--------------------------------------------------------------------------------


                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               ------------------



                                   FORM 10-QSB


                               ------------------



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


                For the quarterly period ended September 30, 2006


                               ------------------



                         Commission file number 0-11973


                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP
             Organized pursuant to the Laws of the State of Maryland


                               ------------------



        Internal Revenue Service - Employer Identification No. 52-1321492

                 11200 Rockville Pike, Rockville, Maryland 20852

                                 (301) 468-9200


                               ------------------


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the  registrant  was required to file such reports) and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No | |

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [ X]


--------------------------------------------------------------------------------
<PAGE>


                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                              INDEX TO FORM 10-QSB

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2006


                                                                        Page

Part I - FINANCIAL INFORMATION

Item 1.  Financial Statements

         Balance Sheets
           - September 30, 2006 and December 31, 2005....................  1

         Statements of Operations and Accumulated Losses
           - for the three and nine months ended
             September 30, 2006 and 2005                                   2

         Statements of Cash Flows
           - for the nine months ended September 30, 2006 and 2005.......  3

         Notes to Financial Statements
           - September 30, 2006 and 2005.................................  4

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

Item 3.  Controls and Procedures......................................... 17


Part II - OTHER INFORMATION

Item 3.  Defaults Upon Senior Securities................................. 17

Item 5.  Other Information............................................... 17

Item 6.  Exhibits........................................................ 18

Signature................................................................ 19


<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements


                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                                 BALANCE SHEETS


                                     ASSETS

<TABLE>
<CAPTION>
                                                                                      September 30,    December 31,
                                                                                          2006            2005
                                                                                      ------------    ------------
                                                                                       (Unaudited)
<S>                                                                                   <C>             <C>
Investment in partnerships held for sale or transfer ..............................   $    550,460    $    559,613
Cash and cash equivalents .........................................................      5,002,595       4,647,720
Sales proceeds receivable .........................................................           --           797,693
Other assets ......................................................................         21,925           1,891
                                                                                      ------------    ------------

   Total assets ...................................................................   $  5,574,980    $  6,006,917
                                                                                      ============    ============


                        LIABILITIES AND PARTNERS' CAPITAL



Due on investments in partnerships ................................................   $  1,400,000    $  1,400,000
Accrued interest payable ..........................................................      2,972,762       2,878,262
Accounts payable and accrued expenses .............................................        116,441         140,423
                                                                                      ------------    ------------

   Total liabilities ..............................................................      4,489,203       4,418,685
                                                                                      ------------    ------------

Commitments and contingencies

Partners' capital:

  Capital paid in:
    General Partners ..............................................................          2,000           2,000
    Limited Partners ..............................................................     50,015,000      50,015,000
                                                                                      ------------    ------------

                                                                                        50,017,000      50,017,000

  Less:
    Accumulated distributions to partners .........................................    (34,752,903)    (34,500,041)
    Offering costs ................................................................     (5,278,980)     (5,278,980)
    Accumulated losses ............................................................     (8,899,340)     (8,649,747)
                                                                                      ------------    ------------

      Total partners' capital .....................................................      1,085,777       1,588,232
                                                                                      ------------    ------------

      Total liabilities and partners' capital .....................................   $  5,574,980    $  6,006,917
                                                                                      ============    ============
</TABLE>

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

                                       -1-

<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements


                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                            STATEMENTS OF OPERATIONS

                             AND ACCUMULATED LOSSES

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                     For the three months ended      For the nine months ended
                                                            September 30,                   September 30,
                                                    ----------------------------    ----------------------------
                                                        2006            2005            2006            2005
                                                    ------------    ------------    ------------    ------------
<S>                                                 <C>             <C>             <C>             <C>
Share of (loss) income from partnerships ........   $     (3,090)   $    139,366    $     11,643    $    486,675
                                                    ------------    ------------    ------------    ------------

Other revenue and expenses:

  Revenue:
    Interest ....................................         65,543          32,361         183,031          94,083
                                                    ------------    ------------    ------------    ------------

  Expenses:
    Management fee ..............................         62,499          62,499         187,497         187,497
    General and administrative ..................         48,398         105,060         178,754         296,300
    Interest ....................................         31,500          31,500          94,500          94,500
    Professional fees ...........................         29,163          25,495          87,488         119,816
                                                    ------------    ------------    ------------    ------------

                                                         171,560         224,554         548,239         698,113
                                                    ------------    ------------    ------------    ------------

      Total other revenue and expenses ..........       (106,017)       (192,193)       (365,208)       (604,030)
                                                    ------------    ------------    ------------    ------------

Loss before gain (loss) on disposition of
  investment in partnerships ....................       (109,107)        (52,827)       (353,565)       (117,355)

Additional gain (loss) on disposition of
  investment in partnerships, net of
  disposition fees ..............................          5,819          (6,510)        103,972         367,388
                                                    ------------    ------------    ------------    ------------

Net (loss) income ...............................       (103,288)        (59,337)       (249,593)        250,033

Accumulated losses, beginning of period .........     (8,796,052)    (16,999,487)     (8,649,747)    (17,308,857)
                                                    ------------    ------------    ------------    ------------

Accumulated losses, end of period ...............   $ (8,899,340)   $(17,058,824)   $ (8,899,340)   $(17,058,824)
                                                    ============    ============    ============    ============


