliance,  including  increased  legal  and audit  fees.  Capital
improvements planned for the Partnership's properties are detailed below.

Lakeside Apartments

During  the  six  months  ended  June  30,  2003,  the   Partnership   completed
approximately $74,000 of capital improvements at Lakeside Apartments, consisting
primarily  of  appliance   and  floor   covering   replacements,   parking  area
improvements and plumbing fixture upgrades.  These improvements were funded from
operating cash flow. The Partnership  evaluates the capital improvement needs of
the property  during the year and  currently  expects to complete an  additional
$51,000 in capital  improvements  during the remainder of 2003.  The  additional
capital  improvements  will consist  primarily of floor  covering and  appliance
replacements,  structural  improvements  and HVAC upgrades.  Additional  capital
improvements may be considered and will depend on the physical  condition of the
property as well as the  anticipated  cash flow  generated  by the  property and
replacement reserves.

Bexley House Apartments

During  the  six  months  ended  June  30,  2003,  the   Partnership   completed
approximately  $78,000  of  capital  improvements  at Bexley  House  Apartments,
consisting primarily of heating system upgrades,  damage repairs associated with
the fire, plumbing upgrades and appliance and floor covering replacements. These
improvements  were funded from operating cash flow and insurance  proceeds.  The
Partnership is reconstructing this property as a result of the fire discussed in
"Note D - Casualty Event" to the consolidated financial statements and estimates
that additional costs of repairs of approximately $650,000 will be fully covered
by  insurance   proceeds  to  be  received  during  2003.   Additional   capital
improvements may be considered and will depend on the physical  condition of the
property as well as the anticipated cash flow generated by the property.

North Springs Apartments

During  the  six  months  ended  June  30,  2003,  the   Partnership   completed
approximately  $87,000  of capital  improvements  at North  Springs  Apartments,
consisting primarily of plumbing  improvements and floor covering  replacements.
These  improvements were funded from operating cash flow. This property was sold
to an unrelated third party in April 2003.

Covington Pointe Apartments

During  the  six  months  ended  June  30,  2003,  the   Partnership   completed
approximately  $46,000 of capital  improvements at Covington Pointe  Apartments,
consisting  primarily  of  appliance  and  floor  covering   replacements,   air
conditioning  upgrades,  and structural  improvements.  These  improvements were
funded  from  operating  cash  flow.  The  Partnership   evaluates  the  capital
improvement  needs of the  property  during  the year and  currently  expects to
complete an additional $38,000 in capital  improvements  during the remainder of
2003.  The  additional  capital  improvements  will  consist  primarily of a new
fitness   center,   floor  covering  and  appliance   replacements,   structural
improvements,   interior  decoration  and  HVAC  upgrades.   Additional  capital
improvements may be considered and will depend on the physical  condition of the
property as well as the  anticipated  cash flow  generated  by the  property and
replacement reserves.

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  assets are thought to be sufficient for any near-term  needs
(exclusive  of  capital   improvements)   of  the   Partnership.   The  mortgage
indebtedness  of  approximately  $12,383,000 is amortized over varying  periods,
with balloon payments of approximately $4,416,000 due in July 2010 for Covington
Pointe Apartments and approximately $4,100,000 due in November 2003 for Lakeside
Apartments.  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, 2003 and 2002 (in thousands, except per unit data):
<TABLE>
<CAPTION>

                                           Per                               Per
                   Six Months Ended      Limited     Six Months Ended      Limited
                       June 30,        Partnership       June 30,        Partnership
                         2003             Unit             2002             Unit

<S>                    <C>              <C>              <C>                <C>
Operations             $   --           $    --          $  293             $10.60
Refinancing (1)            --                --             708              25.66
Sales (2)               3,544            128.36              --                 --
                       $3,544           $128.36          $1,001             $36.26

(1) Proceeds from the refinance of the joint venture property in January 2002.

(2) Proceeds from the sale of North Springs Apartments in April 2003.
</TABLE>

Subsequent  to  June  30,  2003,  the  Partnership   distributed   approximately
$1,515,000  (approximately  $1,470,000  to the  limited  partners  or $54.90 per
limited  partnership  unit) from the  proceeds of the  refinancing  of Covington
Pointe Apartments.

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  additional  distributions to its
partners during 2003 or subsequent periods.

