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

                               Form  10 - QSB

(X)       QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) of
               THE SECURITIES EXCHANGE ACT OF 1934
           For the quarterly period ended September 30, 1995

                    or

( )       TRANSITION REPORT PURSUANT TO SECTION 13 or 15 (d) of
               THE SECURITIES EXCHANGE ACT OF 1934
               For the transition period from _______ to _______

                    Commission File Number  1-9043

                    BANYAN HOTEL INVESTMENT FUND

         (Exact name of Registrant as specified in its charter)

        Delaware                                           36-3361229
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                           Identification No.)
                                                    
One Penn Plaza, Suite 1531, New York, N.Y.                  10119
(address of principal executive offices)                 (zip code)
                                                    
Registrant's telephone number, including area code       (212) 736-7880

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  .

Shares of common stock outstanding as of October 31, 1995: 12,403.565

Transitional Small Business Disclosure Format.  Yes   .   No   X. 



<PAGE>
                                    Part I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                                    BANYAN HOTEL INVESTMENT FUND
                                           BALANCE SHEETS
                                 September 30, 1995 And December 31, 1994
                                             (Unaudited)

                                               1995            1994
                                              ------          ------
 ASSETS

 Cash and Cash Equivalents                 $  650,085      $  275,161
 Investment Securities                      1,370,820       1,907,531
 Interest Receivable on Cash and
  Cash Equivalents and                          9,575          16,279
  Investments Securities

 Mortgage Loans in Substantive                    ---             ---
  Foreclosure 

 Prepaid Insurance & Expenses                 295,791          40,091

 Net Investment in Liquidating Trust              ---             ---
 
 Investment in Partnership                        ---             ---

 Other Assets                                   4,139          31,461
                                        ------------------------------
 Total Assets                              $2,330,464      $2,270,523
                                        ==============================
 LIABILITIES AND STOCKHOLDERS' EQUITY

 Liabilities 
   Accounts Payable and Accrued            $   55,194      $  111,197
    Expenses
 Commitments and Contingencies                    ---             ---
                                        ------------------------------
 Stockholders' Equity
 Shares of Common Stock. $0.01 
   Par Value, 20,000,000 shares
   Authorized, 12,403,565 shares
   Issued 1995, and 10,355,799
   shares 1994                             87,477,847      87,027,338

 Accumulated Deficit                      (85,181,027)    (84,794,685)

 Treasury Stock, at Cost, for
   32,757 Shares of Common Stock               (8,189)         (8,189)
 Unrealized loss on Investment Sec.           (13,361)        (65,138)
                                        ------------------------------
 Total Stockholders' Equity                $2,275,270      $2,159,326
                                        ------------------------------
 Total Liabilities & Stockholders'
   Equity                                  $2,330,464      $2,270,523
                                        ==============================

 Book Value Per Share of Common
   Stock (12,403,565 shares 
   outstanding in 1995 and 10,323,042 
   in 1994)                                $      0.19     $     0.21
                                        ==============================


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


                                    2
<PAGE>

                                     BANYAN HOTEL INVESTMENT FUND
                                  STATEMENTS OF INCOME AND EXPENSES
                           FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 and 1994
                                             (UNAUDITED)

 INCOME                                   1995                   1994

 Interest Income on
   Cash and Cash
   Equivalents                       $  13,532               $ 14,988

 Interest Income on
   Investment Securities                52,309                  95,357
                                     ----------              ----------
 Total Income                        $  65,841               $ 110,345
                                     ----------              ----------

 EXPENSES
 Stockholders' Expenses              $  57,191               $  80,899
     
 Directors' Fees,
   Expenses and Insurance              100,050                 202,109
   
 Other Professional Fees               105,293                  93,965

 General and Adminstrative             294,230                 139,741

                                     ----------              ---------- 
Total Other Expenses                 $ 556,764               $ 516,714

 Recovery of Class
   Action Settlement Costs 
   and Expenses                        (29,582)                (90,693)

Recovery from Mortgage Previously
  Written Off                          (75,000)                  ---
                                     ----------              ----------
 Total Expenses                        452,182                 426,021
                                     ----------              ----------
 Net Income (Loss)                   $(386,341)              $(315,676)
                                     ==========              ==========
 Net Income (Loss) Per
   Share of Common Stock 
   (Based on Shares 
   Outstanding of 12,403,575 
   in 1995 and 10,323,042 in 
   1994)                             $   (0.03)              $   (0.03)
                                     ==========              ==========

     The accompanying notes are an integral part of the Financial Statements. 


