<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

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

For the fiscal year ended     December 31, 1996  
                              -----------------

Commission file number             0-11973     
                              -----------------

                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP
------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

                Maryland                              52-1321492      
------------------------------------------        --------------------
    (State or other jurisdiction of               (I.R.S. Employer
     incorporation or organization)               Identification No.)

11200 Rockville Pike, Rockville, Maryland                20852         
------------------------------------------        --------------------
 (Address of principal executive offices)              (Zip Code)

(Registrant's telephone number,
including area code)                                 (301) 468-9200   
                                                  --------------------

           Securities registered pursuant to Section 12(b) of the Act:

                                                  Name of each exchange
          Title of each class                     on which registered  
------------------------------------------        ---------------------
                NONE                                        N/A

           Securities registered pursuant to Section 12(g) of the Act:

                            LIMITED PARTNERSHIP UNITS
-------------------------------------------------------------------------------
                                (Title of class)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]  No [ ]   

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K  (X)

     The partnership interests of the Registrant are not traded in any market. 
Therefore, the partnership interests had neither a market selling price nor an
average bid or asked price within the 60 days prior to the date of this filing.
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                         1996 ANNUAL REPORT ON FORM 10-K

                                TABLE OF CONTENTS

                                     PART I
                                     ------

                                                                 Page
                                                                 ----

Item 1.  Business   . . . . . . . . . . . . . . . . . . . .      I-1
Item 2.  Properties   . . . . . . . . . . . . . . . . . . .      I-6
Item 3.  Legal Proceedings  . . . . . . . . . . . . . . . .      I-7
Item 4.  Submission of Matters to a Vote
           of Security Holders  . . . . . . . . . . . . . .      I-7


                                     PART II
                                     -------

Item 5.  Market for the Registrant's Partnership
           Interests and Related Partnership Matters  . . .      II-1
Item 6.  Selected Financial Data  . . . . . . . . . . . . .      II-2
Item 7.  Management's Discussion and Analysis
           of Financial Condition and Results
           of Operations  . . . . . . . . . . . . . . . . .      II-3
Item 8.  Financial Statements and Supplementary Data  . . .      II-14
Item 9.  Changes in and Disagreements with Accountants
           on Accounting and Financial Disclosure   . . . .      II-14


                                    PART III
                                    --------

Item 10. Directors and Executive Officers
           of the Registrant  . . . . . . . . . . . . . . .      III-1
Item 11. Executive Compensation   . . . . . . . . . . . . .      III-2
Item 12. Security Ownership of Certain Beneficial
           Owners and Management  . . . . . . . . . . . . .      III-3
Item 13. Certain Relationships and Related Transactions   .      III-4


                                     PART IV
                                     -------

Item 14. Exhibits, Financial Statement Schedules and
           Reports on Form 8-K  . . . . . . . . . . . . . .      IV-1

Signatures  . . . . . . . . . . . . . . . . . . . . . . . .      IV-3

Exhibit Index . . . . . . . . . . . . . . . . . . . . . . .      IV-33
<PAGE>
                                     PART I
                                     ------


ITEM 1.   BUSINESS
          --------

     Capital Realty Investors-II Limited Partnership (the Partnership) is a
limited partnership which was formed under the Maryland Revised Uniform Limited
Partnership Act on March 23, 1983.  On May 6, 1983, the Partnership commenced
offering 50,000 limited partnership interests through a public offering which
was managed by Merrill Lynch, Pierce, Fenner and Smith, Incorporated. The
Partnership closed the offering on June 20, 1983 when it became fully
subscribed.

     The General Partners of the Partnership are C.R.I., Inc. (CRI), which is
the Managing General Partner, and current and former shareholders of CRI. 
Services for the Partnership are performed by CRI, as the Partnership has no
employees of its own.

     The Partnership was formed to invest in real estate, which is the
Partnership's principal business activity, by acquiring and holding a limited
partnership interest in limited partnerships (Local Partnerships).  As of
December 31, 1996, the Partnership had investments in twenty-two Local
Partnerships.  Each of these Local Partnerships owns a federal or state
government-assisted or conventionally financed apartment complex, which provides
housing principally to the elderly or to individuals and families of low or
moderate income.  The original objectives of these investments, not necessarily
in order of importance, were to:

     (1)  preserve and protect the Partnership's capital; 
     (2)  provide, during the early years of the Partnership's operations,
          current tax benefits to the partners in the form of tax losses which
          the partners may use to offset income from other sources;
     (3)  provide capital appreciation through increases in the value of the
          Partnership's investments and increased equity through periodic
          payments on the indebtedness on the apartment complexes; and
     (4)  provide cash distributions from sale or refinancing of the
          Partnership's investments and, on a limited basis, from rental
          operations.

See Part II, Item 7, Management's Discussion and Analysis of Financial Condition
and Results of Operations, for a discussion of factors affecting the original
investment objectives.

     The Local Partnerships in which the Partnership has invested were organized
by private developers who acquired the sites, or options thereon, applied for
applicable mortgage insurance and/or subsidies, and remain as the local general
partners in the Local Partnerships.  The Partnership became the principal
limited partner in these Local Partnerships pursuant to negotiations with these
developers who act as the local general partners.  However, in the event of
non-compliance with the Local Partnerships' partnership agreements, the local
general partner may be removed and replaced with another local general partner
or with an affiliate of the Partnership's Managing General Partner.  As a
limited partner, the Partnership's legal liability for obligations of the Local
Partnership is limited to its investment.  An affiliate of the Managing General
Partner of the Partnership is also generally a general partner of the Local
Partnerships.  In most cases, the local general partners of the Local
Partnerships retain responsibility for developing, constructing, maintaining,
operating and managing the project.  Additionally, the local general partners
and affiliates of the Managing General Partner may operate other apartment
complexes which may be in competition for eligible tenants with the Local
Partnerships' apartment complexes.

                                       I-1
<PAGE>
                                     PART I
                                     ------
ITEM 1.   BUSINESS - Continued
          --------

     Although each of the Local Partnerships in which the Partnership has
invested owns an apartment complex which must compete in the market place for
tenants, interest subsidies and/or rent supplements from governmental agencies
generally make it possible to offer certain of these dwelling units to eligible
tenants at a cost significantly below the market rate for comparable
conventionally financed dwelling units. Based on available data, the General
Partners believe there to be no material risk of market competition in the
operations of the apartment complexes described below which adversely impact the
Partnership, except in specific circumstances as described in Part II, Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations.

     The following is a schedule of the apartment complexes owned by Local
Partnerships in which the Partnership is a limited partner:













































                                       I-2
<PAGE>
                 SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS
             IN WHICH CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP
                                 HAS AN INVESTMENT(1)

<TABLE>
<CAPTION>
                                                                                                    Units           Expiration
                            Mortgage                                                            Authorized for          of
 Name and Location         Payable at           Financed and/or Insured        Number of         Rental Asst.        Section 8
of Apartment Complex      12/31/96 (2)          and/or Subsidized Under       Rental Units       Under Sec. 8       HAP Contract
--------------------      ------------       -----------------------------    ------------      --------------      -------------
<S>                       <C>                <C>                              <C>               <C>                 <C>
Arrowhead Apts.           $  3,927,242       Illinois Housing Development          200                40             05/31/01
 Palatine, IL                                 Authority (IHDA)

Beech Hill I                 2,894,810       Federal National Mortgage             200                39             08/31/98 (4)
 Manchester, NH                               Association (FNMA)/236

Beech Hill II                1,625,533       FNMA/236                              120                24             08/31/98 (4)
 Manchester, NH

Chevy Chase Park             3,754,306       Metropolitan Savings Bank             232               228             09/23/97 (4)
 Centerville, OH                             (MSB)/236

Country Place I              4,942,034       Maryland Community Development        192                38             08/09/99
 Burtonsville, MD                             Administration Section 221(d)(4)
                                              of the National Housing Act (NHA)

Country Place II             3,597,873       Reilly Mortgage Group/Section         120                24             08/29/00
 Burtonsville, MD                             221 (d)(4) of the NHA

Deer Grove Apts.            10,041,687       FNMA/Housing and Urban Development/   448                 0                --
 Palatine, IL                                 Section 221(d)(4) of the NHA

Four Winds West              1,007,795       GMAC HUD Insured through Section       62                62             10/17/97
 Birmingham, AL                               221 (d)(4) of the NHA/Section 8

Frenchman's Wharf II         7,923,103       Department of Housing and Urban       324                31             09/30/98 (4)
 New Orleans, LA                              Development

Golden Acres                 1,266,516       California Housing Finance Agency      46                45             09/28/13
 Chowchilla, CA                               (CHFA)

Mercy Terrace                8,643,120       Section 221(d)(4) of the NHA/         158               158             01/30/03
 San Francisco, CA                            Section 8

The Moorings                 3,662,743       IHDA                                  216                44             05/31/01
 Roselle, IL

Orangewood                   1,826,500       CHFA                                   40                 0                --
 Orange Cove, CA

Posada Vallarta             14,246,760       Conventional                          336                70             02/16/04
 Phoenix, AZ

Princeton Community          8,345,020       New Jersey Housing Finance Agency     239                26             01/01/98 (4)
 Village
 Princeton, NJ

Rock Glen                    3,787,748       Section 221(d)(4) of the NHA          241                 0                --
 Baltimore, MD
</TABLE>


                                       I-3
<PAGE>
                    SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS
                IN WHICH CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP
                                HAS AN INVESTMENT(1)

<TABLE>
<CAPTION>
                                                                                                    Units           Expiration
                            Mortgage                                                            Authorized for          of
 Name and Location         Payable at           Financed and/or Insured        Number of         Rental Asst.        Section 8
of Apartment Complex      12/31/96 (2)          and/or Subsidized Under       Rental Units       Under Sec. 8       HAP Contract
--------------------      ------------       -----------------------------    ------------      --------------      -------------
<S>                       <C>                <C>                              <C>               <C>                 <C>
Rolling Green at          $  2,336,586       Massachusetts Housing Finance         204                15             03/01/12
 Amherst                                      Agency (MHFA)/236
 Amherst, MA

Rolling Green at             5,267,856       MHFA/236                              404                77             01/10/12
 Fall River
 Fall River, MA

Tanglewood II                1,521,991       FNMA/Section 221(d)(3) of the NHA     192                 0                --
 Westwego, LA

Troy Manor Apts.               855,409       Farmers Home Administration Section    50                50             10/22/99
 Troy, AL                                     5/ Section 8

Westgate Tower Apts.         2,110,510       Michigan Sate Housing Develop-        148                43             12/01/13
 Westland, MI                                 ment Authority/236

Wexford Ridge                4,087,097       MSB/236                               246               242             09/30/98 (4)
 Madison, WI
--------------------      ------------                                        --------          --------
Totals(3) 22              $ 97,672,239                                           4,418             1,256
                          ============                                        ========          ========

</TABLE>




























                                       I-4
<PAGE>
                  SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS
              IN WHICH CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP
                        HAS AN INVESTMENT(1) - Continued

<TABLE>
<CAPTION>
                                                                                  Average Effective Annual
                                    Units Occupied As                                  Rental Per Unit
                                Percentage of Total Units                            for the Years Ended
                                    As of December 31,                                   December 31,
 Name and Location          ---------------------------------      -----------------------------------------------------
of Apartment Complex        1996   1995    1994   1993   1992        1996        1995        1994        1993       1992
--------------------        ----   ----    ----   ----   ----      --------    --------    --------    --------   --------
<S>                         <C>    <C>     <C>    <C>    <C>       <C>         <C>         <C>         <C>        <C>
Arrowhead Apts.              91%    93%     90%    83%    88%      $  9,205    $  9,025    $  9,282    $  8,534   $  8,465
 Palatine, IL

Beech Hill I                 99%   100%     99%    99%   100%         5,351       5,343       5,352       5,220      4,798
 Manchester, NH

Beech Hill II                99%    98%    100%    98%    99%         4,788       4,836       4,411       4,519      4,447
 Manchester, NH

Chevy Chase Park             97%    99%     98%   100%    99%         4,232       4,224       3,938       3,953      3,771
 Centerville, OH

Country Place I              96%    92%     95%    91%    91%         8,922       8,902       8,783       8,780      8,570
 Burtonsville, MD

Country Place II             93%    93%     95%    94%    89%         9,192       8,833       8,965       8,903      8,878
 Burtonsville, MD

Deer Grove Apts.             91%    93%     95%    96%    96%         8,426       8,383       7,831       7,714      7,274
 Palatine, IL

Four Winds West              99%    98%     95%    97%   100%         4,899       4,537      4,512        5,822      4,267
 Birmingham, AL

Frenchman's Wharf II         89%    90%     88%    88%    92%         4,295       4,171      4,156        4,235      4,192
 New Orleans, LA

Golden Acres                100%   100%    100%   100%   100%         6,297       6,271      6,191        6,011      5,905
 Chowchilla, CA

Mercy Terrace               100%   100%    100%   100%   100%        15,045      15,898     15,585       15,381     14,985
 San Francisco, CA

The Moorings                 97%    97%     97%    97%    94%         9,231       8,577      8,688        8,078      7,980
 Roselle, IL

Orangewood                  100%   100%     98%   100%   100%         2,353       2,700      2,852        2,900      2,987
 Orange Cove, CA

Posada Vallarta              89%    96%     97%    99%    90%         6,808       6,616      6,257        5,807      5,714
 Phoenix, AZ

Princeton Community
 Village                     98%    97%     97%    98%   100%         6,785       6,510      6,244        6,072      5,942
 Princeton, NJ

Rock Glen                    97%    94%     96%    95%    89%         4,724       4,864      4,862        4,778      4,923
 Baltimore, MD
</TABLE>

                                       I-5
<PAGE>
                   SCHEDULE OF PROJECTS OWNED BY LOCAL PARTNERSHIPS
                IN WHICH CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP
                         HAS AN INVESTMENT(1) - Continued

<TABLE>
<CAPTION>
                                                                                  Average Effective Annual
                                    Units Occupied As                                  Rental Per Unit
                                Percentage of Total Units                            for the Years Ended
                                    As of December 31,                                   December 31,
 Name and Location          ---------------------------------      -----------------------------------------------------
of Apartment Complex        1996   1995    1994   1993   1992        1996        1995        1994        1993       1992
--------------------        ----   ----    ----   ----   ----      --------    --------    --------    --------   --------
<S>                         <C>    <C>     <C>    <C>    <C>       <C>         <C>         <C>         <C>        <C>
Rolling Green at Amherst    100%   100%    100    100%   100%      $  7,333    $  7,314    $ 7,091     $  6,961   $  6,683
 Amherst, MA

Rolling Green at             96%    98%     99%    98%    98%         7,163       7,177      7,222        7,080      5,797
 Fall River
 Fall River, MA

Tanglewood II                98%    98%     99%   100%   100%         4,290       4,112      3,923        3,914      3,913
 Westwego, LA

Troy Manor Apts.            100%   100%    100%   100%   100%         4,680       4,681      4,596        5,261      4,365
 Troy, AL

Westgate Tower Apts.        100%    99%     98%    99%   100%         3,551       3,471       3,438       3,261      3,161
 Westland, MI

Wexford Ridge                98%    98%    100%   100%   100%         4,509       4,517       4,413       4,182      4,055
 Madison, WI
                            ----   ----    ----   ----   ----      --------    --------    --------    --------   --------
Totals(3) 22                 97%    97%     97%    97%    97%      $  6,458    $  6,407    $  6,300    $  6,244   $  5,958
                            ====   ====    ====   ====   ====      ========    ========    ========    ========   ========

</TABLE>

(1)  All properties are multifamily housing complexes.  No single
     tenant/resident rents 10% or more of the rentable square footage. 
     Residential leases are typically one year or less in length, with varying
     expiration dates, and substantially all rentable space is for residential
     purposes.

(2)  The amounts provided are the balances of first mortgage loans payable by
     the Local Partnerships as of December 31, 1996.