Other

In addition to its indirect  ownership of the general  partner  interests in the
Partnership,  AIMCO and its affiliates owned 11,916.50 limited partnership units
(the "Units") in the Partnership representing 44.50% of the outstanding Units at
June 30, 2003. A number of these Units were  acquired  pursuant to tender offers
made by AIMCO or its  affiliates.  It is possible  that AIMCO or its  affiliates
will acquire  additional Units in exchange for cash or a combination of cash and
units in the operating  partnership of AIMCO either through private purchases or
tender offers.  Pursuant to the  Partnership  Agreement,  unitholders  holding a
majority of the Units are  entitled to take action with  respect to a variety of
matters that include,  but are not limited to,  voting on certain  amendments to
the Partnership  Agreement and voting to remove the Managing General Partner. As
a result of its  ownership  of 44.50% of the  outstanding  Units,  AIMCO and its
affiliates  are in a position to influence all voting  decisions with respect to
the Partnership.  Although the Managing General Partner owes fiduciary duties to
the limited partners of the Partnership,  the Managing General Partner also owes
fiduciary duties to AIMCO as its sole  stockholder.  As a result,  the duties of
the Managing  General Partner,  as managing general partner,  to the Partnership
and its limited  partners may come into conflict with the duties of the Managing
General Partner to AIMCO, as it sole stockholder.

Critical Accounting Policies and Estimates

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

Impairment of Long-Lived Assets

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

Real  property  investments  are  subject  to varying  degrees of risk.  Several
factors  may  adversely  affect  the  economic  performance  and  value  of  the
Partnership's  investment  properties.  These  factors  include  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 and
the Partnership  fully reserves all balances  outstanding  over thirty days. The
Partnership will offer rental concessions during  particularly slow months or in
response to heavy  competition  from other  similar  complexes in the area.  Any
concessions  given at the inception of the lease are amortized  over the life of
the lease.

ITEM 3.     CONTROLS AND PROCEDURES

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

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

                           PART II - OTHER INFORMATION


ITEM 1.     LEGAL PROCEEDINGS

In March 1998, several putative unit holders of limited partnership units of the
Partnership  commenced an action  entitled  Rosalie  Nuanes,  et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of  California  for the  County  of San  Mateo.  The  plaintiffs  named as
defendants,  among others,  the  Partnership,  its Managing  General Partner and
several of their  affiliated  partnerships  and corporate  entities.  The action
purported  to  assert  claims  on  behalf  of a class of  limited  partners  and
derivatively  on behalf  of a number  of  limited  partnerships  (including  the
Partnership)  that are named as nominal  defendants,  challenging,  among  other
things,  the  acquisition  of  interests  in certain  Managing  General  Partner
entities by Insignia Financial Group, Inc.  ("Insignia") and entities that were,
at one  time,  affiliates  of  Insignia;  past  tender  offers  by the  Insignia
affiliates to acquire limited partnership units;  management of the partnerships
by the  Insignia  affiliates;  and the series of  transactions  which  closed on
October 1, 1998 and February 26, 1999 whereby  Insignia and Insignia  Properties
Trust,  respectively,  were merged into AIMCO.  The plaintiffs  sought  monetary
damages and equitable relief, including judicial dissolution of the Partnership.
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 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 opposed 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 ordered by the court,  was  submitted by the parties.  On July 10, 2002,  the
Court  entered an order  vacating the 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  could  have an  opportunity  to
discuss  settlement.  On October 30, 2002, the court entered an order  extending
the stay in effect through January 10, 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  Heller  action  was  brought  as a  purported
derivative  action,  and  asserted  claims for,  among other  things,  breach of
fiduciary duty, unfair competition,  conversion, unjust enrichment, and judicial
dissolution.  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.  Before  completing
briefing on the appeal, the parties stayed further  proceedings in the appeal in
light of a settlement.

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

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

On June 13, 2003, the Court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions.

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


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.

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

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

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

            b) Reports on Form 8-K:

                  Current  Report  on Form 8-K dated  April  15,  2003 and filed
                  April 25, 2003 disclosing the sale of North Springs Apartments
                  to an unrelated third party.



<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 13, 2003


<PAGE>


Exhibit 31.1

                                  CERTIFICATION


I, Patrick J. Foye, certify that:


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

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

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

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

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

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

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

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

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

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


Date: August 13, 2003

                                /s/Patrick J. Foye
                                Patrick J. Foye
                                Executive    Vice    President    of    Davidson
                                Diversified Properties,  Inc., equivalent of the
                                chief executive officer of the Partnership


<PAGE>


Exhibit 31.2

                                  CERTIFICATION


I, Paul J. McAuliffe, certify that:


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

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

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

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

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

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

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

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

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

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


Date: August 13, 2003

                                /s/Paul J. McAuliffe
                                Paul J. McAuliffe
                                Executive  Vice  President  and Chief  Financial
                                Officer of Davidson Diversified Properties,
                                Inc.,  equivalent of the chief financial officer
                                of the Partnership


<PAGE>


Exhibit 32.1


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



In connection  with the Quarterly  Report on Form 10-QSB of Davidson Income Real
Estate, L.P. (the  "Partnership"),  for the quarterly period ended June 30, 2003
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 13, 2003


                                           /s/Paul J. McAuliffe
                                    Name:  Paul J. McAuliffe
                                    Date:  August 13, 2003


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