                                    3



<PAGE>
                                    BANYAN HOTEL INVESTMENT FUND
                                  STATEMENTS OF INCOME AND EXPENSES
                          FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1995 and 1994
                                               (UNAUDITED)


 INCOME                                 1995                   1994
                                        ----                   ----

 Interest Income on
   Cash and Cash   
   Equivalents                        $  4,411                $  3,823

 Interest Income on                     
   Investment Securities              $  6,433                $ 31,748
  
                                     ----------              ----------
 Total Income                         $ 10,844                $ 35,571
                                     ----------              ----------
 EXPENSES
 Expenses from Lending Activities:
 
   Recovery of Losses on Mortgages
   Loans, Notes and Interest
   Receivable                        $ (75,000)              $   ---
                                     ----------              ----------
Other Expenses:
   Stockholder Expenses              $   7,459                $ 19,596

Directors' Fees, Expenses 
   and Insurance                        21,082                  58,497

 Other Professional Fees                32,197                  35,530

 General and Administrative             37,638                  25,875
                                     ----------              ----------
 Total Other Expenses                 $ 98,376                $139,498
                                     ----------              ----------
 Total Expenses                      $  23,376                $139,498
                                     ----------              ----------
 Net Income (Loss)                   $ (12,532)              $(103,927)
                                     ==========              ==========
 Net Income (Loss Per
   Share of Common
   Stock (Based on      
   Shares Outstanding of 
   12,338,051 in 1995
   and 10,321,042 in 1994               $(0.00)                 $(0.01)
                                     ==========              ==========


     The accompanying notes are an integral part of the Financial Statements. 



                                    4



<PAGE>

                                     BANYAN HOTEL INVESTMENT FUND
                                  STATEMENT OF STOCKHOLDERS' EQUITY
                               FOR THE NINE MONTHS ENDED SEPT. 30, 1995
                                             (UNAUDITED)

<TABLE><CAPTION>

                                        Common        Stock        Accumulated    Treasury      Unrealized    Total
                                        Shares        Amount       Deficit        Stock         Loss
                                      --------------------------------------------------------------------------------
         <S>                          <C>           <C>          <C>              <C>           <C>         <C>   
         Stockholders' Equity                                                                             
          (Deficit)  Dec. 31, 1994    10,355,799    $87,027,338  $(84,794,685)    $(8,189)      $(65,138)   $2,159,326

         Proceeds from Issuance                                                                           
            of Common Stock            2,047,766        450,509        ---           ---           ---         450,509

         Net Loss                          ---            ---        (386,341)       ---           ---        (386,341)

         Market Adjustment                 ---            ---          ---           ---          51,777        51,777
           September 30, 1995
                                      --------------------------------------------------------------------------------
                                      12,403,565    $87,477,847  $(85,181,026)    $(8,189)      $(13,361)   $2,275,271
                                      ================================================================================


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

</TABLE>

                                                  5



<PAGE>
                                    BANYAN HOTEL INVESTMENT FUND
                                       STATEMENT OF CASH FLOWS
                           FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 and 1994
                                             (Unaudited)
<TABLE><CAPTION>
                                                     1995                       1994
                                                     ----                       ----
<S>                                               <C>                         <C>
 Cash Flow from Operating Activities:

 Net Income (Loss)                                $(386,341)                  $(315,676)

 Amortization of Premium on Investment                1,060                       1,392
  Securities

 Net Change in:
   Interest Receivable                                6,704                       2,996
   Prepaid Insurance                               (255,700)                     25,141
   Other Assets                                      27,268                     205,906
   Accounts Payable and Accrued Expenses            (56,003)                    (62,363)
                                                  ----------                ------------
 Net Cash Used in Operating Activities            $(663,012)                  $(142,604)
                                                  ----------                ------------
Cash Flows From Investing Activities:
   Net Proceeds from Sale of and
   Principal Payments on Investment
   Securities                                     $ 587,427                      ---    
   Purchase from Securities of Investment         $   ---                   $(1,974,562)
                                                  ----------                ------------
Net Cash used in or Provided by 
   Investment Activities                          $ 587,427                 $(1,974,562)
                                                  ----------                ------------
Cash Flow From Financing Activities:
   Proceeds from Issuance of Common Stock         $ 450,509                       ---
                                                  ----------                ------------
Net Increase or (Decrease) in Cash and 
   Cash Equivalents                               $ 374,924                 $(2,117,166)