(3)  The totals for the percentage of units occupied and the average effective
     annual rental per unit are based on a simple average.

(4)  The Section 8 contract expiration date reflects a one-year extension from
     the original expiration date, in accordance with Congressional legislation.

     For additional information regarding the real estate of Local Partnerships
in which the Partnership has invested, see Part IV, Schedule III - "Real Estate
and Accumulated Depreciation of Local Partnerships in which Capital Realty
Investors-II Limited Partnership has invested."

     On February 19, 1997, Tanglewood Apartments Associates II Limited
Partnership sold Tanglewood II to a non-profit entity.  See Part II, Item 7,
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the notes to the financial statements for additional information
pertaining to the sale.

                                       I-6
<PAGE>
                                     PART I
                                     ------
ITEM 1.   BUSINESS - Continued
          --------

     On March 18, 1997, Palatine-Barrington Associates Limited Partnership sold
Deer Grove to an unaffiliated entity.  See Part II, Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations and the
notes to the financial statements for additional information pertaining to the
sale.  


ITEM 2.   PROPERTIES
          ----------

     Through its ownership of limited partnership interests in Local
Partnerships, Capital Realty Investors-II Limited Partnership indirectly holds
an interest in the underlying real estate.  See Part I, Item 1 and Schedule III
of Part IV, Item 14 for information pertaining to these properties.


ITEM 3.   LEGAL PROCEEDINGS
          -----------------

     There are no material legal proceedings to which the Partnership is a
party.


ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
          ---------------------------------------------------

     No matters were submitted to a vote of security holders during the fourth
quarter of 1996.































                                       I-7
<PAGE>
                                     PART II
                                     -------

ITEM 5.   MARKET FOR THE REGISTRANT'S PARTNERSHIP INTERESTS AND
          -----------------------------------------------------
               RELATED PARTNERSHIP MATTERS
               ---------------------------

     (a)  On August 29, 1996, Equity Resource Bay Fund (Bay Fund), a
          Massachusetts Limited Partnership which is affiliated with Equity
          Resources Group, the general partner of various partnerships that are
          Additional Limited Partners in the Partnership, initiated a tender
          offer to purchase 1,500 additional units in the Partnership at a price
          of $10 per Additional Limited Partner unit.  Bay Fund, which is
          unaffiliated with CRI, stated that it made the offer for the express
          purpose of holding the limited partnership units for investment
          purposes and not with a view to resale.  The purchase offer was
          determined solely at the discretion of Bay Fund and did not
          necessarily represent the fair market value of each Additional Limited
          Partner unit.  The Bay Fund offer expired on September 29, 1996, and
          as of March 10, 1997, Bay Fund held approximately 2.2% of the
          Additional Limited Partner units of the Partnership.  Other than the
          Bay Fund tender offer, it is not anticipated that there will be any
          formal market for resale of interests in the Partnership.  As a
          result, investors may be unable to sell or otherwise dispose of their
          interests in the Partnership.

     (b)  As of March 10, 1997 there were approximately 4,000 registered holders
          of limited partnership interests in the Partnership.

     (c)  No distributions were declared or paid by the Partnership during 1996
          or 1995.  The Partnership received distributions of $996,557 and
          $870,339 from Local Partnerships during 1996 and 1995, respectively. 
          Some of the Local Partnerships operate under restrictions imposed by
          the pertinent government agencies that limit the cash return available
          to the Partnership.




























                                      II-1
<PAGE>
                                     PART II
                                     -------

ITEM 6.   SELECTED FINANCIAL DATA
          -----------------------

<TABLE>
<CAPTION>
                                                               For the years ended December 31,
                                            1996            1995             1994             1993             1992
                                        ------------    ------------     ------------     ------------     ------------
<S>                                     <C>             <C>              <C>              <C>              <C>
Share of income (loss) from
  partnerships                          $    303,378    $    238,823     $   (121,724)    $    343,278     $   (455,139) 
Interest income                              104,989         181,845          125,477          100,172          120,086
Expenses                                  (6,127,668)     (6,268,596)      (5,605,037)      (5,148,865)      (4,499,106)
                                        ------------    ------------     ------------     ------------     ------------

Loss before extraordinary gain
  from extinguishment of debt             (5,719,301)     (5,847,928)      (5,601,284)      (4,705,415)      (4,834,159)
                                        ------------    ------------     ------------     ------------     ------------

Extraordinary gain from
  extinguishment of debt                   1,803,902              --               --               --               --
                                        ------------    ------------     ------------     ------------     ------------

Net loss                                $ (3,915,399)   $ (5,847,928)    $ (5,601,284)    $ (4,705,415)    $ (4,834,159)
                                        ============    ============     ============     ============     ============

Loss allocated to Additional
  Limited Partners (97%)                $ (3,797,937)   $ (5,672,490)    $ (5,433,246)    $ (4,564,252)    $ (4,689,134)
                                        ============    ============     ============     ============     ============

Loss per unit of Additional Limited
  Partnership Interest based
  on 50,000 units outstanding           $     (75.96)   $    (113.45)    $    (108.66)    $     (91.29)    $     (93.78)
                                        ============    ============     ============     ============     ============

Cash distribution per unit of
  Additional Limited Partnership
  Interest based on 50,000 units
  outstanding                           $         --    $         --     $         --     $         --     $         --
                                        ============    ============     ============     ============     ============

Total assets                            $  9,740,065    $ 11,550,373     $ 11,854,627     $ 12,953,688     $ 13,698,771
                                        ============    ============     ============     ============     ============
Total remaining due on
  investments, including accrued
  interest on purchase money notes      $ 50,725,540    $ 51,676,902     $ 49,371,965     $ 47,346,894     $ 45,293,505
                                        ============    ============     ============     ============     ============
</TABLE>













                                      II-2
<PAGE>
                                     PART II
                                     -------

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS
               -----------------------------------

                                     General
                                     -------

     The Partnership has invested, through Local Partnerships, primarily in
federal or state government-assisted apartment complexes intended to provide
housing to low and moderate income tenants.  In conjunction with such government
assistance, which includes federal and/or state financing at below-market
interest rates and rental subsidies, the Local Partnerships agreed to regulatory
limitations on (i) cash distributions, (ii) use of the properties and (iii) sale
or refinancing.  These limitations typically were designed to remain in place
for the life of the mortgage.

     The original investment objectives of the Partnership primarily were to
deliver tax benefits, as well as cash proceeds upon disposition of the
properties through the Partnership's investment in local limited partnerships. 
Only limited annual cash distributions from property operations were projected
because of the regulatory restrictions on cash distributions from the
properties.

     The original investment objectives of the Partnership have been affected by
the Tax Reform Act of 1986, which virtually eliminated many of the incentives
for the new construction or the sale of existing low income housing properties
by limiting the use of passive loss deductions. Therefore, the Managing General
Partner continues to concentrate on transferring the source of investment yield
from tax benefits to cash flow wherever possible and potentially enhancing the
ability of the Partnership to share in the appreciated value of the properties. 

     The acquisition of interests in certain Local Partnerships resulted in
purchase money note obligations of the Partnership.  The purchase money notes
are non-recourse obligations of the Partnership which typically mature fifteen
years from the dates of acquisition of the interests in particular Local
Partnerships.

     The Managing General Partner has been working to develop a strategy to sell
certain properties by utilizing opportunities presented by federal affordable
housing legislation, favorable financing terms and preservation incentives
available to nonprofit purchasers.  The Managing General Partner intends to
utilize part or all of the Partnership's net proceeds (after a 50% distribution
to limited partners) received from the sale of properties to fund reserves for
paying at maturity, prepaying or purchasing prior to maturity, at a discount
where possible, currently outstanding purchase money notes.  The Managing
General Partner believes that this represents an opportunity to reduce the
Partnership's long-term obligations.

     Some of the rental properties owned by the Local Partnerships have
mortgages which are federally insured under Section 236 or Section 221(d)(3)of
the National Housing Act, as amended.  The Low Income Housing Preservation and
Resident Homeownership Act of 1990 (LIHPRHA), which provided property owners
with restricted opportunities to sell low income housing, ended effective
September 30, 1996.  However, the U.S. Department of Housing and Urban
Development (HUD) received approximately $175 million to fund sales of
qualifying properties under the LIHPRHA program during the federal government's
fiscal year 1997, which began October 1, 1996.  Continued funding of the LIHPRHA



                                      II-3
<PAGE>
                                     PART II
                                     -------


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

program after fiscal year 1997 is uncertain.  There is no assurance that a sale
of any properties that previously qualified under the LIHPRHA program will
occur, except for Tanglewood II, as discussed below.

     Some of the rental properties owned by the Local Partnerships are financed
by state housing agencies.  The Managing General Partner has been working to
develop strategies to sell or refinance certain properties pursuant to programs
developed by these agencies or other potential buyers.  These programs may
include opportunities to sell the property to a qualifying purchaser who would
agree to maintain the property as low to moderate income housing in perpetuity,
or to refinance the property, or to obtain supplemental financing.  The Managing
General Partner continues to monitor certain state housing agency programs
and/or programs provided by certain lenders, to ascertain whether the properties
would qualify within the parameters of a given program and whether these
programs would provide an appropriate economic benefit to the limited partners
of the Partnership.

     Some of the rental properties owned by the Local Partnerships are dependent
on the receipt of project-based Section 8 Rental Housing Assistance Payments
(HAP) provided by HUD pursuant to HAP contracts.  In 1995 and 1996, HUD released
its Reinvention Blueprint and a revision to its Reinvention Blueprint which
contained proposals that have come to be known as "Mark-to-Market".  Congress,
HUD and the Clinton Administration continue to struggle with the Mark-to-Market
initiative.  This initiative was intended to deal with HUD's increasing burden
of funding HAP contracts.  Under the initiative, HUD would eliminate the
project-based subsidy and provide the residents with "sticky vouchers" which
would allow residents to move to other developments should they so choose. 
However, with the elimination of the HAP contract, there is no assurance that
rental properties would be able to maintain the rental income and occupancy
levels necessary to pay operating costs and debt service.  The initiative will
impact those properties that have HAP contracts with shorter terms than that of
the underlying property mortgage.  For instance, some properties may have a 20-
year HAP contract while the underlying mortgage has a 40-year term.  In the
interim, Congress has authorized one-year extensions for properties with HAP
contracts expiring during the government's fiscal year 1997, which began October
1, 1996.  In light of recent political scrutiny of appropriations for HUD
programs, continued funding of annual renewals for Section 8 HAP contracts
expiring after fiscal year 1997 is uncertain.

     With the ending of the LIHPRHA program and with the uncertainty surrounding
renewals of expiring Section 8 HAP contracts, the Managing General Partner is
developing new strategies to deal with the ever changing environment of
affordable housing policy.  Section 236 and Section 221(d)(3) properties that
are in the 18th year of their mortgage may be eligible for pre-payment of the
mortgage.  Properties with expiring Section 8 HAP contracts may become
convertible to market-rate apartment properties.  Currently, there are a few
lenders that will provide financing either to prepay the existing mortgage or
provide additional funds to allow the property to convert to market rate units. 
Where opportunities exist, the Managing General Partner will continue to work
with the Local Partnerships to develop a strategy that makes economic sense for
all parties involved.

     In 1990, CRI, as managing general partner of the Partnership and various
other entities, subcontracted certain property-level asset management functions

                                      II-4
<PAGE>
                                     PART II
                                     -------


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

for certain properties to Capital Management Strategies, Inc. (CMS).  Among
these properties were properties owned by some of the Local Partnerships in
which the Partnership invested.  CMS was formed by Martin C. Schwartzberg, a
nominal general partner of the Partnership and a former stockholder of CRI, when
he retired from CRI and its related businesses as of January 1, 1990.  Mr.
Schwartzberg agreed not to act as a general partner with respect to any of the
CRI-sponsored partnerships, including this Partnership, and has not done so
since that time.  In late 1995, a dispute arose between CRI and CMS over the
funding level of the 1996 contract for CMS.  On November 9, 1995, CRI filed a
complaint against CMS to determine the proper amount of fees to be paid in 1996
under the asset management agreement.  CMS answered on January 10, 1996, but
asserted no counterclaims.

     Thereafter, Mr. Schwartzberg launched a hostile consent solicitation to be
designated as managing general partner of approximately 125 private partnerships
sponsored by CRI.  On January 18, 1996, Mr. Schwartzberg and CMS filed a
complaint in the Circuit Court of Montgomery County, Maryland (the Circuit
Court), against CRI and Messrs. Dockser and Willoughby (who are general partners
of the Partnership) alleging, among other things, that CRI and Messrs. Dockser
and Willoughby breached the asset management agreement pursuant to which Mr.
Schwartzberg's company, CMS, agreed to perform limited functions related to
property-level issues for a portion of CRI's subsidized housing portfolio
(including some of the properties in which the Partnership invested), by
reducing the proposed budget for 1996.  The Partnership was not named as a
defendant in this action.  Messrs. Dockser and Willoughby entered an answer
denying all of Mr. Schwartzberg's claims.  On February 6, 1996, CRI terminated
the CMS contract for cause.  (CRI subsequently retained an
independent asset management company to perform functions previously performed
by CMS.)  Mr. Schwartzberg and CMS responded to the contract termination by
filing a motion for injunctive relief in the Circuit Court, asking the court to
enjoin CRI from terminating the contract.  In a ruling issued on February 12,
1996, the Circuit Court, among other things, refused to grant the injunction
requested by CMS.  On February 12, 1996, the Circuit Court also issued a
memorandum opinion and order enjoining CMS and Mr. Schwartzberg from disclosing
information made confidential under the asset management agreement.

     Following subsequent litigation, none of which involved the Partnership, on
June 12, 1996, Mr. Schwartzberg, CRI and others entered an agreement (which
contemplates the execution of a subsequent definitive agreement) to resolve the
disputes between CRI and CMS.  The Partnership was not a signatory to the
agreement.  As part of the resolution, Mr. Schwartzberg withdrew any derogatory
statements he made about CRI and its principals.  Upon execution of the
definitive agreement, Mr. Schwartzberg shall withdraw as a General Partner of
this Partnership and his interest will become that of a Special Limited Partner.
As of March 10, 1997, CRI and Mr. Schwartzberg were unable to agree on the
language of various provisions of the definitive agreement and have agreed to
submit the open issues to arbitration.  The Partnership is not a party to the
arbitration proceeding.

                          Financial Condition/Liquidity
                          -----------------------------

     As of December 31, 1996, the Partnership had approximately 4,000 investors
who subscribed to a total of 50,000 units of limited partnership interests in

                                      II-5
<PAGE>
                                     PART II
                                     -------


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

the original amount of $50,000,000.  The Partnership has made investments in
twenty-two Local Partnerships.  The Partnership's liquidity, with unrestricted
cash resources of $2,128,849 as of December 31, 1996, along with anticipated
future cash distributions from the Local Partnerships, is expected to meet its
current and anticipated operating cash needs.  The Partnership has determined
that the carrying amount of its cash and cash equivalents approximates fair
value.  As of March 10, 1997, there were no material commitments for capital
expenditures.

     During 1996, 1995 and 1994, the Partnership received cash distributions of
$996,557, $870,339 and $793,007, respectively, from the Local Partnerships.

     The Partnership's obligations with respect to its investments in Local
Partnerships, in the form of purchase money notes having a principal balance of
$20,140,678 (exclusive of unamortized discount on purchase money notes of
$5,159,494) plus accrued interest of $30,584,862 as of December 31, 1996, are
payable in full upon the earliest of:  (1) sale or refinancing of the respective
Local Partnership's rental property; (2) payment in full of the respective Local
Partnership's permanent loan; or (3) maturity.  Purchase money notes in an
aggregate principal amount of $2,100,000 matured on December 31, 1996, as
discussed below.  Purchase money notes in an aggregate principal amount of
$1,900,000 mature on December 31, 1997, as discussed below.  The remaining
purchase money notes mature in 1998 and 1999.  The purchase money notes are
generally secured by the Partnership's interest in the respective Local
Partnership.  There is no assurance that the underlying properties will have
sufficient appreciation and equity to enable the Partnership to pay the purchase
money notes' principal and accrued interest when due.  If a purchase money note
is not paid in accordance with its terms, the Partnership will either have to
renegotiate the terms of repayment or risk losing its partnership interest in
the Local Partnership.  The Managing General Partner is continuing to
investigate possible alternatives to reduce the Partnership's long-term debt
obligations.  These alternatives include, among others, retaining the cash
available for distribution to meet the purchase money note requirements, buying
out certain purchase money notes at a discounted price, extending the due dates
of certain purchase money notes, or refinancing the respective properties'
underlying debt and using the Partnership's share of the proceeds to pay off or
buy down certain purchase money note obligations.