Net (loss) income allocated
  to General Partners (1.51%) ...................   $     (1,560)   $       (896)   $     (3,769)   $      3,776
                                                    ============    ============    ============    ============

Net (loss) income allocated
  to Initial and Special Limited Partners (1.49%)   $     (1,539)   $       (884)   $     (3,719)   $      3,725
                                                    ============    ============    ============    ============

Net (loss) income allocated
  to Additional Limited Partners (97%) ..........   $   (100,189)   $    (57,557)   $   (242,105)   $    242,532
                                                    ============    ============    ============    ============

Net (loss) income per unit of
  Additional Limited Partner Interest,
  based on 49,910 units outstanding .............   $      (2.01)   $      (1.15)   $      (4.85)   $       4.86
                                                    ============    ============    ============    ============
</TABLE>

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

                                       -2-

<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements


                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                   For the nine months ended
                                                                                          September 30,
                                                                                  ----------------------------
                                                                                      2006            2005
                                                                                  ------------    ------------
<S>                                                                               <C>             <C>
Cash flows from operating activities:
  Net (loss) income ...........................................................   $   (249,593)   $    250,033

  Adjustments to reconcile net (loss) income to net cash used in operating
    activities:
    Share of income from partnerships .........................................        (11,643)       (486,675)
    Gain on distribution of investment in partnerships, net of disposition fees           --          (255,043)
    Additional gain on disposition of investment in partnerships ..............       (103,972)       (112,345)
    Loss on sale proceeds receivable ..........................................           --            15,733

    Changes in assets and liabilities:
      (Increase) decrease in other assets .....................................        (20,034)            204
      Increase in accrued interest receivable on advances .....................         (1,122)         (1,122)
      Increase in accrued interest payable ....................................         94,500          94,500
      (Decrease) increase in accounts payable and accrued expenses ............        (23,982)         45,743
                                                                                  ------------    ------------

        Net cash used in operating activities .................................       (315,846)       (448,972)
                                                                                  ------------    ------------

Cash flows from investing activities:
  Receipt of distributions from partnerships ..................................         21,918         350,393
  Proceeds from disposition of investment in partnership ......................           --         1,012,685
  Collection of sales proceeds ................................................        901,665         456,879
  Payment of disposition fees to related party ................................           --        (1,968,050)
                                                                                  ------------    ------------

        Net cash provided by (used in) investing activities ...................        923,583        (148,093)
                                                                                  ------------    ------------

Cash flows used in financing activities:
  Distribution to Additional Limited Partners .................................           --        (9,867,848)
  Tax distribution on behalf of Additional Limited Partners ...................       (252,862)       (603,970)
                                                                                  ------------    ------------

        Net cash used in financing activities .................................       (252,862)    (10,471,818)
                                                                                  ------------    ------------

Net increase (decrease) in cash and cash equivalents ..........................        354,875     (11,068,883)

Cash and cash equivalents, beginning of period ................................      4,647,720      15,311,566
                                                                                  ------------    ------------

Cash and cash equivalents, end of period ......................................   $  5,002,595    $  4,242,683
                                                                                  ============    ============
</TABLE>

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

                                       -3-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2006 and 2005

                                   (Unaudited)


1.   BASIS OF PRESENTATION

     In the opinion of C.R.I.,  Inc. (CRI), the Managing  General  Partner,  the
accompanying unaudited financial statements reflect all adjustments,  consisting
of normal recurring accruals, necessary for a fair presentation of the financial
position of Capital Realty Investors-II Limited Partnership (the Partnership) as
of September 30, 2006,  and the results of its operations for the three and nine
month periods ended September 30, 2006 and 2005, and its cash flows for the nine
month periods ended  September 30, 2006 and 2005.  The results of operations for
the interim periods ended September 30, 2006, are not necessarily  indicative of
the results to be expected for the full year.

     The  accompanying  unaudited  financial  statements  have been  prepared in
conformity with accounting principles generally accepted in the United States of
America (US GAAP) and with the instructions to Form 10-QSB.  Certain information
and accounting policies and footnote  disclosures normally included in financial
statements  prepared in conformity  with US GAAP have been  condensed or omitted
pursuant to such instructions.  These condensed  financial  statements should be
read in conjunction with the financial  statements and notes thereto included in
the Partnership's annual report on Form 10-KSB at December 31, 2005.


2.   NEW ACCOUNTING PRONOUNCEMENT

     In September  2006, the Securities and Exchange  Commission  ("SEC") issued
Staff  Accounting  Bulletin  No.  108,  "Considering  the  Effects of Prior Year
Misstatements   when   Quantifying   Misstatements  in  Current  Year  Financial
Statements" ("SAB No. 108"). SAB No. 108 requires quantification of errors using
both  a  balance  sheet  approach  and  an  income  statement  approach  in  the
determination  of  materiality  in  relation to a  misstatement.  SAB No. 108 is
effective  the first  fiscal year ending after  November  15,  2006.  Management
believes SAB No. 108 will not have any impact on the Partnership.


