SUPPLEMENT TO
                     AMENDED AND RESTATED OFFER TO PURCHASE

                                    (AIMCO)

                             AIMCO PROPERTIES, L.P.
      is offering to purchase up to 13,363.92 limited partnership units in

                       DAVIDSON INCOME REAL ESTATE, L.P.
                          FOR $60.26 PER UNIT IN CASH

     On February 16, 2005, we commenced an offer to purchase up to 13,363.92
limited partnership units of Davidson Income Real Estate, L.P. upon the terms
and subject to the conditions set forth in the Offer to Purchase and the related
Letter of Transmittal dated as of that date, which have been subsequently
amended and restated by the Amended and Restated Offer to Purchase and the
Amended and Restated Letter of Transmittal, each dated as of June 6, 2005
(which, together with any supplements or amendments, including this Supplement
and the Amended and Restated Offer to Purchase and the related Amended and
Restated Letter of Transmittal, collectively constitute the "Offer").

     THE PURPOSE OF THIS SUPPLEMENT IS TO SUPPLEMENT AND AMEND THE INFORMATION
CONTAINED IN THE AMENDED AND RESTATED OFFER TO PURCHASE PREVIOUSLY MAILED TO
YOU. WE URGE YOU TO READ THE INFORMATION IN THIS SUPPLEMENT AND THE OFFER
CAREFULLY FOR A DESCRIPTION OF OUR OFFER. SEE "RISK FACTORS" BEGINNING ON PAGE 4
OF THE AMENDED AND RESTATED OFFER TO PURCHASE PREVIOUSLY MAILED TO YOU FOR A
DESCRIPTION OF RISK FACTORS THAT YOU SHOULD CONSIDER IN CONNECTION WITH OUR
OFFER.

     Upon the terms and subject to the conditions set forth in the Offer, we
will accept up to 13,363.92 units validly tendered in response to our offer.
Your partnership's agreement of limited partnership prohibits any transfer of an
interest if such transfer, together with all other transfers during the
preceding 12 months, would cause 50% or more of the total interest in capital
and profits of your partnership to be transferred within such 12-month period.
Prior to expiration of the offer, the general partner of your partnership will
notify us of the number of units transferred during the preceding 12 months. If
units are tendered and not withdrawn that would otherwise cause such a transfer,
we will accept for payment and pay for the maximum number of units validly
tendered that would not violate the terms of your partnership agreement, and the
number of units accepted from each tendering unitholder will be prorated
according to the number of units so tendered, with appropriate adjustments to
avoid purchases of fractional units. See "THE OFFER -- Section 2. Acceptance for
Payment and Payment for Units" in the Amended and Restated Offer to Purchase
previously mailed to you.

     Our offer and your withdrawal rights will expire at midnight, New York City
time, on July 12, 2005, unless we extend the deadline.

     If you desire to tender any of your units in response to our offer, you
should complete and sign the Amended and Restated Letter of Transmittal that was
previously mailed to you in accordance with its instructions and mail and
deliver it and any other required documents to the Altman Group, Inc., which is
acting as the Information Agent in connection with our offer. If you have
already tendered your units, you need not take any further action to continue to
tender your units. If you have already tendered your units and would like to
withdraw any of your tendered units, you must comply with the requirements for
exercising your withdrawal rights as set forth in the Amended and Restated Offer
to Purchase.

     THE GENERAL PARTNER DOES NOT MAKE ANY RECOMMENDATION REGARDING WHETHER YOU
SHOULD ACCEPT OUR OFFER. YOU ARE ENCOURAGED TO CAREFULLY REVIEW THIS SUPPLEMENT,
THE AMENDED AND RESTATED OFFER TO PURCHASE, THE AMENDED AND RESTATED LETTER OF
TRANSMITTAL, AND ANY OTHER INFORMATION AVAILABLE TO YOU AND TO SEEK THE ADVICE
OF YOUR INDEPENDENT LAWYER, TAX ADVISOR AND/OR FINANCIAL ADVISOR WITH RESPECT TO
YOUR PARTICULAR CIRCUMSTANCES BEFORE DECIDING WHETHER OR NOT TO ACCEPT OUR
OFFER.

     NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THIS TRANSACTION, PASSED UPON THE
MERITS OF THIS TRANSACTION, OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE
DISCLOSURE IN THIS SUPPLEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

                                  July 7, 2005


VALUATION OF UNITS

     General.  As disclosed in the Amended and Restated Offer to Purchase, under
the section entitled "SPECIAL FACTORS -- Valuation of Units," we initially
determined our offer price by calculating a net equity value per unit, which is
equal to the amount that would be distributed to limited partners in the event
of a hypothetical winding up of the partnership, assuming that all of the
partnership's properties are sold at prices equal to our estimate of their gross
property values. The gross property value is directly comparable to the gross
sale price if a property were sold. Ordinarily, when a property is sold, the
terms of the mortgage on the property require that the outstanding balance be
repaid, together with a prepayment penalty. As a result, in calculating net
equity value, we deduct our estimate of such prepayment penalties from the gross
property value to arrive at a net property value.