     Purchase money notes relating to Wexford Ridge Associates in the principal
amount of $1,900,000 mature on December 31, 1997.  The Managing General Partner
anticipates negotiating with the purchase money note holders for a five year
extension on the purchase money notes.  There is no assurance that the Managing
General Partner will reach an agreement of any kind with the noteholders. 
Accordingly, there can be no assurance that the Partnership will be able to
retain its interest in the Local Partnership.  The uncertainty about the
continued ownership of the Partnership's interest in the related Local
Partnership does not impact the Partnership's financial condition because the
related purchase money notes are nonrecourse and secured solely by the
Partnership's interest in the Local Partnership.  Therefore, should the
investment in Wexford Ridge not produce sufficient value to satisfy the purchase
money notes related to Wexford Ridge, the Partnership's exposure to loss is
limited since the amount of the nonrecourse indebtedness exceeds the carrying



                                      II-6
<PAGE>
                                     PART II
                                     -------


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

amount of the investment in and advances to the Local Partnership.  Thus, even a
complete loss of this investment would not have a material impact on the
operations of the Partnership.

     On May 23, 1994, the local general partner of Tanglewood Apartments
Associates II Limited Partnership (Tanglewood II) filed a notice of intent to
participate under LIHPRHA.  On July 11, 1996, the local managing general
partner's plan of action regarding the sale of Tanglewood II under the LIHPRHA
program was approved by HUD.  On February 19, 1997, Tanglewood II sold the
property, a 192-unit apartment complex located in Westwego, Louisiana, under the
LIHPRHA program.  The sale of the property generated net cash proceeds to the
Partnership of $933,987.  The proceeds were net of $1,385,154 used to retire, at
a discount, the Partnership's purchase money note obligation with respect to the
property.  The sale provided proceeds to the Partnership in excess of its
investment in the Local Partnership, and will result in a net financial
statement gain in 1997 of approximately $3.2 million, of which approximately
$1.7 million will result from the retirement of the purchase money note
obligation with respect to the property.  The federal tax gain is estimated to
be approximately $4.9 million.  The Managing General Partner of the Partnership
and/or its affiliates will not receive fees relating to the sale.

     The Partnership defaulted on its purchase money note relating to Rock Glen
Limited Partnership (Rock Glen) on August 1, 1995 when the note matured and was
not paid.  The noteholder signed a standstill agreement which expired on October
31, 1995.  The Managing General Partner made an offer to the noteholder to
extend the purchase money note due date to August 2000.  This offer was rejected
by the noteholder.  On January 11, 1996, the Partnership paid off the purchase
money note at a discount, resulting in a gain on extinguishment of debt of
$1,803,902.

     The Partnership defaulted on its purchase money notes relating to Beech
Hill Development Co. (Beech Hill I) and Beech Hill Development Co. II (Beech
Hill II) on August 1, 1995 when the notes matured and were not paid.  On March
29, 1996, the noteholders agreed to extend the purchase money note due dates to
January 1, 1998.  Under the agreement, the Partnership will pay the purchase
money noteholders of Beech Hill I and Beech Hill II all annual cash flow
distributions received from the related Local Partnerships in excess of $5,000
and $2,500, respectively.  The Partnership received cash flow distributions of
$5,000 and $2,500 from Beech Hill I and II, respectively, during the year ended
December 31, 1996.  Cash flow distributions of $60,365 and $27,500 were paid
directly by Beech Hill I and Beech Hill II, respectively, to the purchase money
note holders during the year ended December 31, 1996.  There were no annual cash
flow distributions made to the Partnership from the related Local Partnerships
during the year ended December 31, 1995.  Also under the agreement, documents
transferring the Partnership's interests in the related Local Partnerships to
the noteholders have been placed in escrow and would be released to the
noteholders upon a future default by the Partnership on the respective purchase
money notes.

     The Partnership defaulted on its purchase money notes relating to Chevy
Chase Park, Limited (Chevy Chase) on December 31, 1996 when the notes matured
and were not paid.  The default amount included principal and accrued interest
of $2,100,000 and $3,553,912, respectively.  As of March 10, 1997 principal and
accrued interest totalling $2,100,000 and $3,608,885, respectively, were due. 

                                      II-7
<PAGE>
                                     PART II
                                     -------


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

The Managing General Partner is currently negotiating a five year extension of
the purchase money notes with the noteholders.  The Managing General Partner is
also awaiting the potential future sale of the property under the LIHPRHA
program.  There is no assurance that a sale will take place under the LIHPRHA
program, nor is there any assurance that any agreement will be reached with the
noteholders.  As such, there is no assurance that the Partnership will be able
to retain its interest in Chevy Chase.  The uncertainty regarding the continued
ownership of the Partnership's interests in Chevy Chase does not impact the
Partnership's financial condition because the related purchase money notes are
nonrecourse and secured solely by the Partnership's interest in the related
Local Partnership.  Therefore, should the investment in Chevy Chase not produce
sufficient value to satisfy the related purchase money notes, the Partnership's
exposure to loss is limited since the amount of the nonrecourse indebtedness
exceeds the carrying amount of the investment in and advances to the Local
Partnership.  Thus, even a complete loss of this investment would not have a
material impact on the operations of the Partnership.

     The Partnership has determined that it is not practicable to estimate the
fair value of the purchase money notes, either individually or in the aggregate,
due to:  (1) the lack of an active market for this type of financial instrument,
(2) the variable nature of purchase money note interest payments as a result of
fluctuating cash flow distributions received from the related Local
Partnerships, and (3) the excessive costs associated with an independent
appraisal of the purchase money notes.

     The Partnership closely monitors its cash flow and liquidity position in an
effort to ensure that sufficient cash is available for operating requirements. 
In 1996 and 1995, the receipt of distributions from Local Partnerships was
adequate to support operating cash requirements.  Cash and cash equivalents
decreased during 1996 as a result of the pay-off of the Rock Glen purchase money
note, as discussed above.

                              Results of Operations
                              ---------------------

     The Partnership's net loss decreased in 1996 from 1995 primarily due to the
extraordinary gain on extinguishment of the Rock Glen purchase money note, as
discussed above.  Contributing to the decrease in net loss was a decrease in
interest expense which was also due to the extinguishment of the Rock Glen
purchase money note, as discussed above.  Also contributing to the decrease in
net loss was an increase in share of income from partnerships primarily due to
decreased depreciation and maintenance expense at two properties.  Partially
offsetting the decrease in net loss was a decrease in interest income as a
result of decreased cash and cash equivalent balances in 1996 and an increase in
professional fees due to legal fees incurred in connection with the Arrowhead
and Moorings litigation, as discussed below.

     The Partnership's net loss increased in 1995 from 1994 primarily due to an
increase in interest expense as a result of the amortization of imputed
interest.  Partially offsetting the increase in net loss was an increase in
share of income from Local Partnerships principally due to the loss in 1994
resulting from the pay-off of the remaining Country Place I and II purchase



                                      II-8
<PAGE>
                                     PART II
                                     -------


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

money notes, as discussed below.  Also partially offsetting the increase in net
loss was an increase in interest income resulting from increased yields on
investments and higher cash balances during 1995.

     The purchase money notes originated from 1983 through 1984. When they were
issued, the market interest rate was approximately 15%, while the stated
interest rates ranged from 9% to 12%. The notes were discounted as required by
Generally Accepted Accounting Principles, and a simple/compound method was used
at the stated interest rate for tax purposes and the compound method at the
market interest rate was used for book purposes. As the book interest is being
compounded, the interest expense for book purposes will eventually surpass the
interest expense for tax purposes, thereby reducing the discount and increasing
the interest expense.  In fiscal year 1996, all properties with purchase money
notes that has not previously matured had book interest which exceeded the tax
interest.  This increase in interest expense and the resulting reduction in the
discount is expected to increase in future years.

     For financial reporting purposes, the Partnership, as a limited partner in
the Local Partnerships, does not record losses from the Local Partnerships in
excess of its investment to the extent that the Partnership has no further
obligation to advance funds or provide financing to the Local Partnerships.  As
a result, the Partnership's recognized losses for the years ended December 31,
1996, 1995 and 1994 did not include losses of $3,526,546, $3,522,606 and
$3,493,216, respectively.  The Partnership's net loss recognized from the Local
Partnerships is generally expected to decrease in subsequent years as the
Partnership's investments in the Local Partnerships are reduced to zero. Accord-
ingly, excludable losses are generally expected to increase. Distributions of
$247,917, $248,235 and $113,392, received from eight, six and five Local
Partnerships, respectively, during 1996, 1995 and 1994, respectively, were
offset against the respective years' recorded losses because these amounts were
in excess of the Partnership's investment.

     The local general partner of Lake Properties Limited Partnership
(Frenchman's Wharf II), in conjunction with the Managing General Partner,
engaged in extensive negotiations with HUD, holder of the mortgage on the
property, to extend the previous workout arrangement related to the mortgage
loan on the property, which expired December 1990.  On April 30, 1996, the local
general partner received approval from HUD for a four-year workout.  Under the
workout agreement, Frenchman's Wharf II will make minimum monthly payments to
HUD, consisting of a service charge and tax escrow.  Additionally, Frenchman's
Wharf II will make monthly interest payments representing approximately 50%,
65%, 85% and 100% of the interest due on the outstanding principal balance of
the note for the periods July 1 through June 30 during the years 1996 through
2000, respectively.  As of March 10, 1997, Frenchman's Wharf II had made all
monthly payments in accordance with the workout arrangement.  There is, however,
no assurance that the Local Partnership will be able to comply with the terms of
the workout arrangement.

     To cover operating deficits incurred in prior years for Frenchman's Wharf
II, the Partnership advanced funds totalling $324,410 as of both December 31,
1996 and December 31, 1995.  The last advance was made to Frenchman's Wharf II
in March 1987.  The Partnership does not expect to advance any additional funds
in connection with Frenchman's Wharf II's loan workout with HUD.  These loans,
together with accrued interest of $187,372 as of both December 31, 1996 and

                                      II-9
<PAGE>
                                     PART II
                                     -------


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

December 31, 1995, are payable from cash flow of Frenchman's Wharf II after
payment of first-mortgage debt service and after satisfaction by the Partnership
of certain other interest obligations on the purchase money notes relating to
the Local Partnership.  There is no assurance that the Local Partnership, upon
expiration of the workout, will be able to repay the loans in accordance with
the terms.

     The purchase money notes related to Frenchman's Wharf II in the principal
amount of $3,150,000 which were initially due to mature on June 1, 1988 have
been extended to mature on June 1, 1998.  In conjunction with the four-year
workout agreement, the Partnership is currently negotiating with the purchase
money note holders to reach an extension agreement which would be coterminous
with the expiration of the HUD workout arrangement.  There is no assurance that
the noteholders will consent to an extension agreement.  As of March 10, 1997,
the noteholders had not given consent to an extension agreement.

     The report of the auditors on the financial statements of Frenchman's Wharf
II for the year ended December 31, 1996 indicated that substantial doubt exists
about the ability of the Local Partnership to continue as a going concern due to
the Local Partnership's default on its mortgage and the expiration of its
Section 8 HAP contract with HUD on November 30, 1997.  The report of the
auditors on the financial statements of Frenchman's Wharf II for the year ended
December 31, 1995 indicated that substantial doubt exists about the ability of
the Local Partnership to continue as a going concern due to the property's
recurring operating deficits and the Local Partnership's default on its
mortgage.  The uncertainty about the Local Partnership's continued ownership of
the property does not impact the Partnership's financial condition because the
related purchase money note is nonrecourse and secured solely by the
Partnership's interest in the Local Partnership.  Therefore, should the
investment in Frenchman's Wharf II not produce sufficient value to satisfy the
related purchase money note, the Partnership's exposure to loss is limited since
the amount of the nonrecourse indebtedness exceeds the carrying amount of the
investment in and advances to the Local Partnership.  Thus, even a complete loss
of this investment would not have a material impact on the operations of the
Partnership.

     On January 31, 1996, the local managing general partner of Palatine-
Barrington Associates Limited Partnership (Deer Grove) received an offer to sell
the property to an unaffiliated entity.  This offer was rejected by the local
managing general partner.  On September 13, 1996, the local  managing general
partner of Deer Grove received another offer to sell the property.  The local
managing general partner accepted the offer and, on March 18, 1997, Deer Grove
sold the property, a 448-unit apartment complex located in Palatine, Illinois. 
The sale of the property generated cash proceeds to the Partnership of $3.4
million at closing.  The Partnership anticipates receiving additional proceeds
upon final release of the property's reserves.  The proceeds received at closing
were in excess of the Partnership's investment in the Local Partnership and will
result in a net financial statement gain in 1997 of approximately $3.4 million. 
The tax gain is estimated to be approximately $17.8 million.

     Posada Associates Limited Partnership (Posada Vallarta Apartments) was
operating under an extension of a three-year workout agreement with HUD, the
holder of the mortgage.  The workout provided for, among other things, a minimum
monthly debt service payment, with excess cash, if any, being applied to

                                      II-10
<PAGE>
                                     PART II
                                     -------


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

delinquent interest.  All debt service payments were made in accordance with the
workout.  In June 1995, the three-year workout which originally expired on
October 1, 1995 was extended to October 1, 1996.  In June 1996, HUD sold the
mortgage loan to a third party.  The new mortgagee issued a notice of default
and acceleration of the loan to Posada Vallarta Apartments.  The notice was
determined to be in error, and on July 8, 1996 the notice of default and
acceleration was withdrawn by the new mortgagee.  The workout agreement related
to Posada Vallarta Apartments provided that upon cancellation of the workout
agreement, the loan would be recast at an annual interest rate of 7.5%, if
certain conditions are satisfied.  As of October 1, 1996, the expiration of the
workout agreement, the local managing general partner and the new mortgagee were
disputing whether or not those conditions had been satisfied.  On October 1,
1996, the Local Partnership made a monthly payment, and has continued to make
such monthly payments, on the debt in the amount which would be due if the loan
is recast at a 7.5% annual interest rate.  The new mortgagee made an offer to
extend the workout agreement for two years.  The local managing general partner
made a counter-offer to extend the workout agreement for ten years.  On February
6, 1997, the local managing general partner and the new mortgagee reached an
agreement in principle to recast the loan at a 7.5% annual interest rate with a
ten-year call provision, as stated in the workout agreement.  As of March 10,
1997, the parties are negotiating revised loan documents implementing their
agreement.  There is no assurance that a final agreement will be reached on
these documents.  Should the mortgagee begin foreclosure proceedings, the
Partnership intends to vigorously defend such action.

     The report of the auditors on the financial statements of Posada Vallarta
Apartments for the year ended December 31, 1996 indicates that substantial doubt
exists about the ability of Posada Vallarta Apartments to continue as a going
concern due to the uncertainty about the Local Partnership's continued ownership
of the property due to the potential foreclosure of the property.  The
uncertainty about the Local Partnership's continued ownership of the property
does not impact the Partnership's financial condition because the related
purchase money note is nonrecourse and secured solely by the Partnership's
interest in the Local Partnership.  Therefore, should the investment in Posada
Vallarta Apartments not produce sufficient value to satisfy the related purchase
money note, the Partnership's exposure to loss is limited since the amount of
nonrecourse indebtedness exceeds the carrying amount of the investment in and
advances to the Local Partnership.  Thus, even a complete loss of this
investment would not have a material impact on the operations of the
Partnership.