3.   PLAN OF LIQUIDATION AND DISSOLUTION

     On February 4, 2004, the  Partnership  filed a Definitive  Proxy  Statement
pursuant to Section 14(a) of the Securities  Exchange Act of 1934, and mailed it
to limited partners to solicit consents for approval of the following:

(1)  The sale of all of the  Partnership's  assets  and the  dissolution  of the
     Partnership  pursuant to a Plan of  Liquidation  and  Dissolution,  and the
     amendment of the Partnership's  Limited Partnership Agreement to permit the
     Managing General Partner, CRI, to be eligible to receive increased property
     disposition  fees from the  Partnership  on the same basis as such fees may
     currently be paid to Local General  Partners,  real estate brokers or other
     third party intermediaries employed to sell Partnership properties,  to the
     extent that CRI markets and sells the Partnership's  properties  instead of
     such persons (a "Disposition Fee");

                                       -4-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2006 and 2005

                                   (Unaudited)


3. PLAN OF LIQUIDATION AND DISSOLUTION - Continued

(2)  The amendment of the Partnership's  Limited Partnership Agreement to permit
     CRI to be eligible to receive a partnership  liquidation  fee in the amount
     of $500,000,  payable only if the Managing General Partner is successful in
     liquidating all of the Partnership's  investments within 36 months from the
     date the liquidation is approved [March 22, 2004], in recognition  that one
     or more of the properties in which the Partnership  holds an interest might
     not be  saleable  to  parties  not  affiliated  with the  respective  Local
     Partnership  due to the amount and/or terms of their  current  indebtedness
     (the "Partnership Liquidation Fee"); and

(3)  To authorize the Managing General Partner, in its sole discretion, to elect
     to extend the period  during  which  Consents  of Limited  Partners  may be
     solicited and voted,  but not beyond sixty (60) days from the date that the
     Consent Solicitation Statement was sent to the Limited Partners.

The matters for which consent was solicited are collectively  referred to as the
"Liquidation."

     The record date for voting was  December  31,  2003,  and the final  voting
deadline  was March 22,  2004.  A  tabulation  of votes  received  by the voting
deadline follows.

<TABLE>
<CAPTION>
                                    FOR                  AGAINST                ABSTAIN                 TOTAL
                             ------------------     ------------------     -------------------     -------------------
                             Units of               Units of               Units of                Units of
                             limited                limited                limited                 limited
                             partner                partner                partner                 partner
Description                  interest   Percent     interest   Percent     interest    Percent     interest    Percent
-----------                  --------   -------     --------   -------     --------    -------     --------    -------
<S>                          <C>        <C>         <C>        <C>         <C>         <C>         <C>         <C>
Sale, dissolution and
  five percent
  Disposition Fee             28,699     57.6%       1,264       2.5%         268        0.5%       30,231      60.6%

$500,000 Partnership
  Liquidation Fee             25,841     51.8%       3,546       7.1%         844        1.7%       30,231      60.6%

Extension of
  solicitation period         27,975     56.1%       1,767       3.5%         489        1.0%       30,231      60.6%

</TABLE>


     There can be no assurance that the Liquidation  will be completed  pursuant
to the Plan of Liquidation and Dissolution.


4.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

a.   Due on investments in partnerships and accrued interest payable
     ---------------------------------------------------------------

                                    Westgate
                                    --------

     The Partnership defaulted on its one remaining purchase money note, related
to Westgate  Limited Dividend Housing  Association  (Westgate),  on September 1,
2003,  when the note (as extended)  matured and was not paid. The default amount
included   principal  and  accrued   interest  of  $1,400,000  and   $2,584,492,
respectively.  As of  November  9,  2006,  principal  and  accrued  interest  of
$1,400,000  and  $2,986,311,  respectively,  were due. In  conjunction  with the
approved Plan of Liquidation  and Dissolution of the  Partnership,  the Managing
General  Partner is  currently  negotiating  the sale of the  property  owned by
Westgate and seeking the consent of the noteholders

                                       -5-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2006 and 2005

                                   (Unaudited)


4.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

to accept the  proceeds  from such sale as a  discounted  payoff of the purchase
money note's principal and accrued interest.  The discounted payoff would result
in cancellation of indebtedness  income to the Limited Partners,  which would be
taxed at a federal tax rate of up to 35 percent.  There can be no assurance that
a sale of Westgate and discounted payoff of the purchase money note will occur.

     Interest  expense on the  Partnership's  Westgate  purchase  money note was
$31,500 and $94,500 for each of the three and nine month periods ended September
30, 2006 and 2005,  respectively.  The accrued  interest payable on the purchase
money note of $2,972,762 and$2,878,262 as of September 30, 2006 and December 31,
2005, respectively, is in default.

     Due to  the  possible  sale  of  the  property  related  to  Westgate,  the
Partnership's  basis in the Local  Partnership,  along with the net  unamortized
amount of acquisition fees and property  purchase costs,  which totaled $424,803
and $423,113 as of September 30, 2006 and December 31, 2005,  respectively,  has
been   reclassified  to  investment  in  partnerships   held  for  sale  in  the
accompanying balance sheets.

b.   Completed sales
     ---------------

                                    Arrowhead
                                    ---------

     On November 17, 2004, the  Partnership's  interest in Arrowhead  Apartments
Associates  (Arrowhead)  was sold.  Gross cash proceeds  received in 2004 by the
Partnership totaled $1,156,495.  The sale resulted in net gain on disposition of
investment in partnerships of $698,210 for financial  statement  purposes and in
total gain of $6,082,297  for federal tax purposes in 2004.  In accordance  with
the terms of the Partnership  Agreement,  in December 2004 the Managing  General
Partner was paid a disposition fee of $432,824  related to the sale. The fee was
netted against the related gain on disposition of investment in partnerships. In
2005, the Partnership  accrued $85,470 for additional cash proceeds  expected to
be received upon the release of escrow  reserves,  of which $42,649 was received
in August 2005 and the remaining $42,821 was received in January 2006.