Cash and Cash Equivalents at Beginning of           275,161                   2,443,797
   Period
                                                  ----------                ------------
Cash and Cash Equivalents at End 
   of Period                                      $ 650,085                 $   326,631
                                                  ==========                ============


               The accompanying notes are an integral part of the Financial Statements

</TABLE>

                                                  6



<PAGE>



                        BANYAN HOTEL INVESTMENT FUND
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            SEPTEMBER 30, 1995
                                (UNAUDITED)

     Readers of this quarterly report should refer to the Banyan Hotel
Investment Fund's (the "Fund's") audited financial statements for the year
ended December 31, 1994, which are included in the Fund's 1994 Annual
Report, as certain footnote disclosures which would be substantially
duplicate those contained in such audited statements have been omitted from
this report.

1.   FINANCIAL STATEMENT PRESENTATION

     The accompanying financial statements include the accounts of the Fund
and its wholly owned subsidiaries.  All intercompany balances and
transactions have been eliminated in consolidation.  In the opinion of
management, all adjustments necessary for a fair presentation have been
made to the accompanying financial statements as of September 30, 1995 and for
the three months ended September 30, 1995 and 1994.  These adjustments made to
the financial statements, as presented, are all of a normal recurring
nature to the Fund unless otherwise indicated.

2.   CHANGE IN CONTROL

     On February 15, 1995, a change in control of the Fund occurred
pursuant to the closing of the sale of shares of common stock in the Fund
to Mr. Harvey Polly per the terms of a purchase agreement.  A tender offer
conducted by Mr. Polly, which commenced on December 28, 1994, concluded on
January 26, 1995, and resulted in the tender to Mr. Polly of 1,288,217
shares of common stock, or 12.5% of the Fund's then outstanding shares of
common stock, for a cash price of $0.35 per share.  Subsequent to the
closing of the tender offer, the terms of the purchase agreement also
required Mr. Polly to purchase from the Fund a number of shares sufficent
to allow Mr. Polly to own, by virtue of the combination of the shares
acquired through the tender offer and the shares purchased directly from
the Fund, not less than 3,335,000 and not more than 40% of the shares of
common stock after giving effect to the shares issued in connection with
the purchase.  On February 15, 1995, per the purchase agreement, Mr. Polly
purchased 2,047,766 newly issued shares of common stock of the Fund for a
cash price of $0.22 per share.  Upon the acquisition of the aforesaid shares
from the Fund, when combined with the shares of common stock previously
owned and acquired pursuant to the tender offer, Mr. Polly is the
beneficial owner of 3,335,983 shares, or approximately 27% of the Fund's
outstanding voting shares of common stock.

3.   TRANSACTIONS WITH AFFILIATES

     Prior to the February 15, 1995 acquisition of the Fund by Mr. Polly,
administrative costs, primarily salaries and general and administrative
expenses, were reimbursed by the Fund to Banyan Management Corp. ("BMC").
These costs were charged to the Fund and certain other entities for which
BMC provides administrative services based upon the actual number of hours
spent by BMC personnel on matters related to those entities. The Fund's




                                     7
<PAGE>



                       BANYAN HOTEL INVESTMENTS FUND
                       NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1995
                                (UNAUDITED)



3.   TRANSACTIONS WITH AFFILIATES (CONTINUED)

reimbursements to BMC for the expenses during the three months ended March
31, 1995 totaled $83,674, representing the Fund's portion of BMC costs from
January 1, 1995 through February 15, 1995, which included a one-time
termination fee of $46,354 paid pursuant to the terms of an Administrative
Services Agreement between the Fund and BMC.  During the first three months
of 1994, the Fund's portion of BMC costs was $25,416.  During the second
quarter, the Fund paid $181 to BMC and $4,647 to Oak Realty Group, Inc., for
administrative costs during the management transition.  During the third 
quarter, Oak Realty Group, Inc. performed its final services for the Fund,
for which the Oak Realty Group was paid $4,958.

