FORM 10-Q

               SECURITIES AND EXCHANGE COMMISSION
                     WASHINGTON, D.C.  20549


 X   Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
 Act of 1934

For the quarterly period ended September 30, 1998 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:  0-17582

  AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
     (Exact name of registrant as specified in its charter)

Delaware                                                47-0719051            
(State or other jurisdiction                            (IRS Employer 
of incorporation or organization)                       Identification No.)


Suite 400, 1004 Farnam Street, Omaha, Nebraska          68102       
(Address of principal executive offices)                (Zip Code)


(402) 444-1630                              
(Registrant's telephone number, including area code)


     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     



































<PAGE>                               - i -
Part I.  Financial Information
  Item 1.  Financial Statements
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
                                                                                            Sept. 30, 1998       Dec. 31, 1997
                                                                                             --------------      --------------
<S>                                                                                          <C>                 <C>          
Assets                                                                                                                        
Cash and temporary cash investments, at cost which                                  
 approximates market value																																																												   				$				 473,154 						$			2,577,493
 Investment in mortgage-backed securities (Note 5)                                               6,704,175           7,359,399
 Investment in preferred real estate participations (PREPs),                                                                  
  net of valuation allowance (Note 6)                                                                 -                   -   
 Interest receivable												                                                     	              50,845              55,977
 Other assets                                                                                       28,747              32,016
                                                                                             --------------      --------------
                                                                                             $   7,256,921       $  10,024,885
                                                                                             ==============      ==============
Liabilities and Partners' Capital                                                                                             
 Liabilities                                                                                                                  
  Accounts payable (Note 7)                                                                   $     62,310       $     142,959
  Distribution payable (Note 4)                                                                     93,251              97,003
                                                                                             --------------      --------------
                                                                                                   155,561             239,962
                                                                                             --------------      --------------
 Partners' Capital                                                                                                            
  General Partner                                                                                      100                 100
  Beneficial Unit Certificate Holders                                                                                         
  ($7.84 per BUC in 1998 and $10.80 in 1997)                                                     7,101,260           9,784,823
                                                                                             --------------      --------------
                                                                                                 7,101,360           9,784,923
                                                                                             --------------      --------------
                                                                                             $   7,256,921       $  10,024,885 
                                                                                             ==============      ==============
</TABLE>
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
                                                           For the             For the        For the Nine        For the Nine
                                                     Quarter Ended       Quarter Ended        Months Ended        Months Ended
                                                    Sept. 30, 1998      Sept. 30, 1997      Sept. 30, 1998      Sept. 30, 1997
                                                    ---------------     ---------------     ---------------     ---------------
<S>                                                 <C>                 <C>                 <C>                 <C>           
Income                                                                                                                        
 Mortgage-backed securities income                  $      124,555      $      139,052      $      386,363      $      424,589
 Equity in earnings of property partnerships                17,698              12,791              33,206              59,852
 Interest income on temporary cash investments              33,879              35,317             102,130             103,058  
                                                    ---------------     ---------------     ---------------     ---------------
                                                           176,132             187,160             521,699             587,499
Expenses                                                                                                                      
 General and administrative expenses (Note 7)               55,520             120,526             302,210             218,942
                                                    ---------------     ---------------     ---------------     ---------------
Net income                                          $      120,612      $       66,634      $      219,489      $      368,557
                                                    ===============     ===============     ===============     ===============
Net income allocated to:                                                                                                      
 General Partner                                    $       23,007      $        2,958      $       28,778      $        8,987
 BUC Holders                                                97,605             	63,676             190,711             359,570
                                                    ---------------     ---------------     ---------------     ---------------
                                                    $      120,612      $       66,634     $       219,489      $      368,557
                                                    ===============     ===============     ===============     ===============
Net income, basic and diluted, per BUC              $          .11      $          .07      $          .21      $          .40
                                                    ===============     ===============     ===============     ===============
                                                                                                                               
The accompanying notes are an integral part of the financial statements.
</TABLE>






<PAGE>                               - 1 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>