                                   Chevy Chase
                                   -----------

     On November 22, 2005, the property owned by Chevy Chase Park,  Ltd.  (Chevy
Chase) was sold. Gross cash proceeds received in 2005 by the Partnership totaled
$6,814,125.  The sale  resulted  in net gain on  disposition  of  investment  in
partnerships of $5,238,173 for financial statement purposes and in total gain of
$7,115,800 for federal tax purposes in 2005. The  Partnership  accrued  $23,208,
which is included in gain on disposition of investment in  partnerships in 2005,
for additional sale proceeds receivable related to the sale of which $18,909 was
received in March 2006 and the  remaining  $4,299 was received in April 2006. In
2006,  net gain on  disposition  of  investment in  partnerships  was reduced by
$11,602 relating to additional  expenses incurred.  In accordance with the terms
of the Partnership Agreement,  in November 2005 the Managing General Partner was
paid a  disposition  fee of  $435,000  related  to the sale.  The fee was netted
against the related gain on disposition of investment in partnerships.

                                       -6-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2006 and 2005

                                   (Unaudited)


4.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

                                 Country Place I
                                 ---------------

     On December  29, 2004,  the  Partnership's  interest in  Blackburn  Limited
Partnership  (Country  Place I) was sold.  Gross cash  proceeds  received by the
Partnership in 2004 totaled $6,821,935.  In addition,  at December 31, 2004, the
Partnership  accrued  $504,604 for cash proceeds to be received in 2005 upon the
release of escrow  reserves,  which were posted as security for the purchaser to
claim any monetary damages as a result of any breach of the  representations and
warranties  made by the seller within one year after closing.  The sale resulted
in net gain on  disposition  of investment  in  partnerships  of $6,565,858  for
financial  statement  purposes and in total gain of $11,060,421  for federal tax
purposes in 2004. In accordance with the terms of the Partnership Agreement,  in
January 2005 the Managing General Partner was paid a disposition fee of $743,366
related to the sale.  The fee was accrued and netted against the related gain on
disposition of investment in  partnerships at December 31, 2004. In August 2005,
approximately fifty percent of the escrowed reserves was received. The remaining
amount of $253,358 was received in January  2006.  In April 2005,  an additional
$9,000 that was  received  from the Local  Partnership  was  recorded as gain on
disposition of investments in partnerships at December 31, 2005.

                                Country Place II
                                ----------------

     On December  29,  2004,  the  Partnership's  interest  in Second  Blackburn
Limited Partnership (Country Place II) was sold. Gross cash proceeds received in
2004 by the Partnership in 2004 totaled $4,438,748. In addition, at December 31,
2004, the Partnership  accrued $328,275 for cash proceeds to be received in 2005
upon the  release of escrow  reserves,  which were  posted as  security  for the
purchaser  to  claim  any  monetary  damages  as  a  result  of  any  breach  of
representations and warranties made by the seller within one year after closing.
The sale resulted in net gain on  disposition of investment in  partnerships  of
$4,288,096 for financial  statement purposes and in total gain of $6,846,454 for
federal tax purposes in 2004.  In accordance  with the terms of the  Partnership
Agreement,  in January 2005 the Managing  General Partner was paid a disposition
fee of $467,042  related to the sale. The fee was accrued and netted against the
related gain on disposition of investment in  partnerships at December 31, 2004.
In August  2005,  approximately  fifty  percent  of the  escrowed  reserves  was
received.  The  remaining  amount of $164,728 was received in January  2006.  In
April 2005,  an additional  $9,000 that was received from the Local  Partnership
was recorded as gain on disposition of investments in  partnerships  at December
31, 2005.

                                  Mercy Terrace
                                  -------------

     On June 6, 2005,  the  Partnership's  interest in Mercy Terrace  Associates
(Mercy  Terrace) was sold.  Gross proceeds  received in 2005 by the  Partnership
totaled  $1,012,685.  The sale resulted in net gain on disposition of investment
in partnerships of $255,043 for financial  statement  purposes and in total gain
of $7,320,022 for federal tax purposes in 2005. In accordance  with the terms of
the Partnership Agreement,  in June 2005 the Managing General Partner was paid a
disposition fee of $757,642  related to the sale. The fee was netted against the
related gain on disposition of investment in partnerships.

                                       -7-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2006 and 2005

                                   (Unaudited)


4.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

                                    Moorings
                                    --------

     On November 17, 2004,  the  Partnership's  interest in Moorings  Apartments
Associates  (Moorings)  was sold.  Gross cash  proceeds  received in 2004 by the
Partnership  totaled  $366,943.  The sale resulted in net loss on disposition of
investment in partnerships of $120,694 for financial  statement  purposes and in
total gain of $6,216,291  for federal tax purposes in 2004.  In accordance  with
the terms of the Partnership  Agreement,  in December 2004 the Managing  General
Partner was paid a disposition fee of $462,417  related to the sale. In 2005 the
Partnership accrued $27,101 for additional cash proceeds expected to be received
upon the release of escrow  reserves,  of which  $13,523 was  received in August
2005 and $13,578 was received in January 2006.