4.   MORTGAGE LOANS RECEIVABLE

     OMNI PARK CENTRE

     On June 17, 1987, the Fund issued a $5,154,600 third mortgage loan to
Park Centre Associates (the "Borrower") which was collateralized by the
Omni Park Hotel (the "Property") located in New York, New York.  On July 19,
1991 the Fund was served with a summons in a mortgage foreclosure action
filed by Sheraton Holding Inc. ("Sheraton") in the Superior Court of New
York, New York. Sheraton sought to foreclose on its $54,000,000 first
mortgage collateralized by the Property. The Sheraton foreclosure action
was based on monetary defaults by the Borrower. On September 30, 1991 the
Fund filed a counterclaim to the Sheraton foreclosure action. In addition,
the second mortgage on the property in the amount of approximately
$5,600,000 is also in default and the holder of the mortgage has filed a
counterclaim to the foreclosure with the court. On June 12, 1992, the
Borrower filed for protection under the U.S. Bankruptcy Code. On June 30,
1992, an order was entered in the Bankruptcy Court between the Fund,
Sheraton, the second mortgage holder and the Borrower authorizing and
restricting the use of cash collateral by the Borrower. During 1992, the
Fund recorded a provision for losses for the remaining carrying balance of
the loan.

     In May, 1993, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 144, Accounting by
Creditors for Impairment of a Loan ("FAS 114"). Effective January 1, 1995,
in accordance with FAS 114, the Fund has reclassified Mortgage Loans in
Substantive Foreclosure to Mortgage Loans Receivable with an appropriate
allowance for the loan losses determined based on consideration of the fair
value of the collateral or discounted future cash flows to be received. 

     During the third quarter of 1995, the Fund assigned its interest in this
loan for $75,000.  In as much as the entire loan had previously been written 
off, this receipt is reflected as income on the accompanying Financial 
Statements.




                                     8
<PAGE>


4.   MORTGAGE LOANS RECEIVABLE (CONTINUED)

     On October 10, 1995, the Fund made a first mortgage loan in the amount
of $375,000 which is secured by a commercial property in New York City, as well
as by a personal guaranty of one of the principals of the borrower.  The loan 
calls for interest at 12% per annum with monthly payments based on a ten 
(10) year amortization schedule and a balloon payment of the total balance 
in five (5) years.

5.   INVESTMENT IN PARTNERSHIP

     In 1991, in connection with a release from liability related to a loan
made by the Fund, the Fund acquired a 50% limited partnership interest in
the partnership which owns the Santa Barbara Biltmore Resort. The Fund did
not record losses related to its interest in the Santa Barbara Biltmore
during 1995 and 1994 since the carrying value of the partnership interest
was reduced to zero as of December 1992, and the Fund has no obligation to
make additional capital contributions to, or to pay the liabilities of, the
partnership. 

6.   INVESTMENT SECURITIES

     The Fund's investment securities portfolio at June 30, 1995 is as follows:


<TABLE><CAPTION>

   Title of Each Issue and                    Amortized Cost             Estimated
       Name of Insurer                       Net of Principal              Market
                                             Paydowns Received              Value
                                            September 30, 1995      September 30, 1995 (2)

<S>                                           <C>                     <C>
 Federal National Mortgage Assn. (1)(4)           $493,169                $483,939
 8.00%, 1/20/94 - 2/25/2005

 Federal National Mortgage Assn. (1)(3) 
 7 1/4%, 10/27/95 - 5/25/22                        882,012                 888,750

                                              ------------             ------------
                                                $1,375,181              $1,372,689
                                              ============             ============
</TABLE>
  

(1)  The Guaranteed Remic Pass-Through Certificates are guaranteed as to
     timely payment of principal and interest by the Federal National 
     Mortgage Association.  The maturity of the principal of the above
     investment securities is dependent upon the repayments of the underlying
     U.S. Agency sponsored mortgages.



                                     9

<PAGE>



6.   INVESTMENT SECURITIES (CONTINUED)

(1)  The rate of repayment is dependent upon the current market level of 
     interest rates on mortgage loans as it relates to the interest rates of
     the mortgages underlying each REMIC security. The stated maturity of these
     investment securities, under the market conditions of the second quarter of
     1995, is expected to be from February 25, 2005 to May 25, 2022. These 
     Expectation may change as interest rates on mortgage loans change.

(2)  The Fund has recorded a market adjustment of 13,361 representing
     unrealized losses on its investment securities based on current
     market values at September 30, 1995. 
 
(3)  On June 11, 1995 the Fund sold these securities for $884,250 resulting
     in a realized loss of approximately $20,200. On the same day the
     Fund purchased $900,000 of FNMA 7 1/4% certificates  for $891,000. This
     transaction will increase the Fund's annual income from investment
     securities by $20,200.