                                                                                           Beneficial Unit
                                                                              General          Certificate
                                                                              Partner              Holders               Total
                                                                        --------------     ----------------     ---------------
<S>                                                                     <C>                <C>                  <C>           
Partners' Capital (excluding net unrealized holding gains(losses))                                                            
 Balance at December 31, 1997                                           $         100      $     9,772,081      $    9,772,181
 Net income                                                                    28,778              190,711             219,489
 Cash distributions paid or accrued (Note 4)                                  (28,778)          (2,849,029)         (2,877,807)
                                                                        --------------     ----------------     ---------------
                                                                                  100            7,113,763           7,113,863
                                                                        --------------     ----------------     ---------------
Net unrealized holding gains (losses)
 Balance at December 31, 1997                                                    -                  12,742              12,742
 Net change                                                                      -                 (25,245)            (25,245)
                                                                        --------------     ----------------     ---------------
                                                                                 -                 (12,503)            (12,503)
                                                                        --------------     ----------------     ---------------
Balance at September 30, 1998                                           $         100      $     7,101,260      $    7,101,360
                                                                        ==============     ================     ===============
</TABLE>
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
                                                                                              For the Nine        For the Nine
                                                                                              Months Ended        Months Ended
                                                                                            Sept. 30, 1998      Sept. 30, 1997
                                                                                            ---------------     ---------------
<S>                                                                                         <C>                 <C>           
Cash flows from operating activities                                                                                           
 Net income                                                                                $       219,489      $      368,557
  Adjustments to reconcile net income to net cash                                                                             
   from operating activities                                                                                            
    Equity in earnings of property partnerships                                                    (33,206)            (59,852)
    Amortization of discount on mortgage-backed securities                                         (11,189)             (6,495)
    Decrease in interest receivable                                                                  5,132               4,073
    Decrease in other assets                                                                         3,269              15,883
    Decrease in accounts payable                                                                   (80,649)             (8,571)
                                                                                            ---------------     ---------------
Net cash provided by operating activities                                                        	 102,846             313,595
                                                                                            ---------------     ---------------
Cash flows from investing activities                                                                                          
 Mortgage principal payments received                                                              641,168           1,024,700
 Distributions received from PREPs                                                                  33,206              59,852
                                                                                            ---------------     ---------------
Net cash provided by investing activities                                                         	674,374           1,084,552
                                                                                            ---------------     ---------------
Cash flow used in financing activity                                                                                          
 Distributions paid                                                                             (2,881,559)           (902,498)
                                                                                            ---------------     ---------------
Net increase (decrease) in cash and temporary cash investments                                  (2,104,339)            495,649
Cash and temporary cash investments at beginning of period                                       2,577,493           2,072,577 
                                                                                            ---------------     ---------------
Cash and temporary cash investments at end of period                                        $      473,154      $    2,568,226 
                                                                                            ===============     ===============
The accompanying notes are an integral part of the financial statements.
</TABLE>










<PAGE>                               - 2 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)

1. Organization

America First PREP Fund 2 Pension Series Limited Partnership (the Partnership) 
was formed on February 2, 1988, under the Delaware Revised Uniform Limited 
Partnership Act for the purpose of acquiring a portfolio of federally-insured 
multifamily mortgages and other investments including preferred real estate 
participations (PREPs).  PREPs consist of equity interests which are intended 
to provide the Partnership with a participation in the net cash flow and net 
sale or refinancing proceeds of the properties collateralizing the mortgage 
loans.  The Partnership began operations with the first escrow closing on 
May 25, 1988, and will continue in existence until December 31, 2017, unless 
terminated earlier under the provisions of the Partnership Agreement.  The 
General Partner of the Partnership is America First Capital Associates Limited 
Partnership Six (AFCA 6). 

On April 10, 1998, the Partnership consummated a merger with AF Merger, L.P., 
a Delaware limited partnership (Merger L.P.), pursuant to an Agreement and 
Plan of Merger, dated as of July 29, 1997 (the Merger Agreement), among the 
Partnership, Merger L.P., America First Participating/Preferred Equity 
Mortgage Fund Limited Partnership, a Delaware limited partnership, America 
First PREP Fund 2 Limited Partnership, a Delaware limited partnership, and 
America First Mortgage Investments, Inc., a Maryland corporation (AFM).  The 
Partnership was the surviving limited partnership of the merger with Merger 
L.P., but as a result of the merger, (i) the general partner interest in AFCA 6 
was acquired by AFM, (ii) the limited partner interest in AFCA 6 was acquired 
by a wholly-owned subsidiary of AFM, (iii) a total 883,422 BUCs of the 
Partnership were exchanged, at the rate of approximately 1.31 shares per BUC, 
for 1,153,552 shares of the common stock of AFM and (iv) AFM became the holder 
of such BUCs.  Accordingly, the Partnership has become a partnership 
subsidiary of AFM.  The holders of 11,060 BUCs elected to continue their 
current investment in the Partnership through the retention of their BUCs.

2. Summary of Significant Accounting Policies

 A) Financial Statement Presentation
    The financial statements of the Partnership are prepared without audit on 
    the accrual basis of accounting in accordance with generally accepted 
    accounting principles.  The financial statements should be read in 
    conjunction with the financial statements and notes thereto included in 
    the Partnership's Annual Report on Form 10-K for the year ended 
    December 31, 1997.  In the opinion of	management, all normal and recurring 
    adjustments necessary to present fairly	the financial position at 
    September 30, 1998, and results of operations for all periods presented	
    have been made.

    The preparation of financial statements in conformity with generally 
    accepted accounting principles requires management to make estimates and 
    assumptions that affect the reported amounts of assets and liabilities and 
    disclosure of contingent assets and liabilities at the date of the 
    financial statements and the reported amounts of revenues and expenses 
    during the reporting period.  Actual results could differ from those 
    estimates.

