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 September 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 0-15676


                     DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.
               (Exact name of registrant as specified in its charter)



           Delaware                                               62-1242599
(State or other jurisdiction of                                (I.R.S. Employer
 incorporation or organization)                              Identification No.)

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

                                 (864) 239-1000
                           (Issuer's telephone number)

<PAGE>



                         PART I - FINANCIAL INFORMATION


ITEM 1.     FINANCIAL STATEMENTS



                     DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.

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


                               September 30, 2003
<TABLE>
<CAPTION>


Assets
<S>                                                                          <C>
   Cash and cash equivalents                                                 $  887
   Receivables and deposits                                                      253
   Restricted escrows                                                            158
   Other assets                                                                  225
   Investment properties:
      Land                                                    $ 2,821
      Buildings and related personal property                   40,216
                                                                43,037
      Less accumulated depreciation                            (23,874)       19,163
                                                                            $ 20,686

Liabilities and Partners' Deficit
Liabilities
   Accounts payable                                                          $ 864
   Tenant security deposit liabilities                                           131
   Accrued property taxes                                                        546
   Other liabilities                                                             294
   Due to affiliates                                                           6,919
   Mortgage notes payable                                                     23,127

Partners' Deficit
   General partners                                            $ (224)
   Limited partners (1,011.5 units issued and
      outstanding)                                             (10,971)      (11,195)
                                                                            $ 20,686

            See Accompanying Notes to Consolidated Financial Statements

</TABLE>

<PAGE>

                     DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.

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

<TABLE>
<CAPTION>

                                        Three Months Ended           Nine Months Ended
                                           September 30,               September 30,
                                        2003          2002           2003          2002
                                                   (Restated)                   (Restated)

Revenues:
<S>                                    <C>           <C>           <C>            <C>
  Rental income                        $ 1,059       $ 1,159       $ 2,993        $ 3,484
  Other income                             140           129            428            415
  Casualty gain (Note D)                    --           167             62            167
      Total revenues                     1,199         1,455          3,483          4,066

Expenses:
  Operating                                685           581          1,852          1,908
  General and administrative                50            59            153            175
  Depreciation                             464           439          1,318          1,329
  Interest                                 566           492          1,530          1,527
  Property taxes                           189            92            422            303
      Total expenses                     1,954         1,663          5,275          5,242

Net loss                               $ (755)       $ (208)       $ (1,792)     $ (1,176)

Net loss allocated to general
  partners (2%)                         $ (15)        $ (4)         $ (36)         $ (24)
Net loss allocated to limited
  partners (98%)                          (740)         (204)        (1,756)        (1,152)

                                       $ (755)       $ (208)       $ (1,792)     $ (1,176)

Net loss per limited partnership
  unit                                $(731.59)     $(201.68)     $(1,736.04)   $(1,138.90)

            See Accompanying Notes to Consolidated Financial Statements

</TABLE>

<PAGE>

                     DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.

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

<TABLE>
<CAPTION>

                                     Limited
                                     Partnership     General      Limited
                                        Units        Partners    Partners      Total

<S>                                    <C>             <C>       <C>          <C>
Original capital contributions         1,013.0         $ 1       $ 20,240     $ 20,241

Partners' deficit at
   December 31, 2002                   1,011.5        $ (188)    $ (9,215)    $ (9,403)

Net loss for the nine months
   ended September 30, 2003                 --           (36)      (1,756)      (1,792)

Partners' deficit at
   September 30, 2003                  1,011.5        $ (224)    $(10,971)    $(11,195)

            See Accompanying Notes to Consolidated Financial Statements

</TABLE>

<PAGE>
                     DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.

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

                                                                    Nine Months Ended
                                                                      September 30,
                                                                    2003         2002
Cash flows from operating activities:                                         (Restated)
<S>                                                                <C>          <C>
  Net loss                                                         $(1,792)     $(1,176)
  Adjustments to reconcile net loss to net cash (used in)
   provided by operating activities:
     Depreciation                                                    1,318        1,329
     Amortization of mortgage discounts and loan costs                  52           52
     Bad debt expense                                                  200          195
     Casualty gain                                                     (62)        (167)
     Change in accounts:
      Receivables and deposits                                        (343)        (314)
      Other assets                                                     (68)         (45)
      Accounts payable                                                 (91)        (134)
      Tenant security deposit liabilities                               60            2
      Accrued property taxes                                           285          203
      Other liabilities                                                 39           (3)
      Due to affiliate                                                 264          203
         Net cash (used in) provided by operating activities          (138)         145