     Wexford Ridge Associates Local Partnership (located in Madison, Wisconsin),
its local general partner, and its management agent have been named in eight
sexual harassment and discrimination complaints filed with HUD.  The Managing
General Partner believes the claims will have no aggregate material effect on
the financial statements of the Partnership and that legal costs associated with
the claims will be borne by the management agent.

     On May 1, 1996, C.R.H.C., Incorporated (CRHC), an affiliate of the Managing
General Partner, notified the local managing general partner of Arrowhead
Apartments Associates Limited Partnership (Arrowhead) and Moorings Apartments
Associates Limited Partnership (Moorings) that it was in default under the
Partnership Agreements and threatened to remove him as managing general partner
of the Local Partnerships.  The managing agent of Arrowhead and Moorings, which

                                      II-11
<PAGE>
                                     PART II
                                     -------


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

is an affiliate of the local managing general partner, filed arbitration against
CRHC seeking, among other things, a declaration that the allegations set forth
in CRHC's notice did not constitute grounds for removal of the local managing
general partner.  CRHC subsequently filed for arbitration against the local
managing general partner seeking his removal.  On September 3, 1996, CRHC filed
an emergency petition in the arbitration to have a trustee appointed to serve as
local managing general partner and managing agent of the Local Partnerships
until the arbitration hearings are held.  The emergency petition was denied.  As
of March 10, 1997, the litigation is in discovery, and the parties are
negotiating the terms of a settlement.  There is no assurance that a settlement
of the arbitration will occur.  The hearing is scheduled for July 1997.

     In 1994, the Partnership purchased the remaining six purchase money notes
for Country Place I and II, two at a discount, with an aggregate original
principal amount of $495,000, resulting in an aggregate loss from extinguishment
of debt of $117,353.  The loss from extinguishment of debt is included in share
of loss from partnerships in the statements of operations.

     The local general partners of the following properties have each filed a
notice of intent to participate under the LIHPRHA program:



































                                      II-12
<PAGE>
                                     PART II
                                     -------


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

<TABLE>
<CAPTION>

          Property                            Date of Filing   
          --------                           -----------------
          <C>                                <C>
          Rolling Green at Amherst           June 5, 1992 (1)
          Tanglewood II                      May 23, 1994 (2)
          Chevy Chase Park                   July 18, 1994
          Wexford Ridge                      July 27, 1994
          Beech Hill I                       December 21, 1994 (1)
          Beech Hill II                      December 21, 1994 (1)
          Rolling Green at Fall River        March 1, 1995 (1)

</TABLE>

(1)  The plan of actions for these properties were not approved by HUD,
     therefore, these properties are no longer eligible to participate in what
     remains of the LIHPRHA program.

(2)  Tanglewood II was sold under the LIHPRHA program on February 19, 1997.

     The LIHPRHA program is discussed above in the General section.  As
discussed above, there is no assurance that a sale or refinancing of the
remaining properties will occur due to the federal government's limited funding
or appropriations to the LIHPRHA program.  Of the properties listed above, only
Chevy Chase and Wexford Ridge are ranked on the master funding list, which is
subject to future government appropriations.

                                    Inflation
                                    ---------

     Inflation allows for increases in rental rates, usually offsetting any
higher operating and replacement costs.  Furthermore, inflation generally does
not impact the fixed rate long-term financing under which real property
investments were purchased.  Future inflation could allow for appreciated values
of the Local Partnerships' properties over an extended period of time as rental
revenues and replacement values gradually increase.

     The following table reflects the combined rental revenues of the properties
for the five years ended December 31, 1996:














                                      II-13
<PAGE>
                                     PART II
                                     -------


ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

<TABLE>
<CAPTION>
                                                     For the years ended December 31,
                         1996                 1995                1994                1993                 1992
                      -----------          -----------         -----------         -----------          -----------
<S>                   <C>          <C>     <C>         <C>     <C>          <C>    <C>           <C>    <C>
Combined Rental
  Revenue             $29,638,904          $29,343,786         $28,130,763         $27,551,120          $26,823,399

Annual Percentage
  Increase                         1.0%                4.31%                2.10%                2.71%

</TABLE>


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
          -------------------------------------------

     The information required by this item is contained in Part IV.


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          -----------------------------------------------------------
               AND FINANCIAL DISCLOSURE
               ------------------------

     None.




























                                      II-14
<PAGE>
                                    PART III
                                    --------

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
          --------------------------------------------------

     (a), (b) and (c)    The Partnership has no directors, executive officers or
                         significant employees of its own.

     (a), (b), (c)
       and (e)           The names, ages and business experience of the
                         directors and executive officers of C.R.I., Inc. (CRI),
                         the Managing General Partner of the Partnership, are as
                         follows:

William B. Dockser, 60, has been the Chairman of the Board of CRI and a Director
since 1974.  Prior to forming CRI, he served as President of Kaufman and Broad
Asset Management, Inc., an affiliate of Kaufman and Broad, Inc., which managed a
number of publicly held limited partnerships created to invest in low and
moderate income multifamily apartment complexes.  For a period of 2-1/2 years
prior to joining Kaufman and Broad, he served in various positions at HUD,
culminating in the post of Deputy FHA Commissioner and Deputy Assistant
Secretary for Housing Production and Mortgage Credit, where he was responsible
for all federally insured housing production programs.  Before coming to
Washington, Mr. Dockser was a practicing attorney in Boston and also was a
special Assistant Attorney General for the Commonwealth of Massachusetts.  He
holds a Bachelor of Laws degree from Yale University Law School and a Bachelor
of Arts degree, cum laude, from Harvard University.  He is also Chairman of the
Board of CRIIMI MAE Inc., CRIIMI, Inc. and CRI Liquidating REIT, Inc.

H. William Willoughby, 50, President, Secretary and a Director of CRI since
January 1990 and Senior Executive Vice President, Secretary and a Director of
CRI from 1974 to 1989. He is principally responsible for the financial
management of CRI and its associated partnerships. Prior to joining CRI in 1974,
he was Vice President of Shelter Corporation of America and a number of its
subsidiaries dealing principally with real estate development and equity
financing.  Before joining Shelter Corporation, he was a Senior Tax Accountant
with Arthur Andersen & Company.  He holds a Juris Doctorate degree, a Master of
Business Administration degree and a Bachelor of Science degree in Business
Administration from the University of South Dakota.  He is also a Director and
executive officer of CRIIMI MAE Inc., CRIIMI, Inc. and CRI Liquidating REIT,
Inc.  

Ronald W. Thompson, 50, Group Executive Vice President-Hotel Asset Management.
Prior to joining CRI in 1985, he was employed at the Hyatt Organization where he
most recently served as the General Manager of the Hyatt Regency in Flint,
Michigan.  During his nine year tenure with Hyatt, he held senior management
positions with the Hyatt Regency in Dearborn, Michigan, the Hyatt in Richmond,
Virginia, the Hyatt in Winston-Salem, North Carolina and the Hyatt Regency in
Atlanta, Georgia.  Before joining Hyatt, Mr. Thompson worked in London, England
for the English Tourist Board as well as holding management positions in Europe,
Australia, and New Zealand in the hotel industry.  Mr. Thompson received his
education in England where he received a business degree in Hotel Administration
from Winston College.

Susan R. Campbell, 38, Senior Vice President-CRI Realty Services.  Prior to
joining CRI in March 1985, she was a budget analyst for the B. F. Saul Advisory
Company.  She holds a Bachelor of Science degree in General Business from the
University of Maryland.

Melissa Cecil Lackey, 41, Senior Vice President and General Counsel.  Prior to
joining CRI in 1990, she was associated with the firms of Zuckerman, Spaeder,
Goldstein, Taylor & Kolker in Washington, D.C. and Hirsch & Westheimer in

                                      III-1
<PAGE>
                                    PART III
                                    --------

ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - Continued
               --------------------------------------------------

Houston, Texas.  She holds a Juris Doctorate from the University of Virginia
School of Law and a Bachelor of Arts degree from the College of William & Mary.

     (d)  There is no family relationship between any of the foregoing directors
          and executive officers.

     (f)  Involvement in certain legal proceedings.

          None.

     (g)  Promoters and control persons.

          Not applicable.

ITEM 11.  EXECUTIVE COMPENSATION
          ----------------------

     (a), (b), (c), (d), (e), (f), (g), (i), (j), (k) and (l)

     The Partnership has no officers or directors.  However, in accordance with
     the Partnership Agreement, and as disclosed in the public offering, various
     kinds of compensation and fees were paid or are payable to the General
     Partners and their affiliates.  Additional information required in these
     sections is included in Notes 3 and 4 of the financial statements contained
     in Part IV, Item 14.

     Additionally, the General Partners may receive an annual distribution from
     the Partnership if there is cash available for distribution, as defined in
     the Partnership Agreement.  The General Partners are also entitled to the
     following payments:

     (1)  Annual incentive management fee for managing the affairs and business
          of the Partnership in an amount not to exceed .25% of invested assets,
          including the Partnership's allocable share of the mortgages, payable
          first, in an annual amount equal to $250,000; and second, after
          distributions to investors in the amount of 1% of the gross proceeds
          of the offering, the balance of such .25% of invested assets.  The
          annual incentive management fee amounted to $249,996 for each of the
          years ended December 31, 1996, 1995 and 1994.

     (2)  15% of sale and refinancing proceeds remaining after the limited
          partners have received a return of all their capital contributions,
          adjusted as provided in the Partnership Agreement, and the General
          Partners have received a return of all their capital contributions and
          the property disposition fees described below.  The General Partners
          may also receive a return of their capital contributions and repayment
          of any loans made to the Partnership.  No sale or refinancing proceeds
          were paid to the General Partners during the years ended December 31,
          1996, 1995 and 1994.









                                      III-2
<PAGE>
                                    PART III
                                    --------

ITEM 11.  EXECUTIVE COMPENSATION - Continued
          ----------------------


     (3)  1% of the aggregate selling prices, including any amounts previously
          unpaid upon prior sales of apartment complexes, payable after the
          limited partners have received a return of all their capital
          contributions, adjusted as provided in the Partnership Agreement. 
          This amount and any other commissions or fees payable upon the sale of
          apartment complexes shall not in the aggregate exceed the lesser of
          the competitive rate or 6% of the sales price of the apartment
          complexes.  No such amounts were paid to the General Partners during
          the years ended  December 31, 1996, 1995 and 1994.

     (4)  In addition, the Managing General Partner and/or its affiliates may
          receive a fee in an amount of not more than 2% of the sales price of
          the investment in a Local Partnership or the property it owns.  The
          fee would only be payable upon the sale of the investment in a Local
          Partnership or the property it owns and would be subject to certain
          restrictions, including achievement of a certain level of sales
          proceeds and making certain minimum distributions to limited partners.
          No such fees were paid to the Managing General Partner and/or its
          affiliates during the years ending December 31, 1996, 1995 and 1994.

     (h)  Termination of employment and change in control arrangements.

          None.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          ---------------------------------------------------
               MANAGEMENT
               ----------

     (a)  Security ownership of certain beneficial owners.

          No person or "group", as that term is used in Section 13(d)(3) of the
          Securities Exchange Act of 1934, is known by the Partnership to be the
          beneficial owner of more than 5% of the issued and outstanding
          partnership units at December 31, 1996.

     (b)  Security ownership of management.

          The following table sets forth certain information concerning all 
          units beneficially owned, as of December 31, 1996, by each director
          and by all directors and officers as a group of the Managing General
          Partner of the Partnership.














                                      III-3
<PAGE>
                                    PART III
                                    --------


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          ---------------------------------------------------
                MANAGEMENT - Continued
               -----------

              Name of                   Amount and Nature       % of total
          Beneficial Owner           of Beneficial Ownership   Units issued
          ----------------           -----------------------   ------------

          William B. Dockser                   None                  0%
          H. William Willoughby                None                  0%
          All Directors and Officers
            as a Group (5 persons)             None                  0%

     (c)  Changes in control.

          There exists no arrangement known to the Partnership, the operation of
          which may, at a subsequent date, result in a change in control of the
          Partnership.  There is a provision in the Limited Partnership
          Agreement which allows, under certain circumstances, the ability to
          change control.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
          ----------------------------------------------

     (a)  Transactions with management and others.

          The Partnership has no directors or officers. In addition, the
          Partnership has had no transactions with individual officers or
          directors of the Managing General Partner of the Partnership other
          than any indirect interest such officers and directors may have in the
          amounts paid to the Managing General Partner or its affiliates by
          virtue of their stock ownership in CRI.  Item 11 of this report, which
          contains a discussion of the fees and other compensation paid or
          accrued by the Partnership to the General Partners or their
          affiliates, is incorporated herein by reference. Note 3 of the notes
          to financial statements, which contains disclosure of related party
          transactions, is also incorporated herein by reference.

     (b)  Certain business relationships.

          The Partnership's response to Item 13(a) is incorporated herein by
          reference.  In addition, the Partnership has no business relationship
          with entities of which the officers and directors of the Managing
          General Partner of the Partnership are officers, directors or equity
          owners other than as set forth in the Partnership's response to Item
          13(a).

     (c)  Indebtedness of management.

          None.

     (d)  Transactions with promoters.

          Not applicable.




                                      III-4
<PAGE>
                                     PART IV
                                     -------

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
          ------------------------------------------------------
               FORM 8-K
               --------

     (a) 1.    Financial Statements                                  Page
               --------------------                                  ----

               Report of Independent Certified Public
                 Accountants - Capital Realty Investors-II
                 Limited Partnership                                 IV-4

               Reports of Independent Certified Public
                 Accountants -  Local Partnerships in which
                 Capital Realty Investors-II Limited
                 Partnership has invested                            IV-5

               Balance Sheets as of December 31, 1996 and 1995       IV-6

               Statements of Operations for the years ended
                 December 31, 1996, 1995 and 1994                    IV-7

               Statements of Changes in Partners' Deficit for
                 the years ended December 31, 1996, 1995 and
                 1994                                                IV-8

               Statements of Cash Flows for the years ended
                 December 31, 1996, 1995 and 1994                    IV-9

               Notes to Financial Statements                         IV-10

     (a) 2.    Financial Statement Schedules
               -----------------------------

               Included in Part IV of this report are the
               following schedules for the year ended
               December 31, 1996, which are applicable to the
               Local Partnerships in which Capital Realty
               Investors-II Limited Partnership has invested:

               Report of Independent Certified Public Accountants 
                 on Financial Statement Schedule                     IV-29

               Schedule III - Real Estate and Accumulated
                 Depreciation                                        IV-30

               The remaining schedules are omitted because the required
               information is included in the financial statements and notes
               thereto or they are not applicable or not required.

     (a) 3.    Exhibits  (listed according to the number assigned in the table
                         in Item 601 of Regulation S-K)

               Exhibit No. 3.  - Articles of Incorporation and Bylaws







                                      IV-1
<PAGE>
                                     PART IV
                                     -------

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
          ------------------------------------------------------
               FORM 8-K - Continued
               --------

               a.   Certificate of Limited Partnership of Capital Realty
                    Investors-II Limited Partnership.  (Incorporated by
                    reference from Exhibit 4 to Registrant's Registration
                    Statement on Form S-11, as amended, dated April 28, 1983.)


               Exhibit No. 4.  - Instruments defining rights of security holders
               including indentures.

               a.   Limited Partnership Agreement of Capital Realty Investors-II
                    Limited Partnership.  (Incorporated by reference from
                    Exhibit 4 to Registrant's Registration Statement on Form
                    S-11, as amended, dated April 28, 1983.)

               Exhibit No. 10. - Material contracts

               a.   Management Services Agreement between CRI and Capital Realty
                    Investors-II Limited Partnership. (Incorporated by reference
                    from Exhibit 10B to Registrant's Registration Statement on
                    Form S-11, as amended, dated April 28, 1983.)