                                 Posada Vallarta
                                 ---------------

     On December  12,  2005,  the property  owned by Posada  Associates  Limited
Partnership  (Posada Vallarta) was sold. Gross cash proceeds received in 2005 by
the Partnership totaled $3,930,457. The sale resulted in net gain on disposition
of investment in partnerships of $3,111,832 for financial statement purposes and
in total gain of  $13,057,662  for federal tax purposes in 2005.  In  accordance
with the terms of the  Partnership  Agreement,  in  December  2005 the  Managing
General  Partner was paid a disposition  fee of $1,118,625  related to the sale.
The fee was netted  against the related gain on  disposition  of  investment  in
partnerships.  The Partnership  accrued  $300,000,  which is included in gain on
disposition of investment in  partnerships in 2005, for additional sale proceeds
received  in March  2006.  During  the first  quarter of 2006,  the  Partnership
recorded gain on disposition of investment in partnerships of $113,617, of which
$54,035  was  received  in March 2006 and  $59,582  was  received in April 2006.
During  the  second  quarter  of 2006,  gain on  disposition  of  investment  in
partnerships  was reduced by $3,861  relating to additional  expenses  incurred.
During the third quarter of 2006, the  Partnership  recorded gain in disposition
of investment in  partnerships  of $5,819,  of which $4,989 was received in July
2006 and $830 was received in September 2006.

c.   Assets held for sale or transfer
     --------------------------------

                                 Four Winds West
                                 ---------------

     As of October  31,  2006,  the  Partnership's  interest  in Four Winds West
Company  Ltd.  (Four Winds West) was  transferred  to an  affiliate of the local
managing  general  partner.  The transfer will result in gain on  disposition of
investment in  partnerships of $12,567 for financial  statement  purposes and in
total gain of approximately $544,000 for federal income tax purposes in 2006.

     The Partnership's  net unamortized  amount of acquisition fees and property
purchase  costs  relating  to Four Winds  West,  which  totaled  $12,567 at both
September 30, 2006 and December 31, 2005, has been reclassified to investment in
partnerships held for sale or transfer in the accompanying balance sheets.

                                       -8-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2006 and 2005

                                   (Unaudited)


4.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

                 Golden Acres, Orangewood Plaza, and Troy Manor
                 ----------------------------------------------

     In accordance  with its approved Plan of Liquidation and  Dissolution,  the
Partnership is currently  negotiating  the sale of the  Partnership's  interests
relating to Chowchilla Elderly Associates, Ltd. (Golden Acres), Orangewood Plaza
Limited Partnership (Orangewood Plaza) and Troy Apartments Ltd. (Troy Manor).

         The Partnership's basis in Golden Acres, which totaled $113,090 and
$123,933 at September 30, 2006 and December 31, 2005, respectively, has been
reclassified to investment in partnerships held for sale or transfer in the
accompanying balance sheets. The Partnership's basis in Orangewood Plaza and
Troy Manor, both totaled $0 at September 30, 2006 and December 31, 2005. There
is no assurance that the sale of any or all of these investments will occur.

                                    Westgate
                                    --------

     See Note 4.a., above.

d.   Advance to Local Partnership
     ----------------------------

                                 Four Winds West
                                 ---------------

     As of October 12, 2004, the Partnership advanced $25,000 to Four Winds West
to assist with current cash  requirements.  As of October 31, 2006, the note was
canceled.  For financial reporting purposes,  the advance was reduced to zero by
the Partnership as a result of losses at the related Local  Partnership level in
2004.

e.   Summarized financial information
     --------------------------------

     Combined statements of operations for the five and seven Local Partnerships
in which  the  Partnership  was  invested  as of  September  30,  2006 and 2005,
respectively,   follow.   The  combined   statements  have  been  compiled  from
information  supplied  by the  management  agents  of  the  properties  and  are
unaudited.  The information for each of the periods is presented  separately for
those Local Partnerships  which have positive  investment basis (equity method),
and for those Local  Partnerships  which have cumulative losses in excess of the
amount of the  Partnership's  investments  in those Local  Partnerships  (equity
method  suspended).  Appended  after  the  combined  statements  is  information
concerning the Partnership's  share of income from partnerships  related to cash
distributions  recorded  as income,  and related to the  Partnership's  share of
income from Local Partnerships.