Cash flows from investing activities:
  Insurance proceeds received                                           62          394
  Property improvements and replacements                            (4,378)      (1,223)
  Net withdrawals from (deposits to) restricted escrows                635          (50)
         Net cash used in investing activities                      (3,681)        (879)

Cash flows from financing activities:
  Payments on mortgage notes payable                                  (130)        (120)
  Advances from affiliates                                           4,567          905
  Payments on advances from affiliates                                 (42)          --
         Net cash provided by financing activities                   4,395          785

Net increase in cash and cash equivalents                              576           51
Cash and cash equivalents at beginning of period                       311          247

Cash and cash equivalents at end of period                          $ 887        $ 298

Supplemental disclosure of cash flow information:
  Cash paid for interest                                           $ 1,547      $ 1,545

Supplemental disclosure of non-cash information:
  Property improvements and replacements included in accounts
   payable                                                          $ 842        $ 208

At December 31, 2002 and 2001, approximately $12,000 and $56,000,  respectively,
of property  improvements  and  replacements  were included in accounts  payable
which are included in property  improvements  and  replacements  during the nine
months ended September 30, 2003 and 2002, respectively.

            See Accompanying Notes to Consolidated Financial Statements

</TABLE>

<PAGE>

                     DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.

                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)


Note A - Basis of Presentation

The  accompanying   unaudited  consolidated  financial  statements  of  Davidson
Diversified Real Estate III, L.P. (the  "Partnership" or "Registrant") have been
prepared in accordance with generally accepted accounting principles for interim
financial  information and with the  instructions to Form 10-QSB and Item 310(b)
of Regulation S-B.  Accordingly,  they do not include all of the information and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements.  In the opinion of Davidson Diversified  Properties,  Inc.
(the  "Managing  General  Partner"),   all  adjustments  (consisting  of  normal
recurring  accruals)  considered  necessary  for a fair  presentation  have been
included. Operating results for the three and nine month periods ended September
30, 2003 are not necessarily  indicative of the results that may be expected for
the 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 year ended December 31, 2002.
The  Managing  General  Partner  is  a  wholly  owned  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) certain
payments to affiliates for services and (ii)  reimbursement  of certain expenses
incurred by affiliates on behalf of the Partnership.

Affiliates of the Managing  General  Partner are entitled to receive 5% of gross
receipts from both of the  Partnership's  investment  properties as compensation
for  providing  property  management  services.  The  Partnership  paid  to such
affiliates  approximately  $168,000  and  $200,000  for the  nine  months  ended
September  30,  2003 and 2002,  respectively,  which is  included  in  operating
expenses.

An affiliate of the Managing  General  Partner is entitled to  reimbursement  of
accountable  administrative  expenses  amounting to  approximately  $221,000 and
$141,000 for the nine months ended  September  30, 2003 and 2002,  respectively,
which  is  included  in  general  and  administrative  expenses  and  investment
properties. Included in the reimbursement of accountable administrative expenses
for the nine months ended September 30, 2003 and 2002 are construction oversight
costs of  approximately  $109,000  and $8,000,  respectively.  The  construction
management  service fees are based on a percentage of current year  additions to
the  investment  properties.  At September 30, 2003,  approximately  $472,000 of
reimbursements  for  services  and related  accrued  interest was accrued by the
Partnership   and  is  included  in  due  to  affiliates  on  the   accompanying
consolidated balance sheet.

During the nine months ended  September  30, 2003 and 2002,  an affiliate of the
Managing General Partner advanced the Partnership  approximately  $4,567,000 and
$905,000,  respectively,  to cover operational  expenses at Plainview Apartments
and the  Partnership.  These advances were made in accordance  with the terms of
the Partnership  Agreement.  At September 30, 2003, the balance of the advances,
including accrued interest, was approximately $6,447,000. Interest is charged at
the prime rate plus 2%. Interest expense was approximately  $125,000 and $53,000
for the nine months ended September 30, 2003 and 2002, respectively.  During the
nine months  ended  September  30,  2003,  the  Partnership  repaid  advances of
approximately   $42,000  to  an  affiliate  of  the  Managing  General  Partner.
Subsequent to September 30, 2003, an affiliate of the Managing  General  Partner
advanced   approximately   $232,000  to  the   Partnership  to  fund  additional
operational  expenses  at  Plainview   Apartments  and  advanced   approximately
$2,890,000 to the Partnership to complete the pay off of the remaining mortgages
for Salem Courthouse Apartments and related closing costs in connection with the
mortgage  refinancing  in the fourth  quarter  of 2003 (See Note E -  Subsequent
Event). The Partnership  expects to repay the advance from operations and/or the
proceeds from the eventual sale of the property.

