<PAGE>1
                                    FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                   QUARTERLY REPORT UNDER SECTION 13 or 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended            June 30, 1997
                                 -------------

Commission file number                1-11059     
                                 -----------------

              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.
        -----------------------------------------------------------------
               (Exact name of registrant as specified in charter)


             California                        13-3257662
  -------------------------------         ------------------
  (State or other jurisdiction of         (I.R.S. Employer
   incorporation or organization)         Identification No.)



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



                                 (301) 816-2300
        ---------------------------------------------------------------- 
              (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 and (2) has been subject to such filing
requirements for the past 90 days.  Yes  X      No    
             ----      ----
     As of June 30, 1997, 12,079,389 depositary units of limited partnership
interest were outstanding. 

<PAGE>2

              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

                               INDEX TO FORM 10-Q

                       FOR THE QUARTER ENDED JUNE 30, 1997

                                                               Page
                                                               ----

PART I.   Financial Information 

Item 1.   Financial Statements

          Balance Sheets - June 30, 1997 (unaudited)
            and December 31, 1996 . . . . . . . . . . .         3

          Statements of Operations - for the three and six 
            months ended June 30, 1997 and 1996
            (unaudited)   . . . . . . . . . . . . . . .         4

          Statement of Changes in Partners' Equity - 
            for the six months ended June 30,  
            1997 (unaudited)  . . . . . . . . . . . . .         5

          Statements of Cash Flows - for the six
            months ended June 30, 1997 and 
            1996 (unaudited)  . . . . . . . . . . . . .         6

          Notes to Financial Statements (unaudited) . .         8

Item 2.   Management's Discussion and Analysis of 
            Financial Condition and Results 
            of Operations . . . . . . . . . . . . . . .        14

PART II.  Other Information

Item 6.   Exhibits and Reports on Form 8-K  . . . . . .        17

Signature . . . . . . . . . . . . . . . . . . . . . . .        18 

<PAGE>3

PART I.   FINANCIAL INFORMATION
ITEM 1.   FINANCIAL STATEMENTS

              AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                              June 30,        December 31,
                                                1997              1996    
                                            -------------     ------------
                                               (unaudited) 

                                     ASSETS 
<S>                                          <C>              <C>         
Investment in FHA-Insured
  Certificates and GNMA Mortgage-
  Backed Securities, at fair value:
    Acquired insured mortgages               $157,970,619     $159,959,297
    Originated insured mortgages               16,596,012       16,646,943
                                             ------------     ------------
                                              174,566,631      176,606,240
                                             ------------     ------------ 
Investment in FHA-Insured Loans, at
  amortized cost, net of unamortized
  discount and premium: 
    Acquired insured mortgages                 14,488,457       14,556,595
    Originated insured mortgages               12,980,371       13,030,131
                                             ------------     ------------
                                               27,468,828       27,586,726

Cash and cash equivalents                       3,126,508        9,716,786

Receivables and other assets                    1,738,041        1,727,662

Investment in affiliate                                --          314,072
                                             ------------     ------------
     Total assets                            $206,900,008     $215,951,486
                                             ============     ============ 


<PAGE>4

                        LIABILITIES AND PARTNERS' EQUITY

Distributions payable                        $  3,770,920     $ 10,684,274

Accounts payable and accrued expenses             209,255          198,964

Note payable and due to affiliate                   5,783          380,877
                                             ------------     ------------
     Total liabilities                          3,985,958       11,264,115
                                             ------------     ------------
Partners' equity:
  Limited partners' equity                    197,730,810      198,836,652
  General partner's deficit                    (1,806,896)      (1,762,017)
  Unrealized gain on investment
    in FHA-Insured Certificates
    and GNMA Mortgage-Backed 
    Securities                                  8,077,585        8,715,942
  Unrealized loss on investment
    in FHA-Insured Certificates
    and GNMA Mortgage-Backed
    Securities                                 (1,087,449)      (1,103,206)
                                             ------------     ------------
     Total partners' equity                   202,914,050      204,687,371
                                             ------------     ------------
     Total liabilities and partners' 
       equity                                $206,900,008     $215,951,486
                                             ============     ============
</TABLE>

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


<PAGE>5


PART I.   FINANCIAL INFORMATION
ITEM 1.   FINANCIAL STATEMENTS

                       AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

                                     STATEMENTS OF OPERATIONS

                                            (Unaudited)