 B) Investment in Mortgage-Backed Securities
    Investment securities are classified as held-to-maturity, 
    available-for-sale, or trading.  Investments classified as 
    held-to-maturity are carried at amortized cost.  Investments classified as 
    available-for-sale are reported at fair value with any unrealized gains or 
    losses excluded from earnings and reflected as a separate component of 
    partners' capital.  Subsequent increases and decreases in the net 
    unrealized gain/loss on the available-for-sale securities are reflected as 
    adjustments to the carrying value of the portfolio and adjustments to the 
    component of partners' capital.  The Partnership does not have investment 
    securities classified as trading.







<PAGE>                               - 3 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)

 C) Investment in PREPs
    The investment in PREPs consists of interests in limited partnerships 
    which own properties underlying the mortgage-backed securities and are 
    accounted for	using the equity method.  When an investment in a PREP has 
    been reduced to zero, earnings are recorded to the extent that 
    distributions are received.  PREPs are not insured or guaranteed.  The 
    value of these investments is a function of the value of the real estate 
    underlying the PREPs.

 D) Allowance for Losses on Investment in PREPs
    The allowance for losses on investment in PREPs is a valuation reserve 
    which has been established at a level that management feels is adequate to 
    absorb potential losses on investments in PREPs.  The allowance is based 
    on the fair value of the properties underlying the PREPs.  The allowance 
    is periodically reviewed and adjustments are made to the allowance when 
    there are significant changes in the fair value of the properties 
    underlying the PREPs.

 E) Income Taxes
    No provision has been made for income taxes since Beneficial Unit 
    Certificate (BUC) Holders are required to report their share of the 
    Partnership's income for federal and state income tax purposes.

 F) Temporary Cash Investments
    Temporary cash investments are invested in short-term debt securities 
    purchased with an original maturity of three months or less. 

 G) Net Income Per BUC
    Net income per BUC has been calculated based on the number of BUCs 
    outstanding (905,974) for all periods presented.

 H) Comprehensive Income
    In the first quarter of 1998, the Partnership adopted Statement of 
    Financial Accounting Standards No. 130, "Reporting Comprehensive Income" 
    (SFAS 130).  SFAS 130 requires the display and reporting of comprehensive 
    income, which includes all changes in Partners' Capital with the exception 
    of additional investments by partners or distributions to partners.  
    Comprehensive income for the Partnership includes net income and the 
    change in net unrealized holding losses on investments charged or credited 
    to Partners' Capital.  Comprehensive income for the quarter and nine months 
    ended September 30, 1998, compared to the same periods in 1997 was as
    follows:

<TABLE>
<CAPTION>
                                                           For the             For the        For the Nine        For the Nine
                                                     Quarter Ended       Quarter Ended        Months Ended        Months Ended
                                                    Sept. 30, 1998      Sept. 30, 1997      Sept. 30, 1998      Sept. 30, 1997
                                                    ---------------     ---------------     ---------------     ---------------
<S>                                                 <C>                 <C>                 <C>                 <C>
Net income                                          $      120,612      $       66,634      $      219,489      $      368,557
Change in net unrealized holding gains (losses)             (8,932)             24,672            	(25,245)             46,045
                                                    ---------------     ---------------     ---------------     ---------------
Comprehensive income                                $      111,680      $       91,306      $      194,244      $      414,602
                                                    ===============     ===============     ===============     ===============
                                                                        
</TABLE>

3. Partnership Reserve Account

The Partnership maintains a reserve account which consisted of the following 
at September 30, 1998:
<TABLE>
<S>                                                                   <C>
 Cash and temporary cash investments                                  $      379,236
 GNMA Certificates                                                         1,100,908
 FNMA Certificates                                                           874,447
                                                                      ---------------
                                                                      $    2,354,591
																																																																						===============
</TABLE>
<PAGE>                               - 4 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)

The reserve account was established to maintain working capital for the 
Partnership and is available for distribution to BUC Holders and for any 
contingencies related to Permanent Investments and the operation of the 
Partnership.  See Note 5 regarding the investment in mortgage-backed 
securities.

4. Partnership Income, Expenses and Cash Distributions

The Partnership Agreement contains provisions for distributing the cash 
available for distribution and for the allocation of income and expenses for 
tax purposes among AFCA 6 and BUC Holders.

Cash distributions included in the financial statements represent the actual 
cash distributions made during each period and the cash distributions accrued 
at the end of each period.

5. Investment in Mortgage-Backed Securities

The mortgage-backed securities held by the Partnership represent Government 
National Mortgage Association (GNMA) Certificates and Federal National 
Mortgage Association (FNMA) Certificates.  The GNMA Certificates are backed by 
first mortgage loans on multifamily housing properties and pools of 
single-family properties.  The FNMA Certificates are backed by pools of 
single-family properties.  The GNMA Certificates are debt securities issued by 
a private mortgage lender and are guaranteed by GNMA as to the full and timely 
payment of principal and interest on the underlying loans.  The FNMA 
Certificates are debt securities issued by FNMA and are guaranteed as to the 
full and timely payment of principal and interest on the underlying loans.

As a result of the merger described in Note 1, on April 10, 1998, the 
Partnership reclassified its securities from held-to-maturity to 
available-for-sale.  The total amortized cost, gross unrealized holding gains, 
gross unrealized holding losses and aggregate fair value of securities 
transferred were $4,985,047, $100,123, $282,755 and $4,802,415, respectively.