During 2002, the Partnership insured both of 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  2003  the  Partnership  is  insuring  Salem
Courthouse  under this method and the  Managing  General  Partner  has  obtained
insurance coverage for Plainview  Apartments from a third party. During the nine
months ended  September 30, 2003 and 2002, the  Partnership was charged by AIMCO
and  its  affiliates  approximately  $36,000  and  $111,000,  respectively,  for
insurance coverage and fees associated with policy claims administration.

Note C - Plainview Apartments Redevelopment

During 2002 the Managing General Partner began a major redevelopment  project at
Plainview  Apartments.  The property  discovered  mold growth  relating to water
leaks in two buildings in October 2001 and  experienced  fires in December 2001,
January 2002 and August 2002. The property also needed to be updated due to many
new  properties  being built which  significantly  increased the  competition in
Plainview's market area and the property has had difficulty staying competitive.
Therefore,  in an effort to increase  occupancy  and become  competitive  in the
local market a  significant  redevelopment  project has been  undertaken  at the
property.  A significant number of units have been unrentable during the ongoing
redevelopment  project.  As of September  30, 2003, a majority of the units have
been restored to a leasable  state with work on the remaining  units expected to
be completed  during the fourth  quarter of 2003. The Managing  General  Partner
expects occupancy at Plainview  Apartments to return to historical levels during
the fourth quarter of 2003.

During the  redevelopment  period  certain  expenses are being  capitalized  and
depreciated  over the remaining life of the property.  For the nine months ended
September 30, 2003, these expenditures  included construction period interest of
approximately  $208,000, tax and insurance expenses of approximately $32,000 and
other construction period expenses of approximately $94,000.

Costs  capitalized  in the fourth  quarter of 2002 related to the  redevelopment
project were  retroactively  applied to the first,  second and third quarters of
2002.  Accordingly,  the accompanying statements of operations for the three and
nine  months  ended  September  30,  2002  have been  restated  to  reflect  the
capitalization  of these costs.  For the nine months ended  September  30, 2002,
capitalized  costs  included   construction  period  interest  of  approximately
$139,000,  tax  and  insurance  expenses  of  approximately  $28,000  and  other
construction period expenses of approximately $93,000.

Note D - Casualty Gain

During the fourth quarter of 2002 a casualty gain of approximately  $211,000 was
recorded at Plainview  Apartments related to a fire that occurred in August 2002
which caused damage to ten units of the complex.  The gain was the result of the
receipt in 2002 of insurance  proceeds of  approximately  $316,000 offset by the
write off of approximately  $105,000 of undepreciated  property improvements and
replacements.  During the nine  months  ended  September  30,  2003,  additional
insurance  proceeds of  approximately  $62,000 were received and recognized as a
casualty  gain.  As of September 30, 2003,  the  property's  mortgage  lender is
holding  approximately  $14,000 of the  insurance  proceeds to be  disbursed  as
reconstruction  is  completed.  These funds were  disbursed  to the  Partnership
during the  fourth  quarter of 2003.  Subsequent  to  September  30,  2003,  the
Partnership   received  the  final  proceeds  from  the  insurance   carrier  of
approximately  $130,000  and  will  recognize  an  additional  casualty  gain of
approximately $123,000 after the write-off of approximately $7,000 of additional
undepreciated  property  improvements and replacements during the fourth quarter
of 2003.

During  the nine  months  ended  September  30,  2002,  a net  casualty  gain of
approximately $167,000 was recorded at Plainview Apartments which was the result
of two separate  fires at the  property.  A December  2001 fire caused damage to
four units of the complex.  The gain associated with this fire was the result of
the  receipt  of  insurance   proceeds  of  approximately   $244,000  offset  by
approximately  $116,000 of undepreciated  property improvements and replacements
being written off.

A January 2002 fire caused  damage to an  additional  four units of the complex.
The gain  associated  with this fire was the result of the receipt of  insurance
proceeds  of  approximately   $150,000  offset  by  approximately   $111,000  of
undepreciated property improvements and replacements being written off.