               Exhibit No. 27 - Financial Data Schedule

               Exhibit No. 99 - Additional Exhibits

               a.   Prospectus of the Partnership, dated May 6, 1983
                    (Incorporated by reference to the Registrant's Registration
                    Statement on Form S-11, as amended, dated April 28, 1983).

     (b)  Reports on Form 8-K
          -------------------

          No reports on Form 8-K were filed during the quarter ended
          December 31, 1996.

     (c)  Exhibits
          --------

          The list of Exhibits required by Item 601 of Regulation S-K is
          included in Item (a)3., above.

     (d)  Financial Statement Schedules
          -----------------------------

          See Item (a)2., above.











                                      IV-2
<PAGE>
                                   SIGNATURES
                                   ----------


     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this Annual Report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                   Capital Realty Investors-II
                                     Limited Partnership

                                   By:  C.R.I., Inc.
                                        Managing General Partner



March 24, 1997                     /s/ William B. Dockser
---------------------------        --------------------------------
DATE                               William B. Dockser, Director,
                                   Chairman of the Board,
                                     Treasurer and Principal
                                     Executive Officer


     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:



March 24, 1997                     /s/ H. William Willoughby
---------------------------        --------------------------------
DATE                               H. William Willoughby
                                   Director, President and 
                                     Secretary



March 24, 1997                     /s/ Deborah K. Browning
---------------------------        --------------------------------
DATE                               Deborah K. Browning
                                   Vice President,
                                     Chief Accounting Officer,
                                     Principal Financial and
                                     Principal Accounting Officer



















                                      IV-3
<PAGE>











                         REPORT OF INDEPENDENT CERTIFIED
                         ------------------------------
                                PUBLIC ACCOUNTANTS
                               -------------------


To the Partners
Capital Realty Investors-II
  Limited Partnership

     We have audited the balance sheets of Capital Realty Investors-II Limited
Partnership as of December 31, 1996 and 1995, and the related statements of
operations, changes in partners' deficit and cash flows for the years ended
December 31, 1996, 1995 and 1994.  These financial statements are the
responsibility of the Partnership's management.  Our responsibility is to
express an opinion on these financial statements based on our audit.  We did not
audit the financial statements of certain Local Partnerships.  The Partnership's
share of income or loss from these Local Partnerships constitutes $55,461 of
income in 1996, $181,378 of losses in 1995 and $315,608 of losses in 1994
included in the Partnership's net loss.  The financial statements of these Local
Partnerships were audited by other auditors whose reports thereon have been
furnished to us, and our opinion expressed herein, insofar as it relates to the
amount included for these Local Partnerships, is based solely upon the reports
of the other auditors.

     We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.  An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.  We believe that our audits provide a reasonable basis for our
opinion.

     In our opinion, based upon our audits and the reports of other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of Capital Realty Investors-II Limited
Partnership as of December 31, 1996 and 1995, and the results of its operations,
changes in partners' deficit and cash flows for the years ended December 31,
1996, 1995 and 1994, in conformity with generally accepted accounting
principles.

                                                              Grant Thornton LLP


Vienna, VA
March 10, 1997 (except for Note 2.c., as
  to which the date is March 18, 1997)




                                      IV-4
<PAGE>























              REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS -

                           LOCAL PARTNERSHIPS IN WHICH

                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                                  HAS INVESTED*





*    The reports of independent certified public accountants - Local
     Partnerships in which Capital Realty Investors-II Limited Partnership has
     invested were filed in paper format under Form SE on March 20, 1997, in
     accordance with the Securities and Exchange Commission's continuing
     hardship exemption granted December 19, 1996.
























                                      IV-5
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                                  BALANCE SHEETS

                                     ASSETS

<TABLE>
<CAPTION>
                                                                                                          December 31,
                                                                                                  -----------------------------
                                                                                                      1996             1995
                                                                                                  ------------     ------------
<S>                                                                                               <C>              <C>
Investments in and advances to partnerships                                                       $  5,962,920     $  7,358,510
Assets held for sale                                                                                   789,258               --
Cash and cash equivalents                                                                            2,128,849        3,192,539
Acquisition fees, principally paid to related parties, net of
  accumulated amortization of $393,948 and $407,496, respectively                                      501,003          592,504
Property purchase costs, net of accumulated amortization of
  $258,870 and $258,343 respectively                                                                   348,378          398,969
Other assets                                                                                             9,657            7,851
                                                                                                  ------------     ------------
     Total assets                                                                                 $  9,740,065     $ 11,550,373
                                                                                                  ============     ============

                             LIABILITIES AND PARTNERS' DEFICIT

Due on investments in
  partnerships                                                                                    $ 14,981,184     $ 14,213,825
Accrued interest payable                                                                            30,584,862       29,256,224
Accounts payable and accrued expenses                                                                   91,418           82,324
                                                                                                  ------------     ------------

     Total liabilities                                                                              45,657,464       43,552,373
                                                                                                  ------------     ------------

Commitments and contingencies

Partners' capital (deficit):

  Capital paid in:
    General Partners                                                                                     2,000            2,000
    Limited Partners                                                                                50,015,000       50,015,000
                                                                                                  ------------     ------------
                                                                                                    50,017,000       50,017,000
  Less:
    Accumulated distributions to partners                                                           (1,254,612)      (1,254,612)
    Offering costs                                                                                  (5,278,980)      (5,278,980)
    Accumulated losses                                                                             (79,400,807)     (75,485,408)
                                                                                                  ------------     ------------

      Total partners' deficit                                                                      (35,917,399)     (32,002,000)
                                                                                                  ------------     ------------

      Total liabilities and partners' deficit                                                     $  9,740,065     $ 11,550,373
                                                                                                  ============     ============

</TABLE>



                     The accompanying notes are an integral part
                             of these financial statements.

                                           IV-6
<PAGE>
                   CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                              STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>

                                                                                         For the years ended December 31,
                                                                                       1996           1995          1994
                                                                                    -----------    -----------   -----------
<S>                                                                                 <C>            <C>           <C>
Share of income (loss) from  partnerships                                           $   303,378    $   238,823   $  (121,724)
                                                                                    -----------    -----------   -----------
Other revenue and expenses:
  Revenue
    Interest income                                                                     104,989        181,845       125,477
                                                                                    -----------    -----------   -----------
  Expenses
    Interest                                                                          5,552,780      5,759,461     5,113,326
    Management fee                                                                      249,996        249,996       249,996
    General and administrative                                                          143,529        128,588       104,500
    Professional fees                                                                   126,118         75,306        81,970
    Amortization                                                                         55,245         55,245        55,245
                                                                                    -----------    -----------   -----------
                                                                                      6,127,668      6,268,596     5,605,037
                                                                                    -----------    -----------   -----------
      Total other revenue and expenses                                               (6,022,679)    (6,086,751)   (5,479,560)
                                                                                    -----------    -----------   -----------

Loss before extraordinary gain from extinguishment
  of debt                                                                            (5,719,301)    (5,847,928)   (5,601,284)
                                                                                    -----------    -----------   -----------

Extraordinary gain from extinguishment of debt                                        1,803,902             --            --
                                                                                    -----------    -----------   -----------
Net Loss                                                                            $(3,915,399)   $(5,847,928)  $(5,601,284)
                                                                                    ===========    ===========   ===========
Loss allocated to General Partners (1.51%)                                          $   (59,123)   $   (88,304)  $   (84,579)
                                                                                    ===========    ===========   ===========
Loss allocated to Initial and Special Limited
  Partners (1.49%)                                                                  $   (58,339)   $   (87,134)  $   (83,459)
                                                                                    ===========    ===========   ===========
Loss allocated to Additional Limited Partners (97%)                                 $(3,797,937)   $(5,672,490)  $(5,433,246)
                                                                                    ===========    ===========   ===========
Loss per unit of Additional Limited Partnership Interest
  based on 50,000 units outstanding                                                 $    (75.96)   $   (113.45)  $   (108.66)
                                                                                    ===========    ===========   ===========

</TABLE>











                      The accompanying notes are an integral part
                             of these financial statements.

                                         IV-7
<PAGE>
                    CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                       STATEMENTS OF CHANGES IN PARTNERS' DEFICIT

                  For the years ended December 31, 1996, 1995 and 1994

<TABLE>
<CAPTION>

                                                                                 Initial and
                                                                                   Special        Additional
                                                                  General          Limited         Limited  
                                                                  Partners         Partners        Partners          Total   
                                                                 -----------     -----------     ------------     ------------
<S>                                                              <C>             <C>             <C>              <C>
Partners' deficit January 1, 1994                                $  (980,936)    $  (954,396)    $(18,617,456)    $(20,552,788)

  Net loss                                                           (84,579)        (83,459)      (5,433,246)      (5,601,284)
                                                                 -----------     -----------     ------------     ------------

Partners' deficit December 31, 1994                               (1,065,515)     (1,037,855)     (24,050,702)     (26,154,072)

  Net loss                                                           (88,304)        (87,134)      (5,672,490)      (5,847,928)
                                                                 -----------     -----------     ------------     ------------

Partners' deficit December 31, 1995                               (1,153,819)     (1,124,989)     (29,723,192)     (32,002,000)

  Net loss                                                           (59,123)        (58,339)      (3,797,937)      (3,915,399)
                                                                 -----------     -----------     ------------     ------------

Partners' deficit December 31, 1996                              $(1,212,942)    $(1,183,328)    $(33,521,129)    $(35,917,399)
                                                                 ===========     ===========     ============     ============

</TABLE>



























                        The accompanying notes are an integral part
                                of these financial statements.

                                            IV-8
<PAGE>
                        CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                                   STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                      For the years ended December 31,
                                                                                   1996           1995            1994
                                                                                -----------    -----------     -----------
<S>                                                                             <C>            <C>             <C>
Cash flows from operating activities:
  Net loss                                                                      $(3,915,399)   $(5,847,928)    $(5,601,284)
  Adjustments to reconcile net loss to net cash
    used in operating activities:
    Share of (income) loss from partnerships                                       (303,378)      (238,823)        121,724
    Payment of purchase money note interest                                        (152,881)      (227,722)       (226,464)
    Amortization of discount on purchase money notes                              3,047,359      3,226,802       2,366,790
    Amortization of deferred costs                                                   55,245         55,245          55,245
    Gain on extinguishment of debt                                               (1,803,902)            --              --

    Changes in assets and liabilities:
      Increase in other assets                                                       (1,806)        (2,545)         (2,406)
      Increase in accrued interest payable                                        2,505,421      2,532,659       2,746,535
      Increase (decrease) in accounts payable                                         9,094         11,935         (23,383)
                                                                                -----------    -----------     -----------
        Net cash used in operating activities                                      (560,247)      (490,377)       (563,243)
                                                                                -----------    -----------     -----------

Cash flows from investing activities:
  Receipt of distributions from partnerships                                        996,557        870,339         793,007
                                                                                -----------    -----------     -----------
        Net cash provided by investing activities                                   996,557        870,339         793,007
                                                                                -----------    -----------     -----------

Cash flows from financing activities:
  Pay-off of purchase money note                                                 (1,500,000)            --        (485,250)
                                                                                -----------    -----------     -----------
Net (decrease) increase in cash and cash equivalents                             (1,063,690)       379,962        (255,486)

Cash and cash equivalents, beginning of year                                      3,192,539      2,812,577       3,068,063
                                                                                -----------    -----------     -----------

Cash and cash equivalents, end of year                                          $ 2,128,849    $ 3,192,539     $ 2,812,577
                                                                                ===========    ===========     ===========

</TABLE>















                      The accompanying notes are an integral part
                             of these financial statements.

                                        IV-9
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     a.   Organization
          ------------

          Capital Realty Investors-II Limited Partnership (the Partnership) was
     formed under the Maryland Revised Uniform Limited Partnership Act on March
     23, 1983 and shall continue until December 31, 2037 unless sooner dissolved
     in accordance with the Partnership Agreement.  The Partnership was formed
     to invest in real estate by acquiring and holding a limited partnership
     interest in limited partnerships (Local Partnerships) which own and operate
     federal or state government-assisted or conventionally financed apartment
     complexes throughout the United States, which provide housing principally
     to the elderly and to individuals and families of low or moderate income.

          The General Partners of the Partnership are C.R.I., Inc. (CRI), which
     is the Managing General Partner, and current and former shareholders of
     CRI.  The Initial Limited Partner is Rockville Pike Associates Limited
     Partnership-II, a limited partnership which includes certain officers and 
     former employees of CRI or its affiliates.  The Special Limited Partner is
     Two Broadway Associates II, a limited partnership comprised of an affiliate
     and employees of Merrill Lynch, Pierce, Fenner & Smith, Incorporated.

          The Partnership sold 50,000 units at $1,000 per unit of Additional
     Limited Partnership Interest through a public offering.  The offering
     period was terminated on June 20, 1983.

     b.   Method of accounting
          --------------------

          The financial statements of the Partnership are prepared on the
     accrual basis of accounting in accordance with generally accepted
     accounting principles.

     c.   Investments in and advances to partnerships
          -------------------------------------------

          The investments in and advances to Local Partnerships (see Note 2) are
     accounted for by the equity method because the Partnership is a limited
     partner in the Local Partnerships.  Under this method, the carrying amount
     of the investments in and advances to Local Partnerships is (i) reduced by
     distributions received and (ii) increased or reduced by the Partnership's
     share of earnings or losses, respectively, of the Local Partnerships. As of
     December 31, 1996 and 1995, the Partnership's share of cumulative losses of
     eleven and nine, of the Local Partnerships, respectively, exceeds the
     amount of the Partnership's investments in and advances to those Local
     Partnerships by $28,225,703 and $24,699,157, respectively. Since the
     Partnership has no further obligation to advance funds or provide financing
     to these Local Partnerships, the excess losses have not been reflected in
     the accompanying financial statements.  As of December 31, 1996 and 1995,
     cumulative cash distributions of approximately









                                      IV-10
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     $2,148,566 and $1,900,649, respectively, have been received from the Local
     Partnerships for which the Partnership's carrying value is zero.  These
     distributions are recorded as increases in the Partnership's share of
     income from partnerships.

          Costs incurred in connection with acquiring these investments have
     been capitalized and are being amortized using the straight-line method
     over the estimated useful lives of the properties owned by the Local
     Partnerships, with the exception of those costs relating to Tanglewood
     Associates II Limited Partnership (Tanglewood II) and Palatine-Barrington
     Associates Limited Partnership (Deer Grove), which are no longer being
     amortized as a result of its classification as an asset held for sale as of
     December 31, 1996, as discussed below.

     d.   Cash and cash equivalents
          -------------------------

          Cash and cash equivalents consist of all money market funds,
     repurchase agreements and commercial paper with original maturities of
     three months or less.  The Partnership has determined that the carrying
     amount of its cash and cash equivalents approximates fair value.

     e.   Offering costs
          --------------

          The Partnership incurred certain costs in connection with the offering
     and selling of limited partnership interests.  Such costs were recorded as
     a reduction of partner's capital when incurred.

     f.   Income taxes
          ------------

          For federal and state income tax purposes, each partner reports on his
     or her personal income tax return his or her share of the Partnership's
     income or loss as determined for tax purposes.  Accordingly, no provision
     (credit) has been made for income taxes in these financial statements.

     g.   Use of estimates
          ----------------

          In preparing financial statements in conformity with generally
     accepted accounting principles, the Partnership is required to make
     estimates and assumptions that affect the reported amounts of assets and
     liabilities and the disclosure of contingent assets and liabilities at the
     date of the financial statements and revenues and expenses during the
     reporting period.  Actual results could differ from those estimates.











                                      IV-11
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued

     h.   Asset held for sale
          -------------------

          On February 19, 1997, and March 18, 1997, the local general partners
     of Tanglewood II and Deer Grove, respectively, sold the respective
     properties, as discussed in Note 2.  Accordingly, the Partnership's
     investment in these Local Partnerships was classified as an investment in
     partnerships held for sale on the balance sheets as of December 31, 1996. 
     Assets held for sale are not recorded in excess of their estimated net
     realizable value.