At September 30, 1998, the total amortized cost, gross unrealized holding 
gains, gross unrealized holding losses, and aggregate fair value of
mortgage-backed securities are $6,716,678, $105,413, $117,916, and 
$6,704,175 respectively.

Descriptions of the Partnership's mortgage-backed securities at September 30, 
1998, are as follows:

<TABLE>
<CAPTION>
                                          					               			    Number	 	 Interest				 					Maturity     						Carrying 
  Type of Security and Name        					  Location              			of Units    	   Rate  		  								Date       						Amount 
  ----------------------------------				  --------------------     --------    --------  		 -------------    ---------------
  <S>                              					  <C>                     	<C>         <C>   						 <C>			    		     <C> 
  GNMA Certificates:                                                                                                       
     Broadmoor Court	              					  Colorado Springs, CO         47		    			9.25%    						10/15/29			  $   		586,535
			  Owings Chase Apartments												  Pikesville, MD														234				 				6.75%    						12/15/23									3,025,966
			  Pools of single-family mortgages 			  																										   				 				 8.74%(1) 		2016 to 2018									1,116,319
			  Pools of single-family mortgages			  																		   								           6.03%(1)				 						2008											588,806(2)
			  Pools of single-family mortgages		 												  																   								 7.58%(1)					 					2008											512,102(2)
  FNMA Certificates:                                                                                                       
			  Pools of single-family mortgages																  														   				 				 5.52%(1)						 				2000									  874,447(2)
                                                                                              					 								 ---------------
  Balance at September 30, 1998                                                                              $    6,704,175 
                                                                                              							 							===============
</TABLE>
  (1) Represents yield to the Partnership.
  (2) Reserve account asset - see Note 3.








<PAGE>                               - 5 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)

Reconciliation of the carrying amount of the mortgage-backed securities is as 
follows:
<TABLE>
<S>																																																																					                                     <C>
Balance at December 31, 1997						                                                                        	  $    7,359,399
  Additions
   Amortization of discount on mortgage-backed securities					                                            		         11,189
   Change in net unrealized holding gains (losses)                                                                  157,387
  Deduction																																																														                                                 
   Mortgage principal payments received                                                                   	        (641,168)
   Net unrealized loss on securities transferred from held-to-maturity to
    available-for-sale                                                                                             (182,632)
                                                         											                                         ---------------
Balance at September 30, 1998           																																																																 		  	$			 6,704,175
																																																																																																							    		===============
</TABLE>

6.	Investment in PREPs

The Partnership's PREPs consist of interests in limited partnerships which own 
multifamily properties financed by the Partnership.  The limited partnership 
agreements originally provided for the payment of a base return on the equity 
provided to the limited partnerships and for the payment of additional amounts 
out of a portion of the net cash flow or net sale or refinancing proceeds of 
the properties subject to various priority payments.  Certain of the 
agreements have been amended to defer payment of the base return.

Descriptions of the PREPs at September 30, 1998, are as follows:

<TABLE>
<CAPTION>
                                                                                                               Carrying
  Name                             Location                 Partnership Name                                     Amount 
  --------------------------       --------------------     -----------------------------              -----------------
  <S>                              <C>                      <C>                                        <C>             
  Broadmoor Court                  Colorado Springs, CO     Stazier Associates Colorado Springs, Ltd.  $         53,547
  Owings Chase Apartments          Pikesville, MD           Owings Chase Limited Partnership                    150,000
  Laurel Park Apartments           Riverdale, GA            Gold Key Venture                                       -   
                                                                                                       -----------------
                                                                                                                203,547
  Less valuation allowance                                                                                     (203,547)
                                                                                                       -----------------
  Balance at September 30, 1998                                                                        $           -    
                                                                                                       =================
</TABLE>

Reconciliation of the carrying amount of the PREPs is as follows:
<TABLE>
<S>                                                                                                    <C>              
Balance at December 31, 1997                                                                           $         -      
  Addition                                                                                                              
   Equity in earnings of property partnerships                                                                 33,206
  Deduction                                                                                                             
   Distributions received from PREPs                                                                          (33,206)
                                                                                                       ---------------
Balance at September 30, 1998                                                                          $         -     
                                                                                                       ===============
</TABLE>

7. Transactions with Related Parties

Substantially all the Partnership's general and administrative expenses are
paid by AFCA 6 or an affiliate and reimbursed by the Partnership. 
The amount of such expenses reimbursed to AFCA 6 or an affiliate during 
1998 was $145,817 ($44,159 for the quarter ended September 30, 1998). 
The reimbursed expenses are presented on a cash basis and do 
not reflect accruals made at quarter end.




<PAGE>                               - 6 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
(UNAUDITED)

Prior to the Merger, AFCA 6 was entitled to an administrative fee of .35% per 
annum of the outstanding principal amounts invested in mortgage-backed 
securities, PREPs, and temporary cash investments to be paid by the 
Partnership to the extent such amount is not paid by property owners.  During 
1998, AFCA 6 earned administrative fees of $5,952 (none for the quarter ended 
September 30, 1998), all of which was paid by the Partnership.