Note E - Subsequent Event

On  October  15,  2003,  the  Partnership   refinanced  its  existing  mortgages
encumbering  Salem  Courthouse  Apartments.  The new loan was refinanced under a
permanent credit facility  ("Permanent  Credit Facility") with Fannie Mae, which
has a maturity of five years, with one five-year extension option. The Permanent
Credit Facility  includes  properties in other  partnerships that are affiliated
with the  Partnership.  The Permanent Credit Facility creates separate loans for
each  property that are not  cross-collateralized  or  cross-defaulted  with the
other property loans. Each note under this Permanent Credit Facility begins as a
variable  rate loan with the  option of  converting  to a fixed  rate loan after
three  years.  The interest  rate on the  variable  rate loans is the Fannie Mae
discounted  mortgage-backed  security  index plus 85 basis points.  The rate was
1.9% at November 1, 2003 and resets monthly.  Each loan automatically  renews at
the end of each month.  In  addition,  monthly  principal  payments are required
based on a  30-year  amortization  schedule  using the  interest  rate in effect
during the first month that any property is on the  Permanent  Credit  Facility.
The loans are prepayable without penalty.

The refinancing of the existing Salem Courthouse  Apartments  mortgages replaced
the first and second  mortgages  totaling  approximately  $7,799,000  with a new
mortgage  in the amount of  $5,200,000.  The  Partnership  recognized  a loss on
extinguishment  of debt of  approximately  $4,000  due to the  write-off  of the
unamortized  discount on the existing second mortgage  encumbering the property.
The Partnership  capitalized loan costs of  approximately  $75,000 in connection
with the refinancing  which will be amortized over the life of the new loan. Due
to the shortfall  between the new mortgage loan and the amount needed to pay off
the existing  mortgages,  the Partnership  received an advance of  approximately
$2,890,000  from  the  Managing  General  Partner  in  order  to pay off the old
mortgages  and pay other  closing  costs  resulting  from the  refinancing.  The
Partnership  expects to repay the advance  from  operations  and/or the proceeds
from the eventual sale of the property.

Note F - Legal Proceedings

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

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

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

On June 13, 2003, the Court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions.  On August 12, 2003, an objector
filed an appeal  seeking  to vacate  and/or  reverse  the  order  approving  the
settlement and entering judgment  thereto.  The Managing General Partner intends
to file a respondent's  brief in support of the order  approving  settlement and
entering judgment thereto.

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

On August 8, 2003 AIMCO  Properties  L.P., an affiliate of the Managing  General
Partner,  was served  with a  Complaint  in the United  States  District  Court,
District of Columbia alleging that AIMCO Properties L.P.  willfully violated the
Fair Labor Standards Act (FLSA) by failing to pay maintenance  workers  overtime
for all hours worked in excess of forty per week.  The  Complaint is styled as a
Collective  Action  under  the FLSA and seeks to  certify  state  subclasses  in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate  maintenance workers for
time  that they were  required  to be  "on-call".  Additionally,  the  Complaint
alleges AIMCO  Properties  L.P.  failed to comply with the FLSA in  compensating
maintenance  workers  for time that they  worked in  responding  to a call while
"on-call".  The  Complaint  also  attempts  to certify a subclass  for  salaried
service  directors who are challenging  their  classification as exempt from the
overtime  provisions of the FLSA.  AIMCO  Properties L.P. has filed an answer to
the Complaint denying the substantive  allegations.  Although the outcome of any
litigation  is  uncertain,  in the opinion of the Managing  General  Partner the
claims will not result in any material liability to the Partnership.

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

ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF 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 two apartment complexes. The
following  table sets forth the average  occupancy of these  properties  for the
nine months ended September 30, 2003 and 2002:

                                                 Average Occupancy
                                                 2003        2002
         Salem Courthouse
            Indianapolis, Indiana                 92%         91%

         Plainview Apartments
            Louisville, Kentucky                  61%         69%