                                       -9-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2006 and 2005

                                   (Unaudited)


4.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued


                                         COMBINED STATEMENTS OF OPERATIONS
                                                    (Unaudited)
<TABLE>
<CAPTION>
                                                                  For the three months ended
                                                                          September 30,
                                               ----------------------------------------------------------
                                                          2006                             2005
                                               --------------------------        ------------------------
                                                 Equity                            Equity
                                                 Method        Suspended           Method       Suspended
                                               ----------      ----------        ----------     ---------
     <S>                                       <C>             <C>               <C>            <C>
     Number of Local Partnerships                  2               3                 2              5
                                                   =               =                 =              =

     Revenue:
       Rental                                  $  233,100      $  209,221        $  560,950     $  799,228
       Other                                        9,070           1,820            13,192         89,407
                                               ----------      ----------        ----------     ----------

         Total revenue                            242,170         211,041           574,142        888,635
                                               ----------      ----------        ----------     ----------

     Expenses:
       Operating                                  187,872         158,299           355,564        462,565
       Interest                                     5,078          31,682           (10,446)       293,148
       Depreciation and amortization               51,915          40,651            89,232        192,454
                                               ----------      ----------        ----------     ----------

         Total expenses                           244,865         230,632           434,350        948,167
                                               ----------      ----------        ----------     ----------

     Net (loss) income                         $   (2,695)     $  (19,591)       $  139,792     $  (59,532)
                                               ==========      ==========        ==========     ==========

     Cash distributions                        $       --      $       --        $       --     $       --
                                               ==========      ==========        ==========     ==========

     Partnership's share of
       Local Partnership net income                (2,712)             --           139,744             --

     Miscellaneous                                     --            (378)               --           (378)
                                               --------------------------        -------------------------

     Share of (loss) income from
       partnerships                                     $(3,090)                         $139,366
                                                         =======                         ========
</TABLE>


                                      -10-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2006 and 2005

                                   (Unaudited)


4. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

<TABLE>
<CAPTION>
                                                                 For the nine months ended
                                                                       September 30,
                                               -----------------------------------------------------------
                                                          2006                             2005
                                               --------------------------        -------------------------
                                                 Equity                            Equity
                                                 Method        Suspended           Method       Suspended
                                               ----------      ----------        ----------     ----------
     <S>                                       <C>             <C>               <C>            <C>
     Number of Local Partnerships                  2               3                 2              5
                                                   =               =                 =              =

     Revenue:
       Rental                                  $  694,031      $  627,663        $1,704,555     $2,397,683
       Other                                       32,338           5,459            36,491        268,221
                                               ----------      ----------        ----------     ----------

         Total revenue                            726,369         633,122         1,741,046      2,665,904
                                               ----------      ----------        ----------     ----------

     Expenses:
       Operating                                  558,248         474,898         1,094,196      1,387,694
       Interest                                    15,235          95,045           (31,337)       879,443
       Depreciation and amortization              155,746         121,953           267,697        577,363
                                               ----------      ----------        ----------     ----------

         Total expenses                           729,229         691,896         1,330,556      2,844,500
                                               ----------      ----------        ----------     ----------


     Net (loss) gain                           $   (2,860)     $  (58,774)       $  410,490     $ (178,596)
                                               ==========      ==========        ==========     ==========

     Cash distributions                        $    6,305      $   15,613        $  273,327     $   77,066 (1)
                                               ==========      ==========        ==========     ==========

     Cash distributions recorded
       as reduction of investments
       in partnerships                         $    6,305      $       --        $  273,327     $       --
                                               ==========      ==========        ==========     ==========

     Cash distributions recorded
       as income                               $       --      $   15,613        $       --     $   77,066 (1)

     Partnership's share of Local
       Partnership net income                      (2,848)             --           410,731             --

     Miscellaneous                                     --          (1,122)               --         (1,122)
                                               --------------------------        -------------------------

     Share of income from partnerships                    $11,643                         $486,675
                                                          =======                         ========
</TABLE>


     (1)  Includes Mercy Terrace sold June 2005.


     Cash  distributions  received from Local Partnerships which have investment
basis (equity method) are recorded as a reduction of investments in partnerships
and as cash  receipts  on the  respective  balance  sheets.  Cash  distributions
received from Local  Partnerships  which have cumulative losses in excess of the
amount of the  Partnership's  investments  in those Local  Partnerships  (equity
method  suspended)  are  recorded  as share of income from  partnerships  on the
respective  statements  of  operations  and as cash  receipts on the  respective
balance sheets.  As of September 30, 2006 and 2005, the  Partnership's  share of
cumulative  losses to date for the three of the five and five of the seven Local
Partnerships, respectively, exceeded the amount of the Partnership's investments
in those Local Partnerships by $1,032,411 and $9,488,093,  respectively.  As the
Partnership has no further  obligation to advance funds or provide  financing to
these  Local  Partnerships,  the excess  losses have not been  reflected  in the
accompanying financial statements.

                                      -11-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2006 and 2005

                                   (Unaudited)


5.   RELATED PARTY TRANSACTIONS

     In accordance with the terms of the Partnership Agreement,  the Partnership
is obligated to reimburse the Managing  General  Partner for its direct expenses
in connection with managing the  Partnership.  The Partnership  paid $38,295 and
$121,953  for the  three  and nine  month  periods  ended  September  30,  2006,
respectively,  and $52,896  and  $192,866  for the three and nine month  periods
ended  September  30, 2005,  respectively,  to the Managing  General  Partner as
direct  reimbursement of expenses  incurred on behalf of the  Partnership.  Such
expenses are included in general and administrative expenses in the accompanying
statements of operations.