     After calculating a net property value for each property owned by the
partnership, we add the net property values of all properties to arrive at an
aggregate net property value for the partnership. We then (i) add our estimate
of the value of all other assets of the partnership, and (ii) deduct the amount
of all liabilities of the partnership, including the mortgage debt (but not the
prepayment penalty which was deducted from the gross property value to produce
the net property value). The result is what we refer to as the net equity value
of the partnership. We then allocate a portion of the net equity value of the
entire partnership to the limited partners, which represents the percentage
allocable to the limited partners under the partnership agreement, and divide
this by the number of outstanding limited partnership units to determine a net
equity value per unit. In our Amended and Restated Offer to Purchase, dated June
6, 2005, we calculated a net equity value for your partnership of $60.26 per
unit, which is our offer price.

POSITION OF THE GENERAL PARTNER OF YOUR PARTNERSHIP WITH RESPECT TO THE OFFER

     As indicated in our Amended and Restated Offer to Purchase, in "SPECIAL
FACTORS -- Position of the General Partner of Your Partnership With Respect to
the Offer -- Factors Not in Favor of Fairness Determination," our estimates of
the gross property values for Covington Pointe Apartments and Lakeside
Apartments are approximately 67% and 74%, respectively, of the appraised values
determined by CBRE in May 2003 and April 2003, respectively, for the lenders in
connection with our refinancing of the indebtedness encumbering those
properties. The general partner believes that our offer price is fair despite
the fact that CBRE's 2003 appraised values for those properties are higher than
our estimates of their gross property values. CBRE's 2003 appraised values of
your partnership's properties were based on information available to CBRE at
that time, and no assurance can be given that the same conditions currently
exist. The general partner believes that our valuation method provides a
reasonably fair method to determine the offer price. In addition, the general
partner believes that it is not uncommon for real estate appraisals to overstate
property values. For example, AAA, which was retained to provide an appraisal in
2003, determined a final "as is" market value of $8,200,000 in 2003 for a
property owned by another partnership in which we control the general partner
and have made tender offers. However, in marketing the property for sale
recently, the general partner of that partnership found that the highest price a
prospective purchaser was willing to pay was only $6,550,000. The general
partner believes that an appraisal obtained by a lender in connection with a
financing transaction is more likely to overstate property values because of the
conflict of interest inherent in the appraiser's role in these situations. On
one hand, it is asked to value the property fairly so that the lender can be
comfortable that the loan does not exceed a specified percentage of the property
value. On the other hand, the appraiser often feels pressured to overstate
property values so that its client, the lender, can complete the transaction and
earn fees and income from the loan.

THE SETTLEMENT OF THE NUANES AND HELLER COMPLAINTS

     As disclosed in the Amended and Restated Offer to Purchase, under the
section entitled "THE OFFER -- Section 6. The Lawsuit and the Settlement -- The
Settlement of the Nuanes and Heller Complaints," on April 28, 2005, an objector
filed a petition for review with the California Supreme Court in connection with
the opinion vacating the order approving the settlement of the Nuanes and Heller
complaints and remanding for further findings. On May 18, 2005, AIMCO filed an
answer to the objector's petition.

     On June 10, 2005, the California Supreme Court denied the objector's
petition for review, and on June 21, 2005, the Court of Appeals sent the matter
back to the trial court. The parties intend to ask the trial court to make
further findings in connection with the settlement consistent with the Court of
Appeals' remand order. The Court of Appeals is also scheduled to hear oral
argument in the Heller appeal on July 27, 2005.

                                    *  *  *

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     QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THIS
SUPPLEMENT, THE AMENDED AND RESTATED OFFER TO PURCHASE OR THE AMENDED AND
RESTATED LETTER OF TRANSMITTAL, OR FOR A COMPLETE COPY OF AN APPRAISAL OF ANY OF
YOUR PARTNERSHIP'S PROPERTIES, MAY BE DIRECTED TO THE INFORMATION AGENT AT (800)
467-0821.

                    THE INFORMATION AGENT FOR THE OFFER IS:

                             THE ALTMAN GROUP, INC.

                                                                
             By Mail:                    By Overnight Courier:                     By Hand:
     1275 Valley Brook Avenue           1275 Valley Brook Avenue           1275 Valley Brook Avenue
       Lyndhurst, NJ 07071                Lyndhurst, NJ 07071                Lyndhurst, NJ 07071



                         For information, please call:
                           TOLL FREE: (800) 467-0821

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