<TABLE>
<CAPTION>
                                                      For the three months ended             For the six months ended
                                                                June 30,                               June 30,
                                                    -----------------------------          -----------------------------

                                                        1997             1996                  1997             1996    
                                                    ------------     ------------          ------------     ------------
<S>                                                 <C>              <C>                   <C>              <C>         
Income:
  Mortgage investment income                        $  4,266,946     $  4,469,099          $  8,484,014     $  9,037,254
  Interest and other income                               51,496           60,369               108,750          104,262
                                                    ------------     ------------          ------------     ------------
                                                       4,318,442        4,529,468             8,592,764        9,141,516
                                                    ------------     ------------          ------------     ------------
Expenses:
  Asset management fee to related parties                476,952          502,066               954,845        1,010,056
  General and administrative                             166,969          160,865               314,959          329,656
  Interest expense to affiliate                               --            5,783                 5,783           11,566
                                                    ------------     ------------          ------------     ------------
                                                         643,921          668,714             1,275,587        1,351,278
                                                    ------------     ------------          ------------     ------------
Net earnings before net gains 
  on mortgage dispositions/
  modifications                                        3,674,521        3,860,754             7,317,177        7,790,238

Net gains on mortgage 
  dispositions/modifications                                  --          556,121               205,217          554,932
                                                    ------------     ------------          ------------     ------------
Net earnings                                        $  3,674,521     $  4,416,875          $  7,522,394     $  8,345,170
                                                    ============     ============          ============     ============
Net earnings allocated to:
  Limited partners - 96.1%                          $  3,531,215     $  4,244,616          $  7,229,021     $  8,019,708
  General partner - 3.9%                                 143,306          172,259               293,373          325,462
                                                    ------------     ------------          ------------     ------------
                                                    $  3,674,521     $  4,416,875          $  7,522,394     $  8,345,170
                                                    ============     ============          ============     ============
Net earnings per Limited
  Partnership Unit                                  $       0.29     $       0.35          $       0.60     $       0.66
                                                    ============     ============          ============     ============



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


</TABLE>


<PAGE>6

PART I.   FINANCIAL INFORMATION
ITEM 1.   FINANCIAL STATEMENTS

                       AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

                               STATEMENT OF CHANGES IN PARTNERS' EQUITY

                                For the six months ended June 30, 1997

                                               (Unaudited)

<TABLE>
<CAPTION>



                                                                       Adjustment     Adjustment
                                                                           to              to
                                                                       Unrealized      Unrealized
                                                                        Gains on       Losses on
                                                                       Investment      Investment
                                        General          Limited       in Insured      in Insured
                                        Partner          Partners       Mortgages       Mortgages         Total   
                                     -------------     -------------  -------------   ------------    -------------
<S>                                  <C>               <C>            <C>             <C>             <C>

Balance, December 31, 1996           $  (1,762,017)    $ 198,836,652  $   8,715,942   $ (1,103,206)   $ 204,687,371

  Net earnings                             293,373         7,229,021             --             --        7,522,394

  Distributions paid or 
    accrued of $0.69 per
    Unit, including return
    of capital of $0.09                   (338,252)       (8,334,863)            --             --       (8,673,115)
    
  Adjustments to unrealized 
    gains (losses) on investments 
    in FHA-Insured Certificates 
    and GNMA Mortgage-Backed
    Securities                                  --                --        (638,357)       15,757         (622,600)
                                     -------------     -------------  --------------  ------------    -------------
Balance, June 30, 1997               $  (1,806,896)    $ 197,730,810  $    8,077,585  $ (1,087,449)   $ 202,914,050
                                     =============     =============  ==============  ============    =============

Limited Partnership Units
    outstanding - June
    30, 1997                                              12,079,514
                                                       =============



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

<PAGE>7

PART I.   FINANCIAL INFORMATION
ITEM 1.   FINANCIAL STATEMENTS

                       AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P.