A property management subsidiary of America First Companies L.L.C. (America 
First) has been retained by the property partnerships which own Laurel Park 
Apartments and Owings Chase Apartments to provide management services for these 
properties.  A director of the general partner of AFCA 6 is a principal owner 
of America First.  The fees for services provided represent the lower of (i) 
costs incurred in providing management of the property, or (ii) customary fees 
for such services determined on a competitive basis and amounted to $36,060 in 
1998 ($12,305 for the quarter ended September 30, 1998).          

The general partner of the property partnership that owns Owings Chase 
Apartments is principally owned by an employee of America First.  Other 
affiliates of America First also own nominal interest in such general partner. 
The general partner has a nominal interest in the property partnership's 
profits, losses and cash flow which is subordinate to the interest of the 
Partnership.  The general partner did not receive cash distributions from the 
property partnership in 1998.
















































<PAGE>                               - 7 -
     Item 2.  Management's Discussion and Analysis of Financial Condition and 
Results of Operations

Liquidity and Capital Resources

The Partnership originally acquired: (i) five mortgage-backed securities 
guaranteed as to principal and interest by the Government National Mortgage 
Association (GNMA) collateralized by first mortgage loans on multifamily 
housing properties located in four states (the GNMA Certificates); (ii) 
various mortgage-backed securities collateralized by pools of single-family 
mortgages and guaranteed as to principal and interest by either GNMA or the 
Federal National Mortgage Association (FNMA) (the Single-Family Certificates); 
and (iii) limited partnership interests (PREPs) in five limited partnerships 
which own the multifamily housing properties financed by the GNMA 
Certificates. At September 30, 1998, the Partnership continued to hold two GNMA 
Certificates and three PREPs (referred to as the Permanent Investments) in 
addition to various Single-Family Certificates.

The following table shows the occupancy levels of the properties financed by 
the Partnership, in which the Partnership continues to hold an equity 
interest, at September 30, 1998.

<TABLE>
<CAPTION>
                                                                                                     Number          Percentage
                                                                                 Number            of Units            of Units
 Property Name                               Location                          of Units            Occupied            Occupied
-------------------------------------        ------------------               ---------          ----------         -----------
<S>                                          <C>                              <C>                <C>                <C>
 Broadmoor Court                             Colorado Springs, CO                   47                  45                  96%
 Laurel Park Apartments                      Riverdale, GA                         387                 375                  97%
 Owings Chase Apartments                     Pikesville, MD                        234                 231                  99%
                                                                              ---------          ----------         -----------
   				                                                                            668                 651                  97%
                                                                              =========          ==========         ===========
</TABLE>

Distributions

Cash distributions paid or accrued per Beneficial Unit Certificate (BUC) were 
as follows:

<TABLE>
<CAPTION>
                                                                                              For the Nine        For the Nine
                                                                                              Months Ended        Months Ended
                                                                                            Sept. 30, 1998      Sept. 30, 1997
                                                                                             --------------      --------------
<S>                                                                                          <C>                 <C>           
Regular monthly distributions                                                                                                  
 Income                                                                                      $       .2105       $       .3969
 Return of Capital                                                                                   .7266               .5852
                                                                                             --------------      --------------
                                                                                             $       .9371       $       .9821
                                                                                             ==============      ==============
Special Distributions
 Return of Capital                                                                           $      2.2076               -
                                                                                             ==============      ==============     
Total Distributions
 Income                                                                                      $       .2105       $       .3969
 Return of Capital                                                                                  2.9342               .5852
                                                                                             --------------      --------------
                                                                                             $      3.1447       $       .9821 
                                                                                             ==============      ==============
Distributions                                                                                                                
	Paid out of cash flow (including mortgage principal payments)                               $       .9182       $       .9821
 Paid out of reserves                                                                               2.2265               -     
                                                                                             --------------      --------------
		                                                                                           $      3.1447       $       .9821
				                                                                                         ==============      ============== 
</TABLE>





<PAGE>                               - 8 -
Regular monthly distributions to investors consist primarily of interest and 
principal received on GNMA Certificates and Single-Family Certificates.  
Additional cash for distributions is received from PREPs and temporary cash 
investments.  The Partnership may draw on reserves to pay operating expenses 
or to supplement cash distributions to BUC Holders.  The Partnership is 
permitted to replenish its reserves through the sale or refinancing of 
assets.  During 1998, a net amount of $2,017,150 of undistributed mortgage 
principal payments was withdrawn from reserves (a net amount of $1,971,397 was 
withdrawn from reserves for the quarter ended September 30, 1998).  The total 
amount held in reserves at September 30, 1998, was $2,354,591 of which 
$1,975,355 was invested in Single-Family Certificates.  

The Partnership believes that cash provided by operating and investing 
activities and, if necessary, withdrawals from the Partnership's reserves will 
be adequate to meet its short-term and long-term liquidity requirements, 
including the payments of distributions to BUC Holders.  Under the terms of 
the Partnership Agreement, the Partnership has the authority to enter into 
short-term and long-term debt financing arrangements; however, the Partnership 
currently does not anticipate entering into such arrangements.  The 
Partnership is not authorized to issue additional BUCs to meet short-term and 
long-term liquidity requirements.