Plainview  Apartments is located in a local market where the apartment  industry
has  been  soft  recently.  In  addition,  two of  the  buildings  at  Plainview
Apartments had roof leaks which has led to some mold growth,  several  buildings
have had units down as a result of fires and the  property  needed to be updated
in order to become  competitive  in the local  market.  These  factors  have all
contributed to  approximately  32% of the property's total available units being
vacated  during the nine months  ended  September  30, 2003 in order to expedite
reconstruction.  The Partnership  has engaged  architectural  and  environmental
engineering experts to perform corrective action on the affected  buildings.  As
of September  30, 2003, a majority of the units have been restored to a leasable
state with work on the  remaining  units  expected  to be  completed  during the
fourth  quarter of 2003.  The  Managing  General  Partner  expects  occupancy at
Plainview Apartments to return to historical levels during the fourth quarter of
2003.  The  Managing   General  Partner   anticipates  the  total  cost  of  the
redevelopment  project to be  approximately  $5,300,000  of which  approximately
$4,900,000  has been  expended as of  September  30,  2003.  These costs will be
funded from available cash flow from property  operations,  additional  advances
from affiliates of the Managing General Partner and insurance proceeds.

Results of Operations

The  Partnership  recognized a net loss for the nine months ended  September 30,
2003  of  approximately  $1,792,000  compared  to a net  loss  of  approximately
$1,176,000 for the same period in 2002. The Partnership's net loss for the three
month period ended September 30, 2003 was approximately $755,000 compared with a
loss of  approximately  $208,000 for the three months ended  September 30, 2002.
The increase in net loss for the nine month period ended  September  30, 2003 is
attributable  to a decrease  in total  revenues  with total  expenses  remaining
relatively  constant.  The  increase  in net loss  for the  three  months  ended
September  30,  2003 is  attributable  to a decrease  in total  revenues  and an
increase in total expenses.

The  decrease  in total  revenues  for the three and nine  month  periods  ended
September 30, 2003 is due to a decrease in rental income caused primarily by the
decrease in average  occupancy at Plainview  Apartments as discussed above and a
decrease in the  casualty  gains  recognized  during the  respective  periods at
Plainview Apartments.

During the fourth quarter of 2002 a casualty gain of approximately  $211,000 was
recorded at Plainview  Apartments related to a fire that occurred in August 2002
which caused damage to ten units of the complex.  The gain was the result of the
receipt in 2002 of insurance  proceeds of  approximately  $316,000 offset by the
write off of approximately  $105,000 of undepreciated  property improvements and
replacements.  During the nine  months  ended  September  30,  2003,  additional
insurance  proceeds of  approximately  $62,000 were received and recognized as a
casualty  gain.  As of September 30, 2003,  the  property's  mortgage  lender is
holding  approximately  $14,000 of the  insurance  proceeds to be  disbursed  as
reconstruction  is  completed.  These funds were  disbursed  to the  Partnership
during the  fourth  quarter of 2003.  Subsequent  to  September  30,  2003,  the
Partnership   received  the  final  proceeds  from  the  insurance   carrier  of
approximately  $130,000  and  will  recognize  an  additional  casualty  gain of
approximately $123,000 after the write-off of approximately $7,000 of additional
undepreciated  property  improvements and replacements during the fourth quarter
of 2003.

During  the nine  months  ended  September  30,  2002,  a net  casualty  gain of
approximately $167,000 was recorded at Plainview Apartments which was the result
of two separate  fires at the  property.  A December  2001 fire caused damage to
four units of the complex.  The gain associated with this fire was the result of
the  receipt  of  insurance   proceeds  of  approximately   $244,000  offset  by
approximately  $116,000 of undepreciated  property improvements and replacements
being written off.

A January 2002 fire caused  damage to an  additional  four units of the complex.
The gain  associated  with this fire was the result of the receipt of  insurance
proceeds  of  approximately   $150,000  offset  by  approximately   $111,000  of
undepreciated property improvements and replacements being written off.