                                     STATEMENTS OF CASH FLOWS

                                            (Unaudited)


</TABLE>
<TABLE>
<CAPTION>
                                                                         For the six months ended June 30,        
                                                                             1997                1996    
                                                                         ------------        ------------
<S>                                                                      <C>                 <C>         
Cash flows from operating activities:
  Net earnings                                                           $  7,522,394        $  8,345,170
  Adjustments to reconcile net earnings
    to net cash provided by operating
    activities:
    Gain on mortgage dispositions/modifications                              (205,217)           (658,974)
    Loss on mortgage dispositions/modifications                                    --             104,042
    Changes in assets and liabilities:
      Increase in accounts payable and
        accrued expenses                                                       10,291              42,391
      Decrease (increase) in receivables and 
        other assets                                                           50,727             (60,771)
      Decrease in investment in affiliate                                     314,072                  --
                                                                         ------------        ------------
        Net cash provided by operating activities                           7,692,267           7,771,858
                                                                         ------------        ------------
Cash flows from investing activities:
  Receipt of mortgage principal from
    scheduled payments                                                        774,127             669,306
  Proceeds from mortgage dispositions                                         904,891           3,824,757
                                                                         ------------        ------------
        Net cash provided by investing activities                           1,679,018           4,494,063
                                                                         ------------        ------------
Cash flows from financing activities:
  Distributions paid to partners                                          (15,586,469)         (8,673,116)
  Increase (decrease) in note payable 
    and due to affiliate                                                     (375,094)             14,811
                                                                         ------------        ------------
        Net cash used in financing
          activities                                                      (15,961,563)         (8,658,305)
                                                                         ------------        ------------
Net (decrease) increase in cash and cash 
  equivalents                                                              (6,590,278)          3,607,616

Cash and cash equivalents, beginning of period                              9,716,786           3,368,700
                                                                         ------------        ------------
Cash and cash equivalents, end of period                                 $  3,126,508        $  6,976,316
                                                                         ============        ============



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

</TABLE>

<PAGE>8

                         AMERICAN INSURED MORTGAGE INVESTORS - SERIES 85, L.P

                                     NOTES TO FINANCIAL STATEMENTS

                                              (Unaudited)


1.   ORGANIZATION

     American Insured Mortgage Investors - Series 85, L.P. (the Partnership) was
formed  under the Uniform Limited Partnership Act  of the state of California on
June 26,  1984.   The Partnership  will terminate on  December 31,  2009, unless
previously terminated under the provisions of the Partnership Agreement.  

     Effective September 6, 1991,  CRIIMI, Inc. (the General Partner)  succeeded
the  former  general  partners  to  become  the  sole  general  partner  of  the
Partnership.   CRIIMI,  Inc. is  a wholly  owned subsidiary  of CRIIMI  MAE Inc.
(CRIIMI MAE).

     The  Partnership's  investment  in  mortgages  consists  of   participation
certificates  evidencing  a 100%  undivided  beneficial  interest in  government
insured  multifamily  mortgages  issued  or  sold  pursuant to  Federal  Housing
Administration  (FHA)  programs   (FHA-Insured  Certificates),   mortgage-backed
securities  guaranteed by  the Government  National Mortgage  Association (GNMA)
(GNMA  Mortgage-Backed Securities) and  FHA-insured mortgage  loans (FHA-Insured
Loans  and  together  with  FHA-Insured Certificates  and  GNMA  Mortgage-Backed
Securities referred to herein  as Insured Mortgages).  The  mortgages underlying
the FHA-Insured  Certificates, GNMA  Mortgage-Backed Securities  and FHA-Insured
Loans are non-recourse  first liens on  multifamily residential developments  or
retirement homes.

2.   BASIS OF PRESENTATION

     In the opinion of the General Partner, the accompanying unaudited financial
statements contain all  adjustments of  a normal recurring  nature necessary  to
present fairly the financial position of the Partnership as of June 30, 1997 and
December 31, 1996 and the results of its operations for the three and six months
ended June 30, 1997  and 1996 and its cash  flows for the six months  ended June
30, 1997 and 1996.

     These  unaudited financial  statements have been  prepared pursuant  to the
rules  and regulations  of  the Securities  and  Exchange Commission.    Certain
information  and  note disclosures  normally  included  in financial  statements
prepared in accordance with  generally accepted accounting principles  have been
condensed or omitted.  While the  General Partner believes that the  disclosures
presented are adequate to  make the information not misleading,  these financial
statements should be read  in conjunction with the financial statements  and the
notes  to the financial statements  included in the  Partnership's Annual Report
filed on Form 10-K for the year ended December 31, 1996.

     New Accounting Standards
     ------------------------
          In February 1997, FASB issued SFAS No. 128  "Earnings per Share" ("FAS
     128").  FAS 128 changes the requirements for calculation and  disclosure of
     earnings per share.   This statement eliminates the calculation  of primary
     earnings per share  and requires the disclosure of basic earnings per share
     and diluted earnings per  share.  There will  be no impact to the  earnings
     per Unit of limited partnership interest.