2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

     a.   Due on investments in partnerships
          ----------------------------------

          As of December 31, 1996 and 1995, the Partnership had acquired limited
     partnership interests in twenty-two Local Partnerships, which were
     organized to develop, construct, own, maintain and operate apartment
     complexes which provide housing principally to the elderly and to
     individuals and families of low or moderate income.  The remaining
     principal amounts due on investments in the Local Partnerships as of
     December 31, 1996 and 1995 are as follows:

<TABLE>
<CAPTION>
                                           1996          1995
                                        -----------   -----------
     <S>                                <C>           <C>
     Purchase money notes due:
        1995                            $        --   $ 4,660,000
        1996                              2,100,000     2,100,000
        1997                              1,900,000     1,900,000
        1998                             14,800,500    12,420,500
        1999                              1,340,178     1,340,178
     Less:  unamortized discount         (5,159,494)   (8,206,853)
                                        -----------   -----------
                                        $14,981,184   $14,213,825
                                        ===========   ===========
</TABLE>

          The purchase money notes have stated interest rates ranging from 9% to
     12%, certain of which are compounded annually. Unamortized discounts are
     based upon an imputed interest rate of 15% to reflect market interest rates
     which prevailed when the notes were issued.  The resulting discount has
     been recorded by the Partnership and is being amortized to interest expense
     over the life of the respective purchase money notes using the effective
     interest method.  The purchase money notes are payable upon the earliest
     of:  (1) sale or refinancing of the respective Local Partnership's rental
     property; (2) payment in full of the respective Local Partnership's
     permanent loan; or (3) maturity.  Purchase money notes in an aggregate
     principal amount of $2,100,000 matured on December 31, 1996, as discussed
     below.  Purchase money notes in an aggregate principal amount of $1,900,000
     mature on December 31, 1997, as discussed below.  The remaining purchase
     money notes mature in 1998 and 1999.  The purchase money notes are
     generally secured by the Partnership's interest in the respective Local

                                      IV-12
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

     Partnership.  There is no assurance that the underlying properties will
     have sufficient appreciation and equity to enable the Partnership to pay
     the purchase money notes' principal and accrued interest when due.  If a
     purchase money note is not paid in accordance with its terms, the
     Partnership will either have to renegotiate the terms of repayment or risk
     losing its partnership interest in the Local Partnership.  The Managing
     General Partner is continuing to investigate possible alternatives to
     reduce the Partnership's long-term debt obligations.  These alternatives
     include, among others, retaining the cash available for distribution to
     meet the purchase money note requirements, buying out certain purchase
     money notes at a discounted price, extending the due dates of certain
     purchase money notes, or refinancing the respective properties' underlying
     debt and using the Partnership's share of the proceeds to pay off or buy
     down certain purchase money note obligations.

          Interest expense on the Partnership's purchase money notes for the
     years ended December 31, 1996, 1995 and 1994 was $5,552,780, $5,759,461 and
     $5,113,326, respectively.  The accrued interest on the purchase money notes
     of $30,584,862 and $29,256,224 as of December 31, 1996 and 1995,
     respectively, is due on the respective maturity dates of the purchase money
     notes or earlier if the Local Partnerships have distributable net cash
     flow, as defined in the relevant Local Partnership agreements.

          Purchase money notes relating to Wexford Ridge Associates in the
     principal amount of $1,900,000 mature on December 31, 1997.  The Managing
     General Partner anticipates negotiating with the purchase money note
     holders for a five year extension on the purchase money notes.  There is no
     assurance that the Managing General Partner will reach an agreement of any
     kind with the noteholders.  Accordingly, there can be no assurance that the
     Partnership will be able to retain its interest in the Local Partnership. 
     The uncertainty about the continued ownership of the Partnership's interest
     in the related Local Partnership does not impact the Partnership's
     financial condition because the related purchase money notes are
     nonrecourse and secured solely by the Partnership's interest in the Local
     Partnership.  Therefore, should the investment in Wexford Ridge not produce
     sufficient value to satisfy the purchase money notes related to Wexford
     Ridge, the Partnership's exposure to loss is limited since the amount of
     the nonrecourse indebtedness exceeds the carrying amount of the investment
     in and advances to the Local Partnership.  Thus, even a complete loss of
     this investment would not have a material impact on the operations of the
     Partnership.

          On February 19, 1997, the Partnership paid off the purchase money note
     relating to Tanglewood II at a discount, as discussed below.

          The Partnership defaulted on its purchase money note relating to Rock
     Glen Limited Partnership (Rock Glen) on August 1, 1995 when the note
     matured and was not paid.  The noteholder signed a standstill agreement
     which expired on October 31, 1995.  The Managing General Partner made an
     offer to the noteholder to extend the purchase money note due date to
     August 2000.  This offer was rejected by the noteholder.  On January 11,
     1996, the Partnership paid off the purchase money note at a discount,
     resulting in a gain on extinguishment of debt of $1,803,902.

          The Partnership defaulted on its purchase money notes relating to
     Beech Hill Development Co. (Beech Hill I) and Beech Hill Development Co. II

                                      IV-13
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

     (Beech Hill II) on August 1, 1995 when the notes matured and were not paid.
     On March 29, 1996, the noteholders agreed to extend the purchase money note
     due dates to January 1, 1998.  Under the agreement, the Partnership will
     pay the purchase money noteholders of Beech Hill I and Beech Hill II all
     annual cash flow distributions received from the related Local Partnerships
     in excess of $5,000 and $2,500, respectively.  The Partnership received
     cash flow distributions of $5,000 and $2,500 from Beech Hill I and II,
     respectively, during the year ended December 31, 1996.  Cash flow
     distributions of $60,365 and $27,500 were paid directly by Beech Hill I and
     Beech Hill II, respectively, to the purchase money note holders during the
     year ended December 31, 1996. There were no annual cash flow distributions
     made to the Partnership from the related Local Partnerships during the year
     ended December 31, 1995.  Also under the agreement, documents transferring
     the Partnership's interests in the related Local Partnerships to the
     noteholders have been placed in escrow and would be released to the
     noteholders upon a future default by the Partnership on the respective
     purchase money notes.

          The Partnership defaulted on its purchase money notes relating to
     Chevy Chase Park, Limited (Chevy Chase) on December 31, 1996 when the notes
     matured and were not paid.  The default amount included principal and
     accrued interest of $2,100,000 and $3,553,912, respectively.  As of March
     10, 1997 principal and accrued interest totalling $2,100,000 and
     $3,608,885, respectively, were due.  The Managing General Partner is
     currently negotiating a five year extension of the purchase money notes
     with the noteholders.  The Managing General Partner is also awaiting the
     potential future sale of the property under the LIHPRHA program.  There is
     no assurance that a sale will take place under the LIHPRHA program, nor is
     there any assurance that any agreement will be reached with the
     noteholders.  As such, there is no assurance that the Partnership will be
     able to retain its interest in Chevy Chase.  The uncertainty regarding the
     continued ownership of the Partnership's interests in Chevy Chase does not
     impact the Partnership's financial condition because the related purchase
     money notes are nonrecourse and secured solely by the Partnership's
     interest in the related Local Partnership.  Therefore, should the
     investment in Chevy Chase not produce sufficient value to satisfy the
     related purchase money notes, the Partnership's exposure to loss is limited
     since the amount of the nonrecourse indebtedness exceeds the carrying
     amount of the investment in and advances to the Local Partnership.  Thus,
     even a complete loss of this investment would not have a material impact on
     the operations of the Partnership.

          In 1994, the Partnership purchased the remaining six purchase money
     notes for Country Place I and II, two at a discount, with an aggregate
     original principal amount of $495,000, resulting in an aggregate loss from












                                      IV-14
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

     extinguishment of debt of $117,353.  The loss from extinguishment of debt
     is included in share of loss from partnerships in the statements of
     operations.

          The Partnership has determined that it is not practicable to estimate
     the fair value of the purchase money notes, either individually or in the
     aggregate, due to:  (1) the lack of an active market for this type of
     financial instrument, (2) the variable nature of purchase money note
     interest payments as a result of fluctuating cash flow distributions
     received from the related Local Partnerships, and (3) the excessive costs
     associated with an independent appraisal of the purchase money notes.

     b.   Interests in profits, losses and cash distributions
          ---------------------------------------------------

          The Partnership has a 92.99% to 98.99% interest in profits, losses and
     cash distributions (as restricted by various federal and state housing
     agencies) of each Local Partnership.  An affiliate of the General Partners
     of the Partnership is also a general partner of each Local Partnership. 
     The Partnership received cash distributions from the rental operations of
     the Local Partnerships of $996,557, $870,339 and $793,007 during the years
     ended December 31, 1996, 1995 and 1994, respectively. As of December 31,
     1996 and 1995, seventeen of the Local Partnerships had surplus cash, as
     defined by their respective agencies, in the amount of $2,005,402 and
     $2,475,456, respectively, which is available for distribution in accordance
     with their respective agencies' regulations.

          The cash distributions to the Partnership from the operations of the
     rental properties may be limited by HUD regulations.  Such regulations
     limit annual cash distributions to a percentage of the owner's equity
     investment in a rental property.  Funds in excess of those which may be
     distributed to owners are required to be placed in a residual receipts
     account held by the governing state or federal agency for the benefit of
     the property.

          Upon sale or refinancing of the property owned by the Local
     Partnerships or upon the liquidation of each Local Partnership, the
     proceeds from the sale, refinancing or liquidation shall be distributed in
     accordance with the respective provisions of each Local Partnership's
     partnership agreement.  In accordance with such provisions, the Partnership
     would receive from such proceeds its respective percentage interest of any
     remaining proceeds, after payment of (1) all debts and liabilities of the
     Local Partnership and certain other items, (2) the Partnership's capital
     contributions plus certain specified amounts as outlined in each
     partnership agreement, and (3) certain special distributions to general
     partners and related entities of the Local Partnership.

     c.   Property matters
          ----------------

          The following table reflects the amounts of advances made to the Local
     Partnerships as of December 31, 1996 and 1995.





                                      IV-15
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

<TABLE>
<CAPTION>
                                                    December 31,
                                                1996           1995
                                             -----------    -----------
     <S>                                     <C>            <C>
     Local Partnership
     -----------------
     Frenchman's Wharf II:
       Principal amount of funds advanced    $   324,410    $   324,410

      Accrued interest on advances               187,372        187,372
                                             -----------    -----------
         Total                               $   511,782    $   511,782
                                             ===========    ===========
</TABLE>

          The local general partner of Lake Properties Limited Partnership
     (Frenchman's Wharf II), in conjunction with the Managing General Partner,
     engaged in extensive negotiations with HUD, holder of the mortgage on the
     property, to extend the previous workout arrangement related to the
     mortgage loan on the property, which expired December 1990.  On April 30,
     1996, the local general partner received approval from HUD for a four-year
     workout.  Under the workout agreement, Frenchman's Wharf II will make
     minimum monthly payments to HUD, consisting of a service charge and tax
     escrow.  Additionally, Frenchman's Wharf II will make monthly interest
     payments representing approximately 50%, 65%, 85% and 100% of the interest
     due on the outstanding principal balance of the note for the periods July 1
     through June 30 during the years 1996 through 2000, respectively.  As of
     March 10, 1997, Frenchman's Wharf II had made all monthly payments in
     accordance with the workout arrangement.  There is, however, no assurance
     that the Local Partnership will be able to comply with the terms of the
     workout arrangement.

          To cover operating deficits incurred in prior years for Frenchman's
     Wharf II, the Partnership advanced funds totalling $324,410 as of both
     December 31, 1996 and December 31, 1995.  The last advance was made to
     Frenchman's Wharf II in March 1987.  The Partnership does not expect to
     advance any additional funds in connection with Frenchman's Wharf II's loan
     workout with HUD.  These loans, together with accrued interest of $187,372
     as of both December 31, 1996 and December 31, 1995, are payable from cash
     flow of Frenchman's Wharf II after payment of first-mortgage debt service
     and after satisfaction by the Partnership of certain other interest
     obligations on the purchase money notes relating to the Local Partnership. 
     There is no assurance that the Local Partnership, upon expiration of the
     workout, will be able to repay the loans in accordance with the terms.

          The purchase money notes related to Frenchman's Wharf II in the
     principal amount of $3,150,000 which were initially due to mature on June
     1, 1988 have been extended to mature on June 1, 1998.  In conjunction with
     the four-year workout agreement, the Partnership is currently negotiating
     with the purchase money note holders to reach an extension agreement which
     would be coterminous with the expiration of the HUD workout arrangement. 
     There is no assurance that the noteholders will consent to an extension
     agreement.  As of March 10, 1997, the noteholders had not given consent to
     an extension agreement.

                                      IV-16
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

          The report of the auditors on the financial statements of Frenchman's
     Wharf II for the year ended December 31, 1996 indicated that substantial
     doubt exists about the ability of the Local Partnership to continue as a
     going concern due to the Local Partnership's default on its mortgage and
     the expiration of its Section 8 Rental Housing Assistance Payments (HAP)
     contract with HUD on November 30, 1997.  The report of the auditors on the
     financial statements of Frenchman's Wharf II for the year ended December
     31, 1995 indicated that substantial doubt exists about the ability of the
     Local Partnership to continue as a going concern due to the property's
     recurring operating deficits and the Local Partnership's default on its
     mortgage.  The uncertainty about the Local Partnership's continued
     ownership of the property does not impact the Partnership's financial
     condition because the related purchase money note is nonrecourse and
     secured solely by the Partnership's interest in the Local Partnership. 
     Therefore, should the investment in Frenchman's Wharf II not produce
     sufficient value to satisfy the related purchase money note, the
     Partnership's exposure to loss is limited since the amount of the
     nonrecourse indebtedness exceeds the carrying amount of the investment in
     and advances to the Local Partnership.  Thus, even a complete loss of this
     investment would not have a material impact on the operations of the
     Partnership.

          On May 23, 1994, the local general partner of Tanglewood II filed a
     notice of intent to participate under the Low Income Housing Preservation
     and Resident Homeownership Act of 1990 (LIHPRHA).  On July 11, 1996, the
     local managing general partner's plan of action regarding the sale of
     Tanglewood II under the LIHPRHA program was approved by HUD.  On February
     19, 1997, Tanglewood II sold the property, a 192-unit apartment complex
     located in Westwego, Louisiana, under the LIHPRHA program.  The sale of the
     property generated net cash proceeds to the Partnership of $933,987.  The
     proceeds were net of $1,385,154 used to retire, at a discount, the
     Partnership's purchase money note obligation with respect to the property. 
     The sale provided proceeds to the Partnership in excess of its investment
     in the Local Partnership, and will result in a net financial statement gain
     in 1997 of approximately $3.2 million, of which approximately $1.7 million
     will result from the retirement of the purchase money note obligation with
     respect to the property.  The federal tax gain is estimated to be
     approximately $4.9 million.  The Managing General Partner of the
     Partnership and/or its affiliates will not receive fees relating to the
     sale.

          On January 31, 1996, the local managing general partner of Palatine-
     Barrington Associates Limited Partnership (Deer Grove) received an offer to
     sell the property to an unaffiliated entity.  This offer was rejected by
     the local managing general partner.  On September 13, 1996, the local 
     managing general partner of Deer Grove received another offer to sell the
     property.  The local managing general partner accepted the offer and on
     March 18, 1997, Deer Grove sold the property, a 448-unit apartment complex
     located in Palatine, Illinois.  The sale of the property generated cash
     proceeds to the Partnership of $3.4 million at closing.  The Partnership
     anticipates receiving additional proceeds upon final release of the
     property's reserves.  The proceeds received at closing were in excess of
     the Partnership's investment in the Local Partnership and will result in a
     net financial statement gain in 1997 of approximately $3.4 million. The tax
     gain is estimated to be approximately $17.8 million.