Year 2000

The Partnership does not own or operate its own computer system and owns no 
business or other equipment.  However, the operation of the Partnership's 
business relies on the computer system and other equipment maintained by 
America First Companies L.L.C., an affiliate of its general partner 
("America First").  In addition, the Partnership has business relationships 
with a number of third parties whose ability to perform their obligations to 
the Partnership depend on such systems and equipment.  Some or all of these 
systems and equipment may be affected by the inability of certain computer 
programs and embedded circuitry to correctly recognize dates occurring after 
December 31, 1999.  America First has adopted a plan to deal with this 
so-called "Year 2000 problem" with respect to its information technology 
("IT") systems, non-IT systems and third party business relationships.

State of Readiness

The IT system maintained by America First consists primarily of personal 
computers, most of which are connected by a local area network.  All 
accounting and other record keeping functions relating to the Partnership that 
are conducted in house by America First are performed on this PC-LAN system.  
America First does not own or operate any "mainframe" computer systems.  The 
PC-LAN system runs software programs that America First believes are 
compatible with dates after December 31, 1999.  America First has engaged a 
third party computer consulting firm to review and test its PC-LAN system to 
ensure that it will function correctly after that date and expects that this 
process, along with any necessary remediation, will be completed by March 31, 
1999.  America First believes any Year 2000 problems relating to its IT 
systems will be resolved without significant operational difficulties.
However, there can be no assurance that testing will discover all potential
Year 2000 problems or that it will not reveal unanticipated material problems
with the America First IT systems that will need to be resolved.

Non-IT systems include embedded circuitry such as microcontrollers found in 
telephone equipment, security and alarm systems, copiers, fax machines, mail 
room equipment, heating and air conditioning systems and other infrastructure 
systems that are used by America First in connection with the operation of the 
Partnership's business.  America First is reviewing its non-IT systems along 
with the providers that service and maintain these systems, with initial 
emphasis being placed on those, such as telephone systems, which have been 
identified as necessary to America First's ability to conduct the operation of 
the Partnership's business activities.  America First expects that any 
necessary modification or replacement of such "mission critical" systems will 
be accomplished by mid-1999.

The Partnership has no control over the remediation efforts of third parties 
with which it has material business relationships and the failure of certain 
of these third parties to successfully remediate their Year 2000 issues could 
have a material adverse effect on the Partnership.  Accordingly, America First 
has undertaken the process of contacting each such third party to determine 
the state of their readiness for Year 2000.  Such parties include, but are not 



<PAGE>                               - 9 -
limited to, the obligors on the Partnership's GNMA Certificates and 
Single-Family Certificates, the Partnership's transfer and paying agent and 
the financial institutions with which the Partnership maintains accounts.  
America First has received initial assurances from certain of these third 
parties that their ability to perform their obligations to the Partnership are 
not expected to be materially adversely affected by the Year 2000 problem.  
America First will continue to request updated information from these material 
third parties in order to assess their Year 2000 readiness.  If a material 
third party vendor is unable to provide assurance to America First that it is, 
or will be, ready for Year 2000, America First intends to seek an alternative 
vendor to the extent practical.

Costs

All of the IT systems and non-IT systems used to conduct the Partnership's 
business operations are owned or leased by America First.  Under the terms of 
its partnership agreement, neither America First nor the Partnership's general 
partner may be reimbursed by the Partnership for expenses associated with 
their computer systems or other business equipment.  Therefore, the costs 
associated with the identification, remediation and testing of America First's 
IT and non-IT systems will be paid by America First rather than the 
Partnership.  The Partnership will bear its proportionate share of the costs 
associated with surveying the Year 2000 readiness of third parties.  However, 
the Partnership's share of the costs associated with these activities is 
expected to be insignificant.  Accordingly, the costs associated with 
addressing the Partnership's Year 2000 issues are not expected to have a 
material effect on the Partnership's results of operations, financial position 
or cash flow.

Year 2000 Risks

The Partnership's general partner believes that the most reasonably likely 
worst-case scenario will be that one or more of the third parties with which 
it has a material business relationship will not have successfully dealt with 
its Year 2000 issues and, as a result, is unable to provide services or 
otherwise perform its obligations to the Partnership.  For example, if an 
obligor on the Partnership's GNMA Certificate and Single-Family Certificates 
encounters a serious and unexpected Year 2000 issue, it may be unable to make 
a timely payment of principal and interest to the Partnership.  This, in turn, 
could cause a delay or temporary reduction in cash distributions to BUC 
holders.  In addition, if the Partnership's transfer and paying agent 
experiences Year 2000-related difficulties, it may cause delays in making 
distributions to BUC holders or in the processing of transfers of BUCs.  It is 
also possible that one or more of the IT and non-IT systems of America First 
will not function correctly, and that such problems may make it difficult to 
conduct necessary accounting and other record keeping functions for the 
Partnership.  However, based on currently available information, the general 
partner does not believe that there will be any protracted systemic failures
of the IT or non-IT systems utilized by America First in connection with the 
operation of the Partnership's business.