The increase in total  expenses for the nine months ended  September 30, 2003 is
due to an increase in property  tax expense  partially  offset by  decreases  in
operating,  general and  administrative  and  depreciation  expenses.  Operating
expense decreased due to decreases in property, administrative,  management fees
and  maintenance  expenses  partially  offset by an increase in advertising  and
insurance expenses.  The decrease in property expense is primarily  attributable
to a decrease in water costs at Plainview Apartments due to several leaks in the
plumbing  system  contributing  to higher  costs  during the nine  months  ended
September 30, 2002. Administrative expenses decreased primarily due to decreases
in cleaning for the commons area and collection  and eviction  expenses at Salem
Courthouse  Apartments.  Management  fees  are  based  on  rental  revenues  and
decreased in correlation  with the decrease in rental revenues  discussed above.
The  decrease in  maintenance  expense was  primarily  due to an increase in the
capitalization of certain construction period operating costs in connection with
the  rehabilitation  project at Plainview  Apartments  as discussed  below.  The
increase in advertising  expense is due to an overall increase in advertising at
Plainview Apartments as the renovations are completed and units become available
to  lease.  Insurance  expense  increased  primarily  due to the  casualties  at
Plainview  Apartments.  Depreciation  expense  decreased  as  a  result  of  the
write-off of the damaged  units at  Plainview  Apartments  in 2002.  General and
administrative expense decreased due to a decrease in accountable reimbursements
paid to an  affiliate  of the  Managing  General  Partner.  Property tax expense
increased  as the  reduction  in  expense  due to the  capitalization  of  costs
associated with Plainview  Apartments,  discussed below, was more than offset by
an increase in property tax expense for Salem  Courthouse  Apartments,  which is
located in Indiana.  During  2003,  Indiana has  adjusted  its  methodology  for
assessing taxable values and tax rates, which resulted in a significant increase
in property tax expense.

The increase in total  expenses for the three month period ended  September  30,
2003 is  attributable  to increases  in  operating,  depreciation,  interest and
property   tax   expenses   slightly   offset  by  a  decrease  in  general  and
administrative  expenses.   Property  tax  expense  increased  and  general  and
administrative  expense  decreased  due  to the  reasons  discussed  above.  The
increase in operating expense for the three month period is due to a decrease in
the  capitalization  of  certain  construction  period  operating  costs  and an
increase in contract repair costs at Plainview and Salem Courthouse  Apartments.
Depreciation expense increased due to property improvements and replacements put
into  place  during  the past  twelve  months  which are now being  depreciated.
Interest  expense  increased  due  to  a  decrease  in  the   capitalization  of
construction  period interest  between the comparable three month periods and an
increase  in interest  related to  advances  from  affiliates  as advances  have
increased during 2003.

Included  in  general  and  administrative  expense  for the nine  months  ended
September 30, 2003 and 2002 are  reimbursements  to the Managing General Partner
allowed under the  Partnership  Agreement  associated with its management of the
Partnership.  Costs  associated  with quarterly and annual  communications  with
investors  and  regulatory  agencies  and  the  annual  audit  required  by  the
Partnership Agreement are also included.

During 2002 the Managing General Partner began a major redevelopment  project at
Plainview  Apartments.  The property  discovered  mold growth  relating to water
leaks in two buildings in October 2001 and  experienced  fires in December 2001,
January 2002 and August 2002. The property also needed to be updated due to many
new  properties  being built which  significantly  increased the  competition in
Plainview's market area and the property has had difficulty staying competitive.
Therefore,  in an effort to increase  occupancy  and become  competitive  in the
local market a  significant  redevelopment  project has been  undertaken  at the
property.  A significant number of units have been unrentable during the ongoing
redevelopment  project.  As of September  30, 2003, a majority of the units have
been restored to a leasable  state with work on the remaining  units expected to
be completed  during the fourth  quarter of 2003. The Managing  General  Partner
expects occupancy at Plainview  Apartments to return to historical levels during
the fourth quarter of 2003.

During the  redevelopment  period  certain  expenses are being  capitalized  and
depreciated  over the remaining life of the property.  For the nine months ended
September 30, 2003, these expenditures  included construction period interest of
approximately  $208,000, tax and insurance expenses of approximately $32,000 and
other construction period expenses of approximately $94,000.

Costs  capitalized  in the fourth  quarter of 2002 related to the  redevelopment
project were  retroactively  applied to the first,  second and third quarters of
2002.  Accordingly,  the accompanying statements of operations for the three and
nine  months  ended  September  30,  2002  have been  restated  to  reflect  the
capitalization  of these costs.  For the nine months ended  September  30, 2002,
capitalized  costs  included   construction  period  interest  of  approximately
$139,000,  tax  and  insurance  expenses  of  approximately  $28,000  and  other
construction period expenses of approximately $93,000.