          During 1997, FASB issued SFAS No. 129 "Disclosure of Information about
     Capital  Structure"   ("FAS  129").     FAS  129  continues   the  existing
     requirements  to  disclose  the  pertinent  rights and  privileges  of  all
     securities  other  than ordinary  common stock  but  expands the  number of
     companies  subject to portions of  its requirements.   The Partnership does

<PAGE>9 

                          AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85

                                       NOTES TO FINANCIAL STATEMENTS

                                                (Unaudited)

2.   BASIS OF PRESENTATION - Continued

     not anticipate an impact to its current disclosures.

          During 1997, FASB issued SFAS No. 130 "Reporting Comprehensive Income"
     ("FAS  130").   FAS  130 states  that  all items  that are  required  to be
     recognized under accounting standards as components of comprehensive income
     are  to be reported in either the  statement of income or another statement
     of  comprehensive income.    This would  include  net income  as  currently
     reported  by  the Partnership  adjusted  for  unrealized gains  and  losses
     related  to  the Partnership's  mortgages accounted  for as  "available for
     sale".  FAS 130 is effective beginning January 1, 1998.

3.   INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-
       BACKED SECURITIES

     Fully Insured Mortgage Investments
     ----------------------------------
          Listed  below  is  the  Partnership's aggregate  investment  in  Fully
     Insured Mortgages:

<TABLE>
<CAPTION>                                      June 30,     December 31,
                                                 1997           1996    
                                            ------------    ------------
<S>                                         <C>             <C>         
Fully Insured Acquired:
  Number of
    GNMA Mortgage-Backed Securities                    9               9
    FHA-Insured Certificates (1)(2)                   60              62
  Amortized Cost                            $150,503,507    $151,866,819
  Face Value                                 156,194,471     157,889,594
  Fair Value                                 157,970,619     159,959,297


Fully Insured Originated:
  Number of
    GNMA Mortgage-Backed Securities                    1               1
    FHA-Insured Certificates                           1               1
  Amortized Cost                            $ 17,072,988    $ 17,126,685
  Face Value                                  16,716,372      16,770,069
  Fair Value                                  16,596,012      16,646,943

</TABLE> 

<PAGE>10 

                        AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85

                                  NOTES TO FINANCIAL STATEMENTS

                                           (Unaudited)

3.   INVESTMENT IN FHA-INSURED CERTIFICATES AND GNMA MORTGAGE-
       BACKED SECURITIES - Continued

(1)  On October 11, 1996, the servicer of the mortgage on Meadow Park Apartments
     I filed a Notice of Default and Election to Assign the mortgage with HUD. 
     On January 24, 1997, the Partnership received approximately $628,000
     representing approximately 90% of the assignment proceeds.  The Partnership
     recognized a gain of approximately $139,000 for the six months ended June
     30, 1997.  A distribution of $0.05 per Unit related to this assignment, was
     declared in February 1997 and was paid to Unitholders in May 1997. The
     remaining 9% of proceeds due from HUD were received in May 1997, since the
     distribution was less than $0.01 per Unit, these proceeds were distributed
     with regular cash flow in August 1997.

(2)  In late February 1997, the mortgage on Security Apartments was prepaid. 
     The Partnership received net proceeds of approximately $304,000, and
     recognized a gain of approximately $66,000 for the six months ended June
     30, 1997.  A distribution of approximately $0.02 per Unit related to this
     prepayment was declared in March 1997 and was paid to Unitholders in May
     1997.  The remaining 9% due on assignment is expected to be received.

          As of August 6, 1997, all of the fully insured FHA-Insured
     Certificates and GNMA Mortgage-Backed Securities are current with respect
     to the payment of principal and interest except for the mortgages on
     Portervillage I Apartments, which has been delinquent since January 1997,
     as discussed below, and Country Club Terrace Apartments and Isle of Pines
     Village Apartments, which are delinquent with respect to the June 1997
     payment of principal and interest.  The Partnership expects to receive the
     payments from the latter two mortgages.  In May 1997, the servicer of the
     mortgage on Portervillage I Apartments filed a Notice of Default and an
     Election to Assign the mortgage with HUD.  The face value of this mortgage
     was approximately $1.2 million at December 31, 1996.  The Partnership
     expects to receive 99% of this amount plus accrued interest.