(4)  On September 25, 1995, the Fund received $217,207 of principal on the
     8% certificates which is reflected in the accompanying Financial 
     Statements.  On October 25, 1995, the Fund received an additional 
     $433,950 of principal on these 8% certificates which will be reflected
     on the fourth quarter Financial Statements.  On October 27, 1995, the 
     Fund purchased $600,000 in U.S. Treasury bills which will mature on 
     December 21, 1995.
     
7.   RECOVERY OF LOSSES ON MORTGAGE LOANS, NOTES, INTEREST RECEIVABLES
     AND CLASS ACTION COSTS AND EXPENSES

     On February 9, 1995, the Fund received a cash distribution of $47,331
related to its interest in a liquidating trust established for the benefit
of the previously unsecured creditors of VMS Realty Partners and its
affiliates ("VMS").  For the quarter ended March 31, 1995, the Fund has
recorded a $29,582 recovery of losses on mortgage loans, notes and
interest receivable on its consolidated statement of income and expenses
related to the distribution received from the liquidating trust. The
$29,582 net recovery recorded in 1995 represents the $47,331 distribution
received net of an estimated $17,749 due to the Class Action Settlement
Fund for the Fund's share of amounts due per the terms of the previously
settled VMS securities litigation. At June 30, 1995, the Fund has a total
liability to the Class Action Settlement of $30,786. 



                                     10

<PAGE>


7.   RECOVERY OF LOSSES ON MORTGAGE LOANS, NOTES, INTEREST RECEIVABLES
     AND CLASS ACTION COSTS AND EXPENSES (CONTINUED)


     On January 25, 1994, the Fund received net proceeds of $90,693
relating to a recovery of payments previously made into an escrow
established as part of the 1992 class action settlement of the VMS
securities litigation. The escrow was established to provide the directors
of the Fund with monies to fund the cost of any litigation in which they
may be named as defendants following settlement of the class action.
Subsequently, the directors released the proceeds from the escrow, and the
Fund purchased an insurance policy to cover the directors.



                                     11

<PAGE>



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

GENERAL

     Banyan Hotel Investment Fund ("The Fund"), was formed to make mortgage
loans to affiliates of VMS Realty Partners, ("VMS"), secured by hotel and
resort properties. The Fund has been adversely affected as a result of the
non-payment of amounts due from these borrowers on mortgage loans and notes
receivable. 

     In early 1990, the Fund implemented a business plan focused on
preservation of its assets and managing its properties acquired through
foreclosure until they could be disposed of in an orderly manner (the
"Principal Recovery Plan").

     On January 28, 1992, the Board of Directors of the Fund authorized the
preparation of a formal plan of liquidation which was subsequently adopted
on April 7, 1992 (the "Plan"). The Plan contemplated the Fund liquidating
its assets and distributing the proceeds to its stockholders.  The Fund
estimated that its liquidation value was between $.15 and $.20 per share.
After the adoption of the Plan, Management of the Fund completed the
workout or liquidation of certain assets and considered alternatives to
the announced plan of liquidation which could provide greater stockholder
value, including a number of unsolicited proposals from various third
parties. Based upon Management's review of these various proposals, the
Board of Directors resolved that one proposal was in the best interest of
the Fund and its stockholders because it allowed every stockholder an
opportunity to sell his shares at an amount in excess of the projected
liquidation value. The Board of Directors, by unanimous written consent
dated June 15, 1994, authorized the Fund to execute and deliver a non-
binding letter of intent with Mr. Harvey Polly.

     On August 3, 1994 the Fund entered into Purchase Agreement (the
"Purchase Agreement") with Mr. Polly providing, among other things, for
an all cash tender offer, under which Mr. Polly agreed to offer to 
purchase 100% of the shares of common stock of the Fund for $0.35 per 
share. The Purchase Agreement was subsequently amended on November 4, 1994, 
December 19, 1994 and February 15, 1995.  The Purchase Agreement provided, 
among other things, for the following events to occur at or before closing: 
(i) the resignation of the current officers and directors; (ii) the purchase
by the Fund of "run-off" directors' and officers' liability insurance coverage
for the current officers and directors; (iii) the termination of the
employment contract of Leonard G. Levine and payment of the severance
compensation associated therewith; (iv) the termination of the
Administrative Services Agreement with Banyan Management Corp.  
and payment of the termination fee associated therewith; and (v) the
assignment by the Fund of its ownership interest in Banyan Management Corp.