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

Liquidity and Capital Resources

At  September  30,  2003,  the  Registrant  had  cash and  cash  equivalents  of
approximately $887,000 compared to approximately $298,000 at September 30, 2002.
Cash and cash  equivalents  increased  approximately  $576,000 from December 31,
2002 due to  approximately  $4,395,000 of cash provided by financing  activities
partially  offset  by  approximately  $3,681,000  and  $138,000  of cash used in
investing and  operating  activities,  respectively.  Cash provided by financing
activities  consisted of advances to the  Partnership  by the  Managing  General
Partner partially offset by principal payments on the first mortgage encumbering
Salem  Courthouse  Apartments and payments on advances from the Managing General
Partner.  Cash used in  investing  activities  consisted  primarily  of property
improvements  and  replacements  partially  offset by net  withdrawals  from the
restricted  escrow account  maintained by the mortgage lender and by the receipt
of additional  insurance  proceeds  related to the August 2002 fire at Plainview
Apartments.  The  Registrant  invests  its working  capital 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  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 both of the Partnership's properties are detailed below.

Plainview  Apartments:  During the nine months ended  September  30,  2003,  the
Partnership  completed  approximately  $4,879,000  in  capital  expenditures  at
Plainview  Apartments  arising from the  redevelopment  of the  property,  which
includes   capitalization  of  construction  period  interest  of  approximately
$208,000,  real estate  taxes of  approximately  $32,000 and other  construction
period  expenses  of  approximately  $94,000.  The  Partnership  also  completed
additional capital  expenditures of approximately  $177,000  consisting of floor
covering, air conditioning unit, water heater and plumbing fixture replacements.
These  expenditures  were funded primarily  through loans from affiliates of the
Managing  General  Partner.  The Partnership  evaluates the capital  improvement
needs of the  property  during  the  year  and  currently  expects  to  complete
approximately $336,000 for additional property redevelopment as mentioned above,
exclusive of capitalized  construction  period costs, and expects to complete an
additional $40,000 in capital improvements not related to property redevelopment
consisting primarily of floor covering  replacements,  plumbing,  appliances and
HVAC work.

Salem  Courthouse  Apartments:  During the nine months ended September 30, 2003,
the  Partnership  completed  approximately  $152,000 of capital  improvements at
Salem  Courthouse  Apartments,   consisting  primarily  of  floor  covering  and
appliance  replacements and air conditioning  upgrades.  These improvements were
funded  from  operating  cash flow and  replacement  reserves.  The  Partnership
evaluates  the capital  improvement  needs of the  property  during the year and
currently  expects to  complete  an  additional  $7,000 in capital  improvements
during the remainder of 2003. The additional  capital  improvements will consist
primarily of floor covering and appliance replacements.  Additional improvements
may be considered  during 2003 and will depend on the physical  condition of the
property as well as replacement  reserves and anticipated cash flow generated by
the property.

The additional capital expenditures,  exclusive of expenditures  associated with
the redevelopment project ongoing at Plainview Apartments, 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  and  exclusive  of
repayment  of  the  mortgage  indebtedness  encumbering  Salem  Courthouse.  The
mortgage  indebtedness  encumbering the Partnership's  investment  properties of
approximately  $23,127,000,  net of  discount,  requires  a balloon  payment  of
approximately  $15,336,000  due  on  November  15,  2010  related  to  Plainview
Apartments.  The  Managing  General  Partner  will  attempt  to  refinance  such
indebtedness  and/or  sell the  property  prior  to the  maturity  date.  If the
property cannot be refinanced or sold for a sufficient  amount,  the Partnership
will risk losing the property through foreclosure.  The Managing General Partner
refinanced the mortgages  encumbering  Salem Courthouse in October 2003. The new
mortgage  was not  sufficient  to repay the  existing  debt and  accordingly  an
affiliate of the Managing General Partner advanced  approximately  $2,890,000 to
cover the  shortfall  (see "Item 1.  Financial  Statements,  Note E - Subsequent
Event").

There  were no  distributions  to the  partners  during  the nine  months  ended
September 30, 2003 and 2002. 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. The Partnership's
cash available for  distribution is reviewed on a monthly basis. In light of the
redevelopment costs anticipated for 2003 at Plainview Apartments and the amounts
accrued and payable to the Managing General Partner at September 30, 2003, there
can be no assurance that the  Partnership  will generate  sufficient  funds from
operations, after required capital expenditures,  to permit any distributions to
its partners during the remainder of 2003 or subsequent  periods.  Distributions
may be restricted by the requirement to deposit net operating income (as defined
in the  mortgage  note) into the reserve  account  until the reserve  account is
funded  in an  amount  equal  to a  minimum  of $200 and a  maximum  of $400 per
apartment  unit for Salem  Courthouse  Apartments  for a total of  approximately
$78,000 to  $155,000.  The reserve  account  balance at  September  30, 2003 was
approximately $144,000.