4.   INVESTMENT IN FHA-INSURED LOANS

     Fully Insured FHA-Insured Loans
     -------------------------------
          Listed below is the Partnership's aggregate investment in FHA-Insured
     Loans: 

<PAGE>11 

                        AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85

                                     NOTES TO FINANCIAL STATEMENTS

                                              (Unaudited)

4.   INVESTMENT IN FHA-INSURED LOANS - Continued

<TABLE>
<CAPTION>                                June 30,      December 31,
                                           1997            1996    
                                      ------------     ------------
<S>                                   <C>              <C>         
Fully Insured Acquired:
  Number of Loans                               12               12
  Amortized Cost                      $ 14,488,457     $ 14,556,595
  Face Value                            17,287,508       17,405,640
  Fair Value                            17,330,771       17,706,486

Fully Insured Originated:
  Number of Loans                                3                3
  Amortized Cost                      $ 12,980,371     $ 13,030,131
  Face Value                            12,636,333       12,681,532
  Fair Value                            12,896,879       12,969,589

</TABLE>

          As of August 6, 1997, all of the Partnership's FHA-Insured Loans,
     recorded at amortized cost, were current with respect to the payment of
     principal and interest.

          In addition to base interest payments under Originated Insured
     Mortgages, the Partnership is entitled to additional interest based on a
     percentage of the net cash flow from the underlying development (referred
     to as Participations).  During the three and six months ended June 30,
     1997, the Partnership received additional interest of $89,222 from the
     Participations, as compared to $42,417 for the corresponding periods in
     1996.  These amounts, if any, are included in mortgage investment income on
     the accompanying statements of operations.

5.   DISTRIBUTIONS TO UNITHOLDERS

     The distributions paid or accrued to Unitholders on a per Unit basis for
the six months ended June 30, 1997 and 1996 are as follows:

                                         1997           1996 
                                        ------         ------
     Quarter ended March 31,            $ 0.39(1)      $ 0.33
     Quarter ended June 30,               0.30           0.64(2)
                                        ------         ------
                                        $ 0.69         $ 0.97
                                        ======         ======

     (1)  This amount includes approximately $0.07 per Unit return of capital
          and gain from the disposition of the following mortgages:  Meadow Park
          Apartments I $0.05 and Security Apartments $0.02.
     (2)  This amount includes approximately $0.31 per Unit representing
          proceeds from the prepayment of the mortgages on Harbor View Estates,
          Bear Creek Apartments II and Cambridge Arms Apartments.

     The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions, if any, and cash flow from operations, which includes
regular interest income and principal from Insured Mortgages.  Although the
Insured Mortgages yield a fixed monthly mortgage payment once purchased, the 

<PAGE>12 

                        AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85

                                      NOTES TO FINANCIAL STATEMENTS

                                                (Unaudited)

5.   DISTRIBUTIONS TO UNITHOLDERS - Continued

cash distributions paid to the Unitholders will vary during each quarter due to
(1) the fluctuating yields in the short-term money market where the monthly
mortgage payment receipts are temporarily invested prior to the payment of
quarterly distributions, (2) the reduction in the asset base and monthly
mortgage payments resulting from monthly mortgage payments received or mortgage
dispositions, (3) variations in the cash flow attributable to the delinquency or
default of Insured Mortgages and professional fees and foreclosure costs
incurred in connection with those Insured Mortgages and (4) variations in the
Partnership's operating expenses.

6.   TRANSACTIONS WITH RELATED PARTIES

     The General Partner and certain affiliated entities, during the three and
six months ended June 30, 1997 and 1996, earned or received compensation or
payments for services from the Partnership as follows: 

<PAGE>13 

                         AMERICAN INSURED MORTGAGE INVESTORS L.P. - SERIES 85

                                     NOTES TO FINANCIAL STATEMENTS

                                                (Unaudited)

6.   TRANSACTIONS WITH RELATED PARTIES - Continued

<TABLE>
<CAPTION>

                                           COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
                                           -----------------------------------------------

                                                                             For the                      For the 
                                                                       three months ended            six monthes ended
                                    Capacity in Which                        June 30,                     June 30,
Name of Recipient                     Served/Item                   1997             1996            1997          1996
-----------------            ----------------------------        ----------       ----------      ----------    ----------
<S>                          <C>                                 <C>              <C>             <C>           <C>       
CRIIMI, Inc.                 General Partner/Distribution        $  147,066      $   313,741      $  338,252    $  475,513