     In accordance with the terms of the Partnership Agreement,  the Partnership
is obligated to pay the Managing General Partner an annual incentive  management
fee  (Management  Fee) after all other expenses of the Partnership are paid. The
Partnership  paid the Managing  General  Partner a Management Fee of $62,499 for
each of the three month periods ended  September 30, 2006 and 2005, and $187,497
for each of the nine month periods ended September 20, 2006 and 2005.

     In  accordance  with the  terms of a  Definitive  Proxy  Statement  for the
Liquidation and Dissolution of the Partnership,  which was approved on March 22,
2004,  by holders of a majority of the Units of Limited  Partner  Interest,  the
Managing  General  Partner  may  receive  property  disposition  fees  from  the
Partnership  on the same  basis  as such  fees  may  currently  be paid to Local
General  Partners,  real  estate  brokers or other  third  party  intermediaries
employed  to sell  Partnership  properties,  to the extent  that CRI markets and
sells the Partnership's  properties  instead of such persons.  In addition,  the
Managing General Partner may receive a partnership liquidation fee in the amount
of $500,000,  payable  only if the Managing  General  Partner is  successful  in
liquidating all of the Partnership's  investments within 36 months from the date
the liquidation is approved,  in recognition  that one or more of the properties
in which the Partnership  holds an interest might not be saleable to parties not
affiliated with the respective Local  Partnership due to the amount and/or terms
of their current indebtedness. In January 2005, the Managing General Partner was
paid  disposition  fees in the  amount  of  $1,210,408  related  to the sales of
Country Place I and II in December  2004,  which were accrued and netted against
the related gain on  disposition of investment in  partnerships  at December 31,
2004. In June 2005, the Managing  General  Partner was paid a disposition fee of
$757,642  related to the sale of Mercy  Terrace,  which was netted  against  the
related gain on disposition of investment in  partnerships  in 2005. On November
28, 2005, the Managing  General  Partner was paid a disposition fee of $435,000,
related  to the sale of the  property  owned by Chevy  Chase,  which was  netted
against the related gain on disposition of investment in  partnerships  in 2005.
On December 14, 2005, the Managing General Partner was paid a disposition fee of
$1,118,625,  related to the sale of the property owned by Posada Vallarta, which
was netted against the related gain on disposition of investment in partnerships
in 2005.


6.   CASH DISTRIBUTIONS

     On January 31, 2005, the Partnership made a cash distribution of $9,582,720
($192 per Unit) to Additional  Limited Partners who were holders of record as of
December 31, 2004.  The  distribution  consisted of proceeds  received  from the
sales of the Partnership's interests in Arrowhead, Moorings, Country Place I and
Country Place II. On April 7, 2005, the Partnership  made a tax  distribution of
$603,970  (approximately  $17.50  per  Unit) on  behalf  of  Additional  Limited
Partners who are not residents of Maryland.  On July 12, 2005,  the  Partnership
made a cash  distribution  of $285,128  ($17.50 per Unit) to Additional  Limited

                                      -12-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2006 and 2005

                                   (Unaudited)


6.   CASH DISTRIBUTIONS - Continued

Partners who were  holders of record and  Maryland  residents as of December 31,
2004.  The  distributions  consisted of proceeds  from the 2004 sales of Country
Place I and Country Place II. On December 22, 2005, the Partnership  made a cash
distribution of $8,734,250  ($175 per unit) to Additional  Limited  Partners who
were  holders of record as of December 1, 2005.  The  distribution  consisted of
proceeds from the 2005 sale of the Partnership's  interest in Mercy Terrace, and
the 2005 sales of the properties  owned by Chevy Chase and Posada  Vallarta.  On
April  4,  2006,  the   Partnership   made  a  tax   distribution   of  $252,862
(approximately  $7.20 per Unit) on behalf of Additional Limited Partners who are
not residents of Ohio.


7.   SUBSEQUENT EVENT

     As of October 31, 2006, the  Partnership's  interest in Four Winds West was
transferred to an affiliate of the local managing general partner. See Note 4.c.
Assets held for sale or transfer in Part I Item 1 for further information.

                                      # # #

                                      -13-

<PAGE>
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion Analysis of Financial Condition
          and Results of Operations


     Capital  Realty  Investors-II   Limited   Partnership's  (the  Partnership)
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations  section  is  based  on  the  financial   statements,   and  contains
information  that  may  be  considered  forward  looking,  including  statements
regarding  the effect of  governmental  regulations.  Actual  results may differ
materially from those  described in the forward  looking  statements and will be
affected  by  a  variety  of  factors  including  national  and  local  economic
conditions,  the  general  level of  interest  rates,  governmental  regulations
affecting  the  Partnership  and  interpretations  of  those  regulations,   the
competitive  environment in which the Partnership operates, and the availability
of working capital.

                          Critical Accounting Policies
                          ----------------------------

     The  Partnership has disclosed its selection and application of significant
accounting  policies in Note 1 of the notes to financial  statements included in
the  Partnership's  annual  report on Form  10-KSB at  December  31,  2005.  The
Partnership accounts for its investments in partnerships (Local Partnerships) by
the equity  method  because the  Partnership  is a limited  partner in the Local
Partnerships.  As such the  Partnership  has no control over the  selection  and
application  of  accounting  policies,  or the use of  estimates,  by the  Local
Partnerships.  Environmental  and operational  trends,  events and uncertainties
that  might  affect the  properties  owned by the Local  Partnerships  would not
necessarily have a significant  impact on the  Partnership's  application of the
equity  method of  accounting,  since the equity  method has been  suspended for
three Local Partnerships which have cumulative losses in excess of the amount of
the Partnership's investments in those Local Partnerships.