                                      IV-17
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

          Posada Associates Limited Partnership (Posada Vallarta Apartments) was
     operating under an extension of a three-year workout agreement with HUD,
     the holder of the mortgage.  The workout provided for, among other things,
     a minimum monthly debt service payment, with excess cash, if any, being
     applied to delinquent interest.  All debt service payments were made in
     accordance with the workout.  In June 1995, the three-year workout which
     originally expired on October 1, 1995 was extended to October 1, 1996.  In
     June 1996, HUD sold the mortgage loan to a third party.  The new mortgagee
     issued a notice of default and acceleration of the loan to Posada Vallarta
     Apartments.  The notice was determined to be in error, and on July 8, 1996
     the notice of default and acceleration was withdrawn by the new mortgagee. 
     The workout agreement related to Posada Vallarta Apartments provided that
     upon cancellation of the workout agreement, the loan would be recast at an
     annual interest rate of 7.5%, if certain conditions are satisfied.  As of
     October 1, 1996, the expiration of the workout agreement, the local
     managing general partner and the new mortgagee were disputing whether or
     not those conditions had been satisfied.  On October 1, 1996, the Local
     Partnership made a monthly payment, and has continued to make such monthly
     payments, on the debt in the amount which would be due if the loan is
     recast at a 7.5% annual interest rate.  The new mortgagee made an offer to
     extend the workout agreement for two years.  The local managing general
     partner made a counter-offer to extend the workout agreement for ten years.
     On February 6, 1997, the local managing general partner and the new
     mortgagee reached an agreement in principle to recast the loan at a 7.5%
     annual interest rate with a ten-year call provision, as stated in the
     workout agreement.  As of March 10, 1997, the parties are negotiating
     revised loan documents implementing their agreement.  There is no assurance
     that a final agreement will be reached on these documents.  Should the
     mortgagee begin foreclosure proceedings, the Partnership intends to
     vigorously defend such action.

          The report of the auditors on the financial statements of Posada
     Vallarta Apartments for the year ended December 31, 1996 indicates that
     substantial doubt exists about the ability of Posada Vallarta Apartments to
     continue as a going concern due to the uncertainty about the Local
     Partnership's continued ownership of the property due to the potential
     foreclosure of the property.  The uncertainty about the Local Partnership's
     continued ownership of the property does not impact the Partnership's
     financial condition because the related purchase money note is nonrecourse
     and secured solely by the Partnership's interest in the Local Partnership. 
     Therefore, should the investment in Posada Vallarta Apartments not produce
     sufficient value to satisfy the related purchase money note, the
     Partnership's exposure to loss is limited since the amount of nonrecourse
     indebtedness exceeds the carrying amount of the investment in and advances
     to the Local Partnership.  Thus, even a complete loss of this investment
     would not have a material impact on the operations of the Partnership.

          Wexford Ridge Associates Local Partnership (located in Madison,
     Wisconsin), its local general partner, and its management agent have been
     named in eight sexual harassment and discrimination complaints filed with
     HUD.  The Managing General Partner believes the claims will have no
     aggregate material effect on the financial statements of the Partnership
     and that legal costs associated with the claims will be borne by the
     management agent.



                                      IV-18
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

          On May 1, 1996, C.R.H.C., Incorporated (CRHC), an affiliate of the
     Managing General Partner, notified the local managing general partner of
     Arrowhead Apartments Associates Limited Partnership (Arrowhead) and
     Moorings Apartments Associates Limited Partnership (Moorings) that it was
     in default under the Partnership Agreements and threatened to remove him as
     managing general partner of the Local Partnerships.  The managing agent of
     Arrowhead and Moorings, which is an affiliate of the local managing general
     partner, filed arbitration against CRHC seeking, among other things, a
     declaration that the allegations set forth in CRHC's notice did not
     constitute grounds for removal of the local managing general partner.  CRHC
     subsequently filed for arbitration against the local managing general
     partner seeking his removal.  On September 3, 1996, CRHC filed an emergency
     petition in the arbitration to have a trustee appointed to serve as local
     managing general partner and managing agent of the Local Partnerships until
     the arbitration hearings are held.  The emergency petition was denied.  As
     of March 10, 1997, the litigation is in discovery, and the parties are
     negotiating the terms of a settlement.  There is no assurance that a
     settlement of the arbitration will occur.  The hearing is scheduled for
     July 1997.

          Some of the rental properties owned by the Local Partnerships have
     mortgages which are federally insured under Section 236 or Section
     221(d)(3)of the National Housing Act, as amended.  The LIHPRHA program,
     which provided property owners with restricted opportunities to sell low
     income housing, ended effective September 30, 1996.  However, HUD received
     approximately $175 million to fund sales of qualifying properties under the
     LIHPRHA program during the federal government's fiscal year 1997, which
     began October 1, 1996.  Continued funding of the LIHPRHA program after
     fiscal year 1997 is uncertain.  There is no assurance that a sale of any
     properties that previously qualified under the LIHPRHA program will occur,
     except for Tanglewood II, as discussed above.

          The local general partners of the following properties have each filed
     a notice of intent to participate under the LIHPRHA program:























                                      IV-19
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

<TABLE>
<CAPTION>

          Property                           Date of Filing
          --------                           --------------
          <S>                                <C>
          Rolling Green at Amherst           June 5, 1992 (1)
          Tanglewood II                      May 23, 1994 (2)
          Chevy Chase Park                   July 18, 1994
          Wexford Ridge                      July 27, 1994
          Beech Hill I                       December 21, 1994 (1)
          Beech Hill II                      December 21, 1994 (1)
          Rolling Green at Fall River        March 1, 1995 (1)

</TABLE>

     (1)  The plan of actions for these properties were not approved by HUD,
          therefore, these properties are no longer eligible to participate in
          what remains of the LIHPRHA program.

     (2)  Tanglewood II was sold under the LIHPRHA program on February 19, 1997.

          The LIHPRHA program is discussed above.  As discussed above, there is
     no assurance that a sale or refinancing of the remaining properties will
     occur due to the federal government's limited funding or appropriations to
     the LIHPRHA program.  Of the properties listed above, only Chevy Chase and
     Wexford Ridge are ranked on the master funding list, which is subject to
     future government appropriations.

          Some of the rental properties owned by the Local Partnerships are
     financed by state housing agencies.  The Managing General Partner has been
     working to develop strategies to sell or refinance certain properties
     pursuant to programs developed by these agencies or other potential buyers.
     These programs may include opportunities to sell the property to a
     qualifying purchaser who would agree to maintain the property as low to
     moderate income housing in perpetuity, or to refinance the property, or to
     obtain supplemental financing.  The Managing General Partner continues to
     monitor certain state housing agency programs and/or programs provided by
     certain lenders, to ascertain whether the properties would qualify within
     the parameters of a given program and whether these programs would provide
     an appropriate economic benefit to the limited partners of the Partnership.

          Some of the rental properties owned by the Local Partnerships are
     dependent on the receipt of project-based Section 8 Rental Housing
     Assistance Payments (HAP) provided by HUD pursuant to HAP contracts.  In
     1995 and 1996, HUD released its Reinvention Blueprint and a revision to its
     Reinvention Blueprint which contained proposals that have come to be known
     as "Mark-to-Market".  Congress, HUD and the Clinton Administration continue
     to struggle with the Mark-to-Market initiative.  This initiative was
     intended to deal with HUD's increasing burden of funding HAP contracts. 
     Under the initiative, HUD would eliminate the project-based subsidy and
     provide the residents with "sticky vouchers" which would allow residents to
     move to other developments should they so choose.  However, with the
     elimination of the HAP contract, there is no assurance that rental
     properties would be able to maintain the rental income and occupancy levels
     necessary to pay operating costs and debt service.  The initiative will

                                      IV-20
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

     impact those properties that have HAP contracts with shorter terms than
     that of the underlying property mortgage.  For instance, some properties
     may have a 20-year HAP contract while the underlying mortgage has a 40-year
     term.  In the interim, Congress has authorized one-year extensions for
     properties with HAP contracts expiring during the government's fiscal year
     1997, which began October 1, 1996.  In light of recent political scrutiny
     of appropriations for HUD programs, continued funding of annual renewals
     for Section 8 HAP contracts expiring after fiscal year 1997 is uncertain.

          With the ending of the LIHPRHA program and with the uncertainty
     surrounding renewals of expiring Section 8 HAP contracts, the Managing
     General Partner is developing new strategies to deal with the ever changing
     environment of affordable housing policy.  Section 236 and Section
     221(d)(3) properties that are in the 18th year of their mortgage may be
     eligible for pre-payment of the mortgage.  Properties with expiring Section
     8 HAP contracts may become convertible to market-rate apartment properties.
     Currently, there are a few lenders that will provide financing either to
     prepay the existing mortgage or provide additional funds to allow the
     property to convert to market rate units.  Where opportunities exist, the
     Managing General Partner will continue to work with the Local Partnerships
     to develop a strategy that makes economic sense for all parties involved.

     d.   Summarized financial information
          --------------------------------

          Summarized financial information for the Local Partnerships as of
     December 31, 1996 and 1995 and for the years ended December 31, 1996, 1995
     and 1994 is included below.  Certain amounts have been reclassified to
     conform to the 1996 presentation.




























                                      IV-21
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

                          COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                         December 31,
                                                                                    1996           1995
                                                                                ------------   ------------
<S>                                                                             <C>            <C>
Rental property, at cost, net of accumulated
  depreciation of $71,778,854 and $66,489,684,
  respectively                                                                  $ 79,183,226   $ 83,048,981

Land                                                                              11,322,282     11,322,193
Other assets                                                                      16,059,121     15,209,498
                                                                                ------------   ------------
    Total assets                                                                $106,564,629   $109,580,672
                                                                                ============   ============

Mortgage notes payable                                                          $ 97,672,239   $ 98,202,350
Other liabilities                                                                 29,414,000     27,564,786
Due to general partners                                                            6,681,390      6,463,830
                                                                                ------------   ------------
    Total liabilities                                                            133,767,629    132,230,966

Partners' deficit                                                                (27,203,000)   (22,650,294)
                                                                                ------------   ------------
    Total liabilities and partners'
      deficit                                                                   $106,564,629   $109,580,672
                                                                                ============   ============
</TABLE>

                            COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                      For the years ended December 31,
                                                                                    1996           1995           1994
                                                                                ------------   ------------   ------------
<S>                                                                             <C>            <C>            <C>
Revenue:
  Rental                                                                        $ 29,638,904   $ 29,343,786   $ 28,130,763
  Interest                                                                           550,964        474,539      1,071,492
  Other                                                                              795,885        778,072        567,967
                                                                                ------------   ------------   ------------
    Total revenue                                                                 30,985,753     30,596,397     29,770,222
                                                                                ------------   ------------   ------------
Expenses:
  Operating                                                                       20,622,338     20,231,119     19,663,285
  Interest                                                                         8,284,244      8,458,907      8,389,307
  Depreciation                                                                     5,468,433      5,435,953      5,346,581
  Amortization                                                                        78,547         78,173         60,689
                                                                                ------------   ------------   ------------
    Total expenses                                                                34,453,562     34,204,152     33,459,862
                                                                                ------------   ------------   ------------
Net loss                                                                        $ (3,467,809)  $ (3,607,755)  $ (3,689,640)
                                                                                ============   ============   ============
</TABLE>

                                      IV-22
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

     e.   Reconciliation of the Local Partnerships' financial statement net
          -----------------------------------------------------------------
               loss to income tax loss
               -----------------------

          For federal income tax purposes, the Local Partnerships report on a
     basis whereby:  (1) certain revenue and the related assets are recorded
     when received rather than when earned; (2) certain costs are expensed when
     paid or incurred rather than capitalized and amortized over the period of
     benefit; and (3) a shorter life is used to compute depreciation of the
     property for tax purposes as permitted by Internal Revenue Service (IRS)
     Regulations.  These returns are subject to audit and, therefore, possible
     adjustment by the IRS.

          A reconciliation of the Local Partnerships' financial statement net
     loss reflected above to the taxable loss for the years ended December 31,
     1996, 1995 and 1994 is as follows:








































                                      IV-23
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

<TABLE>
<CAPTION>
                                                                                      For the years ended December 31,
                                                                                    1996           1995           1994
                                                                                ------------   ------------   ------------
<S>                                                                             <C>            <C>            <C>
Financial statement net loss                                                    $ (3,467,809)  $ (3,607,755)  $ (3,689,640)

Adjustments:
  Additional tax depreciation using accelerated methods,
  net of depreciation on construction period expenses
  capitalized for financial statement purposes                                    (2,013,453)    (2,301,340)    (2,534,797)

Amortization for tax purposes
  not deducted for financial
  statement purposes                                                                  52,851         33,122         34,805

  Miscellaneous, net                                                               2,121,566      1,061,976        876,666
                                                                                ------------   ------------   ------------
Taxable loss                                                                    $ (3,306,845)  $ (4,813,997)  $ (5,312,966)
                                                                                ============   ============   ============

</TABLE>

3.   RELATED-PARTY TRANSACTIONS

     In accordance with the Partnership Agreement, the Partnership paid the
Managing General Partner a fee for services in connection with the review,
selection, evaluation, negotiation and acquisition of the interests in the Local
Partnerships.  The fee amounted to $1,000,000 which is equal to 2% of the
Additional Limited Partners' capital contributions to the Partnership.  The
acquisition fee was capitalized and is being amortized over a thirty-year period
using the straight-line method.
























                                      IV-24
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


3.   RELATED-PARTY TRANSACTIONS - Continued

     In accordance with the terms of the Partnership Agreement, the Partnership
is obligated to reimburse the Managing General Partner for its direct expenses
in managing the Partnership. For the years ended December 31, 1996, 1995 and
1994, the Partnership paid $109,463, $84,613 and $87,104, respectively, as
direct reimbursement of expenses incurred on behalf of the Partnership. Such
expenses are included in the statements of operations as general and
administrative expenses.

     In addition, in accordance with the terms of the Partnership Agreement, the
Partnership is obligated to pay the Managing General Partner an annual incentive
management fee (the Management Fee), after all other expenses of the of the
Partnership are paid.  The amount of the Management Fee shall not exceed .25% of
invested assets, as defined in the Partnership Agreement, and shall be payable
from the Partnership's cash available for distribution, as defined in the
Partnership Agreement, as of the end of each calendar year, as follows:

     a.   First, on a monthly basis as an operating expense before any
          distributions to limited partners in the amount computed as described
          in the Partnership Agreement, provided that such amount shall not be
          greater than $250,000 and;
     b.   Second, after distributions to the limited partners in the amount of
          1% of the gross proceeds of the offering, the balance of such .25% of
          invested assets.

     For each of the years ended December 31, 1996, 1995 and 1994, the
Partnership paid the Managing General Partner a Management Fee of $249,996.