AIM Acquisition              Advisor/Asset Management Fee           476,952          502,066         954,845     1,010,056
  Partners, L.P.(1)

CRIIMI MAE                   Affiliate of General Partner/           18,081           50,431          35,024        65,673
Management, Inc.               Expense Reimbursement

<FN>
(1)  The Advisor, pursuant to the Partnership Agreement, effective June 26, 1984, is entitled to an Asset Management Fee equal to
     0.95% of Total Invested Assets (as defined in the Partnership Agreement).  CRIIMI MAE Services Limited Partnership, the sub-
     advisor to the Partnership (the Sub-advisor) is entitled to a fee of 0.28% of Total Invested Assets.  Of the amounts paid to
     the Advisor, the Sub-advisor earned a fee equal to $140,349 and $281,205 for the three and six months ended June 30, 1997,
     respectively, and $147,977 and $297,707 for the three and six months ended June 30, 1996, respectively.  The Sub-advisor is an
     affiliate of CRIIMI MAE.
</FN>
</TABLE>

7.   INVESTMENT IN AFFILIATE, NOTE PAYABLE AND DUE TO AFFILIATE

     Integrated Funding, Inc. (IFI), an affiliate of the Partnership, was the
coinsurance lender for coinsured mortgages previously held by the Partnership. 
In order to capitalize IFI with sufficient net worth under HUD regulations, in
April 1994, American Insured Mortgage Investors L.P. - Series 88 (AIM 88), an
affiliate of the Partnership, transferred a GNMA mortgage-backed security in the
amount of $2.0 million to IFI.  The Partnership and American Insured Mortgage
Investors L.P. - Series 86 (AIM 86), an afffiliate of the Partnership, each
issued a demand note payable to AIM 88 and recorded an investment in IFI through
an affiliate (AIM Mortgage, Inc.) in proportion to each entity's coinsured
mortgages for which IFI was mortgagee of record as of April 15, 1994.  Interest
expense on the note payable was based on an interest rate of 7.25% per annum.

     IFI had entered into an expense reimbursement agreement with the
Partnership, AIM 86 and AIM 88 (collectively the AIM Funds) whereby IFI
reimburses the AIM Funds for general and administrative expenses incurred on
behalf of IFI.  The expense reimbursement is allocated to the AIM Funds based on
an amount proportionate to each entity's IFI coinsured mortgages.  The expense
reimbursement, interest from the two notes and the Partnership's equity interest
in IFI's net income or loss, substantially equals the mortgage principal and
interest on the GNMA mortgage-backed security transferred to IFI.

     The final coinsured mortgages held by the Partnership were prepaid in late
1996.  As a result, the aforementioned demand note payable to AIM 88 and the
expense reimbursement agreement from IFI were cancelled as of April 1, 1997. 

<PAGE>14

PART I.   FINANCIAL INFORMATION
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS

Introduction
------------
     The Partnership's Management's Discussion and Analysis of Financial
Condition and Results of Operations contains statements that may be considered
forward looking.  These statements contain a number of risks and uncertainties
as discussed herein and in the Partnership's other reports filed with the
Securities and Exchange Commission that could cause actual results to differ
materially.

General
-------
     As of June 30, 1997, the Partnership had invested in 86 Insured Mortgages
with an aggregate amortized cost of approximately $195 million, an aggregate
face value of approximately $203 million and an aggregate fair value of
approximately $205 million, as discussed below.  
     As of August 6, 1997, all of the fully insured FHA-Insured Certificates and
GNMA Mortgage-Backed Securities are current with respect to the payment of
principal and interest except for the mortgages on Portervillage I Apartments,
which has been delinquent since January 1997, as discussed below, and Country
Club Terrace Apartments and Isle of Pines Village Apartments, which are
delinquent with respect to the June 1997 payment of principal and interest.  The
Partnership expects to receive the payments from the latter two mortgages.  In
May 1997, the servicer of the mortgage on Portervillage I Apartments filed a
Notice of Default and an Election to Assign the mortgage with HUD.  The face
value of this mortgage was approximately $1.2 million at December 31, 1996.  The
Partnership expects to receive 99% of this amount plus accrued interest.