     On February 15, 1995, a change in control of the Fund occurred
pursuant to the closing of the sale of shares of common stock in the Fund
to Mr. Polly per the terms of the Purchase Agreement. Mr. Polly's tender
offer, which commenced on December 28, 1994, concluded on 




                                     12



<PAGE>


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

January 26, 1995, and resulted in the tender to Mr. Polly of 1,288,217 
shares of common stock, or 12.5% of the Fund's then outstanding shares of
common stock, for a cash price of $0.35 per share. Subsequent to the closing
of the tender offer, the terms of the Purchase Agreement also required 
Mr. Polly to purchase from the Fund a number of shares sufficient to allow
Mr. Polly to own, by virtue of the combination of the shares acquired pursuant
to the tender offer and the shares purchased directly from the Fund, not less
than 3,335,000 and not more than 40% of the shares of common stock of the Fund
after giving effect to the shares issued in connection with the purchase. On
February 15, 1995, per the Purchase Agreement, Mr. Polly purchased 2,047,766
newly issued shares of common stock of the Fund for a cash price of $0.22 per
share. Upon the acquisition of the aforesaid shares from the Fund when
combined with the shares of common stock previously owned and acquired
pursuant to the tender offer, Mr. Polly is the beneficial owner of
3,335,983 shares, or approximately 27% of the Fund's outstanding voting
shares of common stock. 

     Upon the closing of the sale of shares of common stock of the Fund on
February 15, 1995, the Purchase Agreement provided for the resignation of
the Fund's then current directors and officers. Accordingly, all of the
then current directors and officers resigned and were replaced with Mr.
Polly's designees. Subsequent to the resignation of the directors and
officers of the Fund, no further arrangements or understandings existed
among the Fund and its officers and directors. On February 15, 1995,
Messrs. Leo Yarfitz, Morton I. Kalb, Willis Ryckman and Harvey Polly were
appointed as new Directors of the Fund. In addition, the new Directors
appointed Harvey Polly as President and Chief Executive Officer, Mr. Morton I.
Kalb as Vice President and Mr. William L. Weiss as Assistant Secretary.
Effective February 15, 1995, the address of the Fund's principal executive
office is One Penn Plaza, Suite 1531, New York, New York 10119.

LIQUIDITY AND CAPITAL RESOURCES

     Cash and cash equivalents consist of cash and short-term investments.
The Fund's cash and cash equivalents balance at September 30, 1995 and December
31, 1994 was $650,085 and $275,161, respectively. This increase in cash and
cash equivalents is due primarily to the receipt of approximately $450,000
from the February 15, 1995 purchase by Mr. Polly, as discussed above, of
2,047,766 shares of common stock from the Fund as well as the receipt of
$47,331 related to the Fund's interest in a VMS liquidating trust (see
discussion below), and the $75,00 related to the assignment of the Omni Park
Centre mortgage(as discussed above).  These receipts were partially offset by
the payment of the Fund's operating expenses and costs associated with the
change in control discussed above.  At September 30, 1995 and December 31, 1994,
the Fund also held investment securities during the quarter with a carrying
value of $1,370,820 and $1,907,531, respectively. The decrease in investment
securities is due to the sale of approximately $350,000 of securities held
by the Fund, as well as principal payments received on the FNMA 8% notes.  The
proceeds from this sale were used primarily for costs associated with the 
change in control and reinvestments.




                                     13


 
<PAGE>

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


     At this time, there are no material commitments for capital
expenditures. The Fund's cash and cash equivalents are sufficient to meet
its need for anticipated operating expenses. The Fund deems its liquidity
to be adequate. 

     As of December 31, 1994, the Fund's mortgage loan portfolio consisted of
one loan, for which the Fund has recorded a provision for losses on the loan 
representing its full carrying balance.  As of September 30, 1995 the Fund had
not material loans in its portfolio.

     On February 9, 1995, the Fund received a cash distribution of $47,331
related to its interest in a liquidating trust established for the benefit
of the previously unsecured creditors of VMS. For the quarter ended March
31, 1995, the Fund recorded a $29,582 recovery of the provision for loan
losses on mortgage loans, notes and interest receivable on its consolidated
statement of income and expenses related to the distribution received from
the liquidating trust. The $29,582 net recovery recorded in 1995 represents
the $47,331 distribution received net of an estimated $17,749 due to the
Class Action Settlement Fund for the Fund's share of amounts due per the terms
of the previously settled VMS securities litigation.