                          New Accounting Pronouncement
                          ----------------------------

     In  September  2006,  the SEC issued  Staff  Accounting  Bulletin  No. 108,
"Considering   the  Effects  of  Prior  Year   Misstatements   when  Quantifying
Misstatements in Current Year Financial Statements" ("SAB No. 108"). SAB No. 108
requires  quantification  of errors using both a balance  sheet  approach and an
income statement  approach in the  determination of materiality in relation to a
misstatement.  SAB No. 108 is  effective  the first  fiscal  year  ending  after
November 15, 2006.  Management  believes SAB No. 108 will not have any impact on
the Partnership.

                       Plan of Liquidation and Dissolution
                       -----------------------------------

     On February 4, 2004, the Partnership  filed a Definitive  Proxy  Statement,
pursuant to Section  14(a) of the  Securities  Exchange Act of 1934,  to solicit
consent for, among other things, the sale of all of the Partnership's assets and
the  dissolution  of the  Partnership  pursuant  to a Plan  of  Liquidation  and
Dissolution.  As of the voting  deadline,  March 22, 2004, the holders of 28,699
units of limited partner interest (57.6%) voted "for" such sale and dissolution.
See Note 3 of the notes to  financial  statements  contained  in Part I, Item 1,
hereof,  for additional  information  concerning  the sale of the  Partnership's
limited  partner  interests  in and the  sales  of  properties  owned  by  Local
Partnerships.

                                     General
                                     -------

     Some of the rental properties owned by the Local  Partnerships are financed
by state and federal housing agencies.  The Managing General Partner has sold or
refinanced,  and will continue to sell, certain properties  pursuant to programs
developed by these agencies.  These programs may include opportunities to sell a
property to a qualifying  purchaser  who would agree to maintain the property as
low to moderate  income  housing.  The  Managing  General  Partner  continues to
monitor  certain state housing  agency  programs,  and/or  programs  provided by
certain  lenders,  to ascertain  whether the properties would qualify within the
parameters  of a given  program  and whether  these  programs  would  provide an
appropriate economic benefit to the Limited Partners of the Partnership.


                                      -14-

<PAGE>
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion Analysis of Financial Condition
          and Results of Operations - Continued


     The Managing  General  Partner  continues to seek  strategies  to deal with
affordable  housing  requirements.  While the Managing  General  Partner  cannot
predict the  outcome for any  particular  property  at this time,  the  Managing
General  Partner will  continue to work with the Local  Partnerships  to develop
strategies that maximize the benefits to investors.

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

     The Partnership's liquidity, with unrestricted cash resources of $5,002,595
as of September 30, 2006, along with anticipated  future cash distributions from
Local  Partnerships,  is  expected  to be  adequate  to  meet  its  current  and
anticipated  operating  needs.  As of November  9, 2006,  there were no material
commitments for capital  expenditures.  The Managing  General Partner  currently
intends  to retain all of the  Partnership's  remaining  undistributed  cash for
operating  cash  reserves  pending  further  distributions  under  its  Plan  of
Liquidation and Dissolution.

     The Partnership's  remaining  obligation with respect to its investments in
Local  Partnerships,  in the form of a  nonrecourse  purchase  money  note which
matured  September 1, 2003, has a principal  balance of $1,400,000  plus accrued
interest of $2,972,762 as of September 30, 2006, and is payable in full upon the
earliest  of: (i) sale or  refinancing  of the  respective  Local  Partnership's
rental  property;  (ii) payment in full of the  respective  Local  Partnership's
permanent loan; or (iii) maturity.

     The  purchase  money note,  which is  nonrecourse  to the  Partnership,  is
secured by the Partnership's  interest in the Westgate Local Partnership,  which
owns Westgate Tower Apartments (Westgate). The underlying property does not have
sufficient appreciation and equity to enable the Partnership to pay the purchase
money note's  principal and accrued  interest.  In conjunction with the approved
Plan of Liquidation and  Dissolution of the  Partnership,  the Managing  General
Partner is currently  negotiating the sale of the property owned by Westgate and
seeking the consent of the  noteholders to accept the proceeds of such sale as a
discounted  payoff of the purchase money note's principal and accrued  interest.
The discounted payoff would result in cancellation of indebtedness income to the
Limited  Partners,  which  would  be  taxed  at a  federal  tax rate of up to 35
percent. There can be no assurance that a sale of Westgate and discounted payoff
of the purchase money note will occur.

     The Managing  General Partner has received  consent from a majority of Unit
Holders  for the  liquidation  of the  Partnership.  (See Note 2 of the notes to
financial  statements  contained in Part I, Item 1,  hereof.) It is  anticipated
that  the  Partnership's  obligation,  discussed  above,  would  be  retired  in
conjunction  with  such  Liquidation.   There  can  be  no  assurance  that  the
Liquidation  will  be  completed   pursuant  to  the  Plan  of  Liquidation  and
Dissolution.

     The Partnership closely monitors its cash flow and liquidity position in an
effort to ensure that sufficient  cash is available for operating  requirements.