Results of Operations
---------------------
     Net earnings for the three and six months ended June 30, 1997 decreased as
compared to the corresponding periods in 1996.  This decrease was primarily the
result of a reduction in mortgage investment income due to the disposition of
six mortgages since May 1996.  In addition, net gains on mortgage
dispositions/modifications decreased, as discussed below.

     Interest and other income increased for the six months ended June 30, 1997,
as compared to the corresponding period in 1996 primarily due to the investment
of proceeds received in December 1996 from the prepayment of the mortgage on
Westlake Village Apartments which was distributed in February 1997.  This
increase was offset by a decrease for the three months ended June 30, 1997, as
compared to the corresponding period in 1996, primarily due to proceeds received
in May 1996 from the prepayment of two mortgages which were distributed in
August 1996.

     Asset management fees decreased for the three and six months ended June 30,
1997, as compared to the corresponding periods in 1996, resulting from the
reduction in the asset base.

     General and administrative expenses did not change significantly for the
three and six months ended June 30, 1997, as compared to the corresponding
periods in 1996.

     Interest expense to affiliate decreased for the three and six months ended
June 30, 1997, as compared to the corresponding periods in 1996.  This decrease
was due to the cancellation of the note payable to affiliate, as discussed in
Note 7 of the financial statements.  

     Net gains on mortgage dispositions decreased for the three and six months
ended June 30, 1997, as compared to the corresponding periods in 1996.  During
the first six months of 1997, the Partnership recognized gains of approximately 

<PAGE>15

PART I.   FINANCIAL INFORMATION
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS - Continued

$66,000 from the prepayment of the mortgage on Security Apartments in February
1997, and approximately $139,000 from the assignment of the mortgage on Meadow
Park Apartments I in January 1997.  During the first six months of 1996, the
Partnership recognized gains on the prepayment of the mortgages on Cambridge
Arms Apartments and Bear Creek Apartments II and the modification of the Oak
Forest loan.

Liquidity and Capital Resources
-------------------------------
     The Partnership's operating cash receipts, derived from payments of
principal and interest on Insured Mortgages, plus cash receipts from interest on
short-term investments, were sufficient during the first six months of 1997 to
meet operating requirements.  

     The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions, if any, and cash flow from operations, which includes
regular interest income and principal from Insured Mortgages.  Although the
Insured Mortgages yield a fixed monthly mortgage payment once purchased, the
cash distributions paid to the Unitholders will vary during each quarter due to
(1) the fluctuating yields in the short-term money market where the monthly
mortgage payments received are temporarily invested prior to the payment of
quarterly distributions, (2) the reduction in the asset base and monthly
mortgage payments due to monthly mortgage payments received or mortgage
dispositions, (3) variations in the cash flow attributable to the delinquency or
default of Insured Mortgages and professional fees and foreclosure costs
incurred in connection with those Insured Mortgages and (4) variations in the
Partnership's operating expenses.

     Net cash provided by operating activities decreased for the six months
ended June 30, 1997, as compared to the corresponding period in 1996, primarily
due to the decrease in net earnings, as discussed above.

     Net cash provided by investing activities decreased for the six months
ended June 30, 1997, as compared to the corresponding period in 1996.  This
decrease is primarily due to proceeds received from the disposition of three
mortgages in 1996 as compared to proceeds received from the disposition of two
mortgages in 1997, as discussed above.  In addition, the receipt of mortgage
principal from scheduled payments increased due to the normal amortization of
mortgages.

     Net cash used in financing activities increased for the six months ended
June 30, 1997, as compared to the corresponding period in 1996.  This increase
was due to the distribution of net proceeds received from the mortgage on
Westlake Village in December 1996 which was distributed in February 1997.  

<PAGE>16

PART II.  OTHER INFORMATION
ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

     No reports on Form 8-K were filed with the Securities and Exchange
Commission during the quarter ended June 30, 1997.

The exhibits filed as part of this report are listed below:

          Exhibit No.               Description
          -----------         -----------------------
             27               Financial Data Schedule  



<PAGE>17

                               SIGNATURE
                              ------------

     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.

                              AMERICAN INSURED MORTGAGE
                                INVESTORS L.P. - SERIES 85
                                (Registrant)

                              By:  CRIIMI, Inc.
                                   General Partner


August 11, 1997               /s/ Cynthia O. Azzara
---------------               -------------------------
DATE                          Cynthia O. Azzara
                              Principal Financial and 
                                Accounting Officer<PAGE>