     On January 25, 1994, the Fund received net proceeds of $90,693
relating to a recovery of payments previously made into an escrow
establishment as part of the 1992 Class Action settlement of the VMS
securities litigation. The escrow was established to provide the directors
of the Fund with monies to fund the cost of any litigation in which they
may be named as defendants following settlement of the Class Action. 
Subsequently, the directors released the proceeds from the escrow, and the
Fund purchased an insurance policy to cover the Directors.

     During the third quarter of 1995 the Fund received $75,000 for assignment
of its mortgage on the Omni Park Centre Hotel, which loan had been written off.

     The Fund's ultimate return of cash to its stockholders is dependent
upon, among other things:  (i) the activities undertaken by the Fund;  (ii)
interest earned from the investment of cash and cash equivalents and
investment securities;  (iii) the Fund's ability to control its operating
expenses; and (iv) possible recoveries from the Santa Barbara Biltmore
Hotel and the liquidating trust, if any.

RESULTS OF OPERATIONS

     Total income for the nine months ended September 30, 1995 and 1994 was
$65,841 and $110,345, respectively. The decrease in total income for the six
months ended Setember 30, 1995 when compared to the same period in 1994 is due
primarily to an approximately $28,500 realized loss on the sale of a portion
of the Fund's investment securities which partially offset the interest income
income earned on investment securities. In addition, interest income on
cash and cash equivalents and investment securities decreased due to the
Fund having approximately $200,000 less cash available for investment
during the first nine months of 1995 when compared to the same period in
1994.




                                     14


 
<PAGE>

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


      Operating expenses for the nine months ended September 30, 1995 increased
when compared to the same period in 1994 as a result of an increase in
stockholder expenses, other professional fees and general and
administrative expenses. These increases are primarily attributable to
costs associated with the tender offer which resulted in a change in
control of the Fund as discussed above, including stock listing fees, legal
and other professional expenses and required termination payments to the
Fund's former President and Banyan Management Corp. Partially offsetting
the increases, Directors' fees expenses and insurance decreased for the six
months ended September 30, 1995 when compared to the same period in 1994 due to
the February 15, 1995 resignation of the former directors as a result of
the change in control.

     As discussed above, during the first quarter of 1995, the Fund
recorded a net recovery of losses on loans, notes and interest receivable
of $29,582 as a result of cash received related to its interest in a
liquidating trust established for the benefit of unsecured creditors of VMS
Realty Partners. For 1994, the Fund recorded a $90,693 recovery of Class
Action settlement costs and expenses representing the recovery of payments
previously made into an escrow established as part of the 1992 Class Action
settlement of the VMS Securities litigation. 

During the third quarter of 1995, the Fund recorded the receipt of $75,000 
for full assignment of the Omni Park Centre mortgage, which had previously 
been written off.

     The above changes for the nine months ended September 30, 1995, when
compared to the same period in 1994, resulted in an increase in the net
loss to $452,182 ($0.03 per share) from $426,021 ($0.03 per share).



                                     15

<PAGE>



                                  Part II

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a)  No exhibits are included with this Report.

(b)  On January 17, 1995, a current report on Form 8-K was filed under Item
     5. Other information reporting the terms of a Tender Offer of the
     Registrant's shares of common stock by Mr. Harvey Polly.

     On February 22, 1995, a current report on Form 8-K was filed under
     Item 6. Registration of the Registrant's Directors reporting the
     Resignation of the Registrant's Directors on February 15, 1995 
     pursuant to a change in control of the Registrant.

     On February 28, 1995, a current report on Form 8-K was filed under
     Item 1. Change in Control of the Registrant reporting a change in
     control of the Registrant on February 15, 1995 pursuant to the 
     closing of the sale of shares of stock in the Registrant to Mr. Harvey
     Polly. 

<PAGE>

                              SIGNATURES


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




BANYAN HOTEL INVESTMENT FUND



By:   /s/ Harvey Polly                              Date: November 8, 1995
     Harvey Polly, Director, President
     and Chief Executive Officer



      /s/ Morton I. Kalb                            Date: November 8, 1995
     Morton I. Kalb, Director, Vice Pres.
     and Chief Financial Officer