Contingency Plans

Because of the progress which America First has made toward achieving Year 
2000 readiness, the Partnership has not made any specific contingency plans 
with respect to the IT and non-IT systems of America First.  In the event of a 
Year 2000 problem with its IT system, America First may be required to 
manually perform certain accounting and other record-keeping functions.  
America First plans to terminate the Partnership's relationships with material 
third party service providers that are not able to represent to America First 
that they will be able to successfully resolve their material Year 2000 issues 
in a timely manner.  However, the Partnership will not be able to terminate 
its relationships with certain third parties, such as the obligors on its GNMA 
Certificates and Single-Family Certificates, who may experience Year 2000 
problems.  The Partnership has no specific contingency plans for dealing with 
Year 2000 problems experienced with these third parties.

All forecasts, estimates or other statements in this report relating to the 
Year 2000 readiness of the Partnership and its affiliates are based on 
information and assumptions about future events.  Such "forward-looking 
statements" are subject to various known and unknown risks and uncertainties 
that may cause actual events to differ from such statements.  Important 
factors upon which the Partnership's Year 2000 forward-looking statements are 



<PAGE>                               - 10 -
based include, but are not limited to, (a) the belief of America First that 
the software used in IT systems is already able to correctly read and 
interpret dates after December 31, 1999 and will require little or any 
remediation; (b) the ability to identify, repair or replace mission critical 
non-IT equipment in a timely manner, (c) third parties' remediation of their 
internal systems to be Year 2000 ready and their willingness to test their 
systems interfaces with those of America First, (d) no third party system 
failures causing material disruption of telecommunications, data transmission, 
payment networks, government services, utilities or other infrastructure, (e) 
no unexpected failures by third parties with which the Partnership has a 
material business relationship and (f) no material undiscovered flaws in 
America First's Year 2000 testing process.

Asset Quality

The Partnership continues to receive monthly principal and interest payments 
on its GNMA Certificates and Single-Family Certificates which are fully 
guaranteed either by GNMA or FNMA.  The obligations of GNMA are backed by the 
full faith and credit of the United States government.  

PREPs, however, are not insured or guaranteed.  The value of these investments 
is a function of the value of the real estate underlying the PREPs.  It is the 
policy of the Partnership to make a periodic review of the real estate 
underlying the PREPs in order to establish, when necessary, a valuation 
reserve on the investment in PREPs.  The allowance for losses on investment in 
PREPs is based on the fair value of the properties underlying the PREPs.  The 
fair value of the properties underlying the PREPs is based on management's 
best estimate of the net realizable value of such properties; however, the 
ultimate realized values may vary from these estimates.  The allowance is 
periodically reviewed and adjustments are made to the allowance when there are 
significant changes in the estimated net realizable value of the properties 
underlying the PREPs.  Internal property valuations and reviews performed
during the nine months ended September 30, 1998, indicated that the PREPs
recorded on the balance sheet at September 30, 1998, required no adjustments 
to their current carrying amounts.

The overall status of the Partnership's Permanent Investments has remained 
relatively constant since June 30, 1998.

Results of Operations

The tables below compare the results of operations for each period shown.
<TABLE>
<CAPTION>
                                                                               For the             For the            Increase
                                                                         Quarter Ended       Quarter Ended           (Decrease)
                                                                        Sept. 30, 1998      Sept. 30, 1997           From 1997
                                                                        ---------------     ---------------     ---------------
<S>                                                                     <C>                 <C>                 <C>           
Mortgage-backed securities income                                       $      124,555       $     139,052      $      (14,497)
Equity in earnings of property partnerships                                     17,698              12,791               4,907
Interest income on temporary cash investments                                   33,879              35,317              (1,438)
                                                                        ---------------     ---------------     ---------------
                                                                               176,132             187,160             (11,028)
General and administrative expenses                                             55,520             120,526             (65,006) 
                                                                        ---------------     ---------------     ---------------
Net income                                                              $      120,612      $       66,634      $       53,978
                                                                        ===============     ===============     ===============
</TABLE>
<TABLE>
<CAPTION>
                                                                          For the Nine        For the Nine            Increase
                                                                          Months Ended        Months Ended           (Decrease)
                                                                        Sept. 30, 1998      Sept. 30, 1997           From 1997
                                                                        ---------------     ---------------     ---------------
<S>                                                                     <C>                 <C>                 <C>
Mortgage-backed securities income                                       $      386,363      $      424,589      $      (38,226)
Equity in earnings of property partnerships                                     33,206              59,852             (26,646)
Interest income on temporary cash investments                                  102,130             103,058                (928)
                                                                        ---------------     ---------------     ---------------
                                                                               521,699             587,499             (65,800)
General and administrative expenses                                            302,210             218,942              83,268
                                                                        ---------------     ---------------     ---------------
Net income                                                              $      219,489      $      368,557      $     (149,068)
                                                                        ===============     ===============     ===============
</TABLE>
<PAGE>                               - 11 -
Mortgage-backed securities income decreased for the quarter and nine months 
ended Septermber 30, 1998, compared to the same periods in 1997 due to the 
continued amortization of the principal balances of the Partnership's 
mortgage-backed securities.