4.   PARTNERSHIP PROFITS AND LOSSES AND DISTRIBUTIONS

     All profits and losses prior to the first date on which Additional Limited
Partners were admitted were allocated 98.49% to the Initial Limited Partner and
1.51% to the General Partners.  Upon admission of the Special Limited Partner
and the Additional Limited Partners, the interest of the Initial Limited Partner
was reduced to .49%.  The net proceeds resulting from the liquidation of the
Partnership or the Partnership's share of the net proceeds from any sale or
refinancing of the projects or their rental properties which are not reinvested
shall be distributed and applied as follows:

      (i)      to the payment of debts and liabilities of the Partnership
               (including all expenses of the Partnership incident to the sale
               or refinancing) other than loans or other debts and liabilities
               of the Partnership to any partner or any affiliate, such debts
               and liabilities, in the case of a non-liquidating distribution,
               to be only those which are then required to be paid or, in the
               judgment of the Managing General Partner, required to be provided
               for;
     (ii)      to the establishment of any reserves which the Managing General
               Partner deems reasonably necessary for contingent, unmatured or
               unforeseen liabilities or obligations of the Partnership;
     (iii)     to each partner in an amount equal to the positive balance in his
               capital account as of the date of the sale or refinancing,
               adjusted for operations and distributions to that date, but
               before allocation of any profits for tax purposes realized from
               such sale or refinancing and allocated pursuant to the
               Partnership Agreement;
     (iv)      to the Additional Limited Partners (A) an aggregate amount of

                                      IV-25
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


4.   PARTNERSHIP PROFITS AND LOSSES AND DISTRIBUTIONS - Continued

               proceeds from sale or refinancing and all prior sales or
               refinancings equal to their capital contributions, without
               reduction for prior cash distributions other than prior
               distributions of sale and refinancing proceeds, plus (B) an
               additional amount equal to a cumulative non-compounded 6% return
               on each limited partner's capital contribution, reduced, but not
               below zero, by (1) an amount equal to 50% of the losses for tax
               purposes plus tax credits allocated to such limited partner and
               (2) distributions of net cash flow to each limited partner, such
               return, losses for tax purposes and net cash flow distributions
               commencing on the first day of the month in which the capital
               contribution was made;
        (v)    to the repayment of any unrepaid loans theretofore made by any
               partner or any affiliate to the Partnership for Partnership
               obligations and to the payment of any unpaid amounts owing to the
               General Partners pursuant to the Partnership Agreement;
       (vi)    to the General Partners in the amount of their capital
               contributions;
      (vii)    thereafter, for their services to the Partnership, in equal
               shares to certain general partners (or their designees), whether
               or not any is then a general partner, an aggregate fee of 1% of
               the gross proceeds resulting from (A) such sale (if the proceeds
               are from a sale rather than a refinancing) and (B) any prior
               sales from which such 1% fee was not paid to the General Partners
               or their designees and,
     (viii)    the remainder, 12% to the General Partners (or their assignees),
               3% to the Special Limited Partner and 85% to the Initial and
               Additional Limited Partners (or their assignees).

     Fees payable to certain general partners (or their designees) under (vii)
above, together with all other property disposition fees and any other
commissions or fees payable upon the sale of apartment complexes, shall not in
the aggregate exceed the lesser of the competitive rate or 6% of the sales price
of the apartment complexes.

     In addition, the Managing General Partner and/or its affiliates may receive
a fee in an amount of not more than 2% of the sales price of the investment in a
Local Partnership or the property it owns.  The fee would only be payable upon
the sale of the investment in a Local Partnership or the property it owns and
would be subject to certain restrictions, including achievement of a certain
level of sales proceeds and making certain minimum distributions to limited
partners.   No such amounts were paid to the Managing General Partner and/or its
affiliates during 1996, 1995 and 1994.

     Pursuant to the Partnership Agreement, all cash available for distribution,
as defined, shall be distributed, not less frequently than annually, 97% to the
Additional Limited Partners, 1% to the Special Limited Partner, .49% to the
Initial Limited Partner and 1.51% to the General Partners after payment of the
Management Fee, as specified in the Partnership Agreement.  As defined in the
Partnership Agreement, prior to the establishment of any reserves deemed
necessary by the Managing General Partner and after payment of the Management
Fee, the Partnership had cash available for distribution of approximately
$432,000, $368,000 and $253,000 for the years ended December 31, 1996, 1995 and
1994, respectively.  No distributions were declared or paid during 1996, 1995 or
1994 because any cash available for distribution is currently being retained by
the Partnership, as previously discussed.

                                      IV-26
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

5.   RECONCILIATION OF THE PARTNERSHIP'S FINANCIAL STATEMENT NET LOSS TO INCOME
          TAX LOSS

     For federal income tax purposes, the Partnership reports on a basis
whereby:  (1) certain expenses are amortized rather than expensed when incurred;
(2) certain costs are amortized over a shorter period for tax purposes, as
permitted by IRS Regulations, and (3) certain costs are amortized over a longer
period for tax purposes.  The Partnership records its share of losses from its
investments in limited partnerships for federal income tax purposes as reported
on the Local Partnerships' federal income tax returns (see Note 2e), including
losses in excess of related investments amounts.  In addition, adjustments
arising from the imputation of interest on the Partnership's purchase money
notes for financial reporting purposes are eliminated for income tax purposes
(see Note 2a).  These returns are subject to audit and, therefore, possible
adjustment by the IRS.  

     A reconciliation of the Partnership's financial statement net loss to the
taxable loss for the years ended December 31, 1996, 1995 and 1994 is as follows:










































                                      IV-27
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS


5.   RECONCILIATION OF THE PARTNERSHIP'S FINANCIAL STATEMENT NET LOSS TO INCOME
          TAX LOSS - Continued

<TABLE>
<CAPTION>
                                                                                       For the years ended December 31,
                                                                                     1996            1995           1994
                                                                                 ------------    ------------   ------------
<S>                                                                              <C>             <C>            <C>
Financial statement net loss                                                     $ (3,915,399)   $ (5,847,928)  $ (5,601,284)

Adjustments:
  Differences between the income tax losses and
   financial statement losses related to the
   Partnership's equity in the Local Partnerships'
   losses (see Note 2e)                                                            (3,248,881)     (4,798,458)    (5,030,386)

Costs amortized over a shorter period for income
  tax purposes                                                                        (59,560)        (59,561)       (59,560)

Effect of imputed interest on purchase money notes
  for financial reporting purposes (see Note 2a)                                    3,035,893       3,031,352      2,366,789
                                                                                 ------------    ------------   ------------
Taxable loss                                                                     $ (4,187,947)   $ (7,674,595)  $ (8,324,441)
                                                                                 ============    ============   ============

</TABLE>

6.   CONTINGENCIES

     In 1990, CRI, as managing general partner of the Partnership and various
other entities, subcontracted certain property-level asset management functions
for certain properties to Capital Management Strategies, Inc. (CMS).  Among
these properties were properties owned by some of the Local Partnerships in
which the Partnership invested.  CMS was formed by Martin C. Schwartzberg, a
nominal general partner of the Partnership and a former stockholder of CRI, when
he retired from CRI and its related businesses as of January 1, 1990.  Mr.
Schwartzberg agreed not to act as a general partner with respect to any of the
CRI-sponsored partnerships, including this Partnership, and has not done so
since that time.  In late 1995, a dispute arose between CRI and CMS over the
funding level of the 1996 contract for CMS.  On November 9, 1995, CRI filed a
complaint against CMS to determine the proper amount of fees to be paid in 1996
under the asset management agreement.  CMS answered on January 10, 1996, but
asserted no counterclaims.

     Thereafter, Mr. Schwartzberg launched a hostile consent solicitation to be
designated as managing general partner of approximately 125 private partnerships
sponsored by CRI.  On January 18, 1996, Mr. Schwartzberg and CMS filed a
complaint in the Circuit Court of Montgomery County, Maryland (the Circuit
Court), against CRI and Messrs. Dockser and Willoughby (who are general partners
of the Partnership) alleging, among other things, that CRI and Messrs. Dockser
and Willoughby breached the asset management agreement pursuant to which Mr.
Schwartzberg's company, CMS, agreed to perform limited functions related to
property-level issues for a portion of CRI's subsidized housing portfolio
(including some of the properties in which the Partnership invested), by
reducing the proposed budget for 1996.  The Partnership was not named as a
defendant in this action.  Messrs. Dockser and Willoughby entered an answer
denying all of Mr. Schwartzberg's claims.  On February 6, 1996, CRI terminated

                                      IV-28
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

6.   CONTINGENCIES - Continued

the CMS contract for cause.  (CRI subsequently retained an
independent asset management company to perform functions previously performed
by CMS.)  Mr. Schwartzberg and CMS responded to the contract termination by
filing a motion for injunctive relief in the Circuit Court, asking the court to
enjoin CRI from terminating the contract.  In a ruling issued on February 12,
1996, the Circuit Court, among other things, refused to grant the injunction
requested by CMS.  On February 12, 1996, the Circuit Court also issued a
memorandum opinion and order enjoining CMS and Mr. Schwartzberg from disclosing
information made confidential under the asset management agreement.

     Following subsequent litigation, none of which involved the Partnership, on
June 12, 1996, Mr. Schwartzberg, CRI and others entered an agreement (which
contemplates the execution of a subsequent definitive agreement) to resolve the
disputes between CRI and CMS.  The Partnership was not a signatory to the
agreement.  As part of the resolution, Mr. Schwartzberg withdrew any derogatory
statements he made about CRI and its principals.  Upon execution of the
definitive agreement, Mr. Schwartzberg shall withdraw as a General Partner of
this Partnership and his interest will become that of a Special Limited Partner.
As of March 10, 1997, CRI and Mr. Schwartzberg were unable to agree on the
language of various provisions of the definitive agreement and have agreed to
submit the open issues to arbitration.  The Partnership is not a party to the
arbitration proceeding.




































                                      IV-29
<PAGE>




























                          FINANCIAL STATEMENT SCHEDULES



































                                      IV-30
<PAGE>


















              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON
              -----------------------------------------------------
                          FINANCIAL STATEMENT SCHEDULE
                          -----------------------------


Partners
Capital Realty Investors-II
  Limited Partnership

     In connection with our audit of the financial statements of Capital Realty
Investors-II Limited Partnership referred to in our report dated March 10, 1997,
which is included in this Form 10-K, we have also audited Schedule III as of
December 31, 1996, 1995 and 1994.  We did not audit the financial statements for
certain of the Local Partnerships in 1996, 1995 and 1994, which are accounted
for as described in Note 1c.  In our opinion, this schedule presents fairly, in
all material respects, the information required to be set forth therein.


                                                            Grant Thornton LLP

Vienna, VA
March 10, 1997























                                      IV-31
<PAGE>
                  CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION OF
               LOCAL PARTNERSHIPS IN WHICH CAPITAL REALTY INVESTORS-II
                          LIMITED PARTNERSHIP HAS INVESTED

                                December 31, 1996
<TABLE>
<CAPTION>

       COL. A                COL. B                   COL. C                                 COL. D
--------------------        -------      -------------------------------        -------------------------------
                                                     Initial                          Costs Capitalized
                                                  Cost to Local                           Subsequent
                                                   Partnership                          to Acquisition
                                         -------------------------------        -------------------------------
                                                             Building
    Description             Encum-                             and                                    Carrying
Operating Properties        brances         Land           Improvements         Improvements          Costs (B)
--------------------        -------      -----------       ------------         -------------        -----------
<S>                         <C>          <C>               <C>                  <C>                  <C>
Deer Grove Apartments       (A)          $ 1,691,558       $ 15,098,195         $   1,437,162        $        --
 Palatine, IL
 (448 units-family
 apartment complex)

Frenchman's Wharf II        (A)            2,543,310          6,099,825               483,131                 --
 New Orleans, LA
 (324 units-family
 apartment complex)

Mercy Terrace               (A)                   --         12,696,941             1,578,347                 --
 San Francisco, CA
 (158 units-family
 apartment complex)

Posada Vallarta             (A)              936,579                 --            15,416,636          1,113,666
  Phoenix, AZ
  (336 units-family
  apartment complex)

Princeton Community         (A)              572,228         10,469,952             1,465,439                 --
  Village
  Princeton, NJ
  (239 units-family
  apartment complex)

Rolling Green at
  Fall River                (A)              473,263         10,377,418             2,597,283                 --
  Fall River, MA
  (404 units-family
  apartment complex)

Aggregate of remain-
 ing properties which
 are individually less
 than 5% of the total
 of Column E                               4,837,474         61,807,672            10,492,622             95,661
                                         -----------       ------------         -------------        -----------

         Total                           $11,054,412       $116,550,003         $  33,470,620        $ 1,209,327
                                         ===========       ============         =============        ===========
</TABLE>

                                      IV-32
<PAGE>
                   CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

             SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION OF
               LOCAL PARTNERSHIPS IN WHICH CAPITAL REALTY INVESTORS-II
                    LIMITED PARTNERSHIP HAS INVESTED - Continued

                                December 31, 1996
<TABLE>
<CAPTION>

       COL. A                              COL. E                            COL. F       COL. G    COL. H           COL. I
--------------------     -------------------------------------------      ------------    -------   -------     ----------------
                                    Gross amount at which                                                         Life upon
                                 carried at close of period                                                       which dep-
                         -------------------------------------------                       Date                  reciation in
                                           Building                        Accumulated      of                   latest income
    Description                              and                          depreciation    Const-      Date       statement is
Operating Properties        Land         Improvements   Total (C) (D)         (D)         ruction   Acquired    computed (years)
--------------------     -----------     ------------   -------------     ------------    -------   --------    ----------------
<S>                      <C>             <C>            <C>               <C>             <C>       <C>         <C>
Deer Grove Apartments    $ 1,692,651     $ 16,534,264   $ 18,226,915      $(7,674,372)      1979      8/83            5-30
 Palatine, IL
 (448 units-family
 apartment complex)

Frenchman's Wharf II       2,543,310        6,582,956      9,126,266       (5,316,854)      1981      6/83            25
 New Orleans, LA
 (324 units-family
 apartment complex)

Mercy Terrace                     --       14,275,288     14,275,288       (6,525,540)      1983      6/83            3-30
 San Francisco, CA
 (158 units-family
 apartment complex)

Posada Vallarta              908,458       16,558,423     17,466,881       (4,704,437)      1984      4/83            5-40
  Phoenix, AZ
  (336 units-family
  apartment complex)

Princeton Community          572,228       11,935,391     12,507,619       (5,811,964)      1971      9/83            3-40
  Village
  Princeton, NJ
  (239 units-family
  apartment complex)

Rolling Green at
  Fall River                 473,396       12,974,568     13,447,964       (6,329,426)      1975      2/84            5-25
  Fall River, MA
  (404 units-family
  apartment complex)

Aggregate of remain-
  ing properties which
  are individually less
  than 5% of the total
  of Column E              5,132,239       72,101,190     77,233,429       (35,416,261)
                         -----------     ------------   ------------      ------------

         Total           $11,322,282     $150,962,080   $162,284,362      $(71,778,854)
                         ===========     ============   ============      ============

</TABLE>

                                      IV-33
<PAGE>
                   CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

           NOTES TO SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
                         OF LOCAL PARTNERSHIPS IN WHICH
            CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP HAS INVESTED

                                 December 31, 1996


(A)  Secured by mortgage loans.
(B)  Consists of capitalized construction period interest and real estate
     taxes during construction.
(C)  The aggregate cost of land for federal income tax purposes is
     $12,967,031 and the aggregate costs of buildings and improvements for
     federal income tax purposes is $162,683,582.  The total of the above-
     mentioned items is $175,650,613.
(D)  Reconciliation of real estate
     -----------------------------

<TABLE>
<CAPTION>

                                                                     For the years ended December 31, 
                                                                   1996              1995             1994
                                                               ------------      ------------     ------------
<S>                                                            <C>               <C>              <C>
Balance at beginning of period                                 $160,860,858      $158,911,927     $157,439,291

Improvements during period                                        1,602,926         2,304,108        2,193,200

Deletions during period                                            (179,422)         (355,177)        (720,564)
                                                               ------------      ------------     ------------
Balance at end of period                                       $162,284,362      $160,860,858     $158,911,927
                                                               ============      ============     ============

</TABLE>

     Reconciliation of accumulated depreciation
     ------------------------------------------

<TABLE>
<CAPTION>
                                                                     For the years ended December 31, 
                                                                   1996              1995             1994
                                                               ------------      ------------     ------------
<S>                                                            <C>               <C>              <C>
Balance at beginning of period                                 $ 66,489,684      $ 61,408,908     $ 56,782,505

Depreciation expense for the period,
  net of deletions                                                5,289,170         5,080,776        4,626,403
                                                               ------------      ------------     ------------
Balance at end of period                                       $ 71,778,854      $ 66,489,684     $ 61,408,908
                                                               ============      ============     ============

</TABLE>









                                      IV-34
<PAGE>


                                  EXHIBIT INDEX
                                  -------------


Exhibit                                                  Method of Filing
-------                                           -----------------------------

27        Financial Data Schedule                 Filed herewith electronically






















































                                                                IV-35