Other

In addition to its indirect  ownership of the managing  general partner interest
in the Partnership,  AIMCO and its affiliates  owned 408.25 limited  partnership
units (the "Units") in the  Partnership  representing  40.36% of the outstanding
Units at September 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 AIMCO Properties, L.P., the operating partnership of AIMCO,
either through private  purchases or tender offers.  Pursuant to the Partnership
Agreement,  unitholders  holding a majority  of the Units are  entitled  to take
action with  respect to a variety of matters that  include,  but are not limited
to,  voting on certain  amendments  to the  Partnership  Agreement and voting to
remove the Managing General  Partner.  As a result of its ownership of 40.36% of
the outstanding  Units,  AIMCO and its affiliates are in a position to influence
all such 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
its sole stockholder.

Critical Accounting Policies and Estimates

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

Impairment of Long-Lived Assets

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

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

Revenue Recognition

The Partnership generally leases apartment units for twelve-month terms or less.
Rental income  attributable to leases is recognized  monthly as it is earned 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.
In addition, 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.

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

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

On June 13, 2003, the Court granted final approval of the settlement and entered
judgment in both the Nuanes and Heller actions.  On August 12, 2003, an objector
filed an appeal  seeking  to vacate  and/or  reverse  the  order  approving  the
settlement and entering judgment  thereto.  The Managing General Partner intends
to file a respondent's  brief in support of the order  approving  settlement and
entering judgment thereto.

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

On August 8, 2003 AIMCO  Properties  L.P., an affiliate of the Managing  General
Partner,  was served  with a  Complaint  in the United  States  District  Court,
District of Columbia alleging that AIMCO Properties L.P.  willfully violated the
Fair Labor Standards Act (FLSA) by failing to pay maintenance  workers  overtime
for all hours worked in excess of forty per week.  The  Complaint is styled as a
Collective  Action  under  the FLSA and seeks to  certify  state  subclasses  in
California, Maryland, and the District of Columbia. Specifically, the plaintiffs
contend that AIMCO Properties L.P. failed to compensate  maintenance workers for
time  that they were  required  to be  "on-call".  Additionally,  the  Complaint
alleges AIMCO  Properties  L.P.  failed to comply with the FLSA in  compensating
maintenance  workers  for time that they  worked in  responding  to a call while
"on-call".  The  Complaint  also  attempts  to certify a subclass  for  salaried
service  directors who are challenging  their  classification as exempt from the
overtime  provisions of the FLSA.  AIMCO  Properties L.P. has filed an answer to
the Complaint denying the substantive  allegations.  Although the outcome of any
litigation  is  uncertain,  in the opinion of the Managing  General  Partner the
claims will not result in any material liability to the Partnership.

ITEM 6      EXHIBITS AND REPORTS ON FORM 8-K

            a) Exhibits:

                  3     Partnership  Agreement dated July 8, 1985 and amended as
                        of  October  9, 1985 is  incorporated  by  reference  to
                        Exhibit  A to the  Prospectus  of the  Registrant  dated
                        October 28, 1985 as filed with the  Commission  pursuant
                        to Rule 424(b) under the Act.

                  3A    Second  Amendment dated April 1, 1986 to the Partnership
                        Agreement  dated July 8, 1985 as amended October 9, 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, 1986.

                  4     Certificate of Limited  Partnership  dated June 28, 1985
                        is  incorporated  by  reference  to  Exhibit  4  to  the
                        Registrant's   Registration   Statement   on  Form  S-11
                        (Registration No. 2-99257).

               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:

                  None filed during the quarter ended September 30, 2003.


<PAGE>


                                   SIGNATURES



In accordance with the  requirements of the Exchange Act, the Registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.



                                    DAVIDSON DIVERSIFIED REAL ESTATE III, L.P.


                                    By:   Davidson Diversified Properties, Inc.
                                          Managing General Partner


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


                                    By:   /s/Paul J. McAuliffe
                                          Paul J. McAuliffe
                                          Executive Vice President
                                          and Chief Financial Officer


                                    Date: November 12, 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
      Diversified Real Estate III, 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:  November 12, 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
      Diversified Real Estate III, 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:  November 12, 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  Diversified
Real Estate III,  L.P.  (the  "Partnership"),  for the  quarterly  period  ended
September 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:  November 12, 2003


                                           /s/Paul J. McAuliffe
                                    Name:  Paul J. McAuliffe
                                    Date:  November 12, 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.