Equity in earnings of property partnerships is a function of the cash flow 
received by the Partnership from its interest in the operating partnerships 
which own the properties. The increase in equity in earnings of property 
partnerships for the quarter ended September 30, 1998 compared to the same 
period in 1997 is due to an increase of approximately $3,600 in cash flow 
received from Broadmoor Court and approximately $1,300 in cash flow received 
from Owings Chase. The decrease for the nine months ended September 30, 1998, 
compared to the same period in 1997 is due to a decrease of approximately 
$19,700 and $6,900 in cash flow received from Owings Chase Apartments and 
Broadmoor Court, respectively.

Interest income on temporary cash investments remained virtually constant 
during both the three- and nine-month periods ended September 30, 1998 
compared with the same periods of 1997.  However, due to the cash distribution 
of $2,020,202 made on September 30, 1998, the amount of interest income earned 
on temporary investments in future periods is expected to decline 
substantially.

General and administrative expenses decreased for the quarter ended September 
30, 1998, compared to the same period in 1997 due to transaction costs of 
approximately $64,600 incurred for the quarter ended September 30, 1997 in 
conjunction with the merger described in Note 1 to the financial statements 
and a decrease of approximately $9,200 in general and administrative expenses 
partially offset by an increase of approximately $8,800 in salaries and 
related expenses.  General and administrative expenses increased for the nine 
months ended September 30, 1998, compared to the same period in 1997 due 
primarily to an increase of approximately $51,400 in transaction costs as 
described above and an increase of approximately $40,200 in salaries and 
related expenses which were partially offset by a decrease of $8,300 in other 
general and administrative expenses.

This report contains forward looking statements that reflect management's 
current beliefs and estimates of future economic circumstances, industry 
conditions, the Partnership's performance and financial results.  All 
statements, trend analysis and other information concerning possible or 
assumed future results of operations of the Partnership and the real estate 
investments it has made (including, but not limited to, the information 
contained in "Management's Discussion and Analysis of Financial Condition and 
Results of Operations"), constitute forward-looking statements.  BUC holders 
and others should understand that these forward looking statements are subject 
to numerous risks and uncertainties and a number of factors could affect the 
future results of the Partnership and could cause those results to differ 
materially from those expressed in the forward looking statements contained 
herein.

     Item 3.  Quantitative and Qualitative Disclosures About Market Risk.  
The requirements of Item 3 of Form 10-Q are not applicable to the Partnership 
prior to its Annual Report on Form 10-K for the year ending December 31, 1998. 























<PAGE>                               - 12 -
PART II.  OTHER INFORMATION

     Item 6.   Exhibits and Reports on Form 8-K

          (a)  Exhibits

               4(a) Agreement of Limited Partnership dated May 25, 1988
                    (incorporated herein by reference to Form 10-Q dated 
                    June 30, 1988 filed pursuant to Section 13 or 15(d) of 
                    the Securities Act of 1934 by America First PREP Fund 2 
                    Pension Series Limited Partnership (Commission File No.
                    0-17582)).

               4(b) Form of Certificate of Beneficial Unit Certificate 
                    (incorporated herein by reference to Form 10-Q dated 
                    June 30, 1988 filed pursuant to Section 13 or 15(d) of 
                    the Securities Act of 1934 by America First PREP Fund 2 
                    Pension Series Limited Partnership (Commission File No. 
                    0-17582)).

               4(c) Agreement and Plan of Merger, dated as of July 29, 1997, 
                    among the Registrant, America First Participating/Preferred 
                    Equity Mortgage Fund Limited Partnership, America First 
                    Prep Fund 2 Limited Partnership and AF Merger, L.P. 
                    (incorporated herein by reference to Form 10-Q dated 
                    June 30, 1997, filed pursuant to Section 13 or 15(d) of the 
                    Securities Exchange Act of 1934 by America First PREP Fund 
                    2 Pension Series Limited Partnership (Commission File No. 
                    0-17582)).

          (b)  Form 8-K

               The registrant did not file a report on Form 8-K during the 
               quarter for which this report is filed.










































<PAGE>                               - 13 -
	                                  SIGNATURES

     Pursuant to the requirements 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.

Dated:  November 13, 1998       AMERICA FIRST PREP FUND 2
                              PENSION SERIES LIMITED PARTNERSHIP

                              By America First Capital
                                   Associates Limited
                                   Partnership Six, General
                                   Partner of the Registrant

                              By America First Mortgage Investments, Inc.,
                                   General Partner of America
																																			First Capital Associates
																																			Limited Partnership Six


                              By /s/ Stewart Zimmerman             
                                   Stewart Zimmerman,
                                   President and Chief Executive Officer

                              By /s/ Gary Thompson
                                   Gary Thompson
	                                  Chief Financial Officer

















































<PAGE>                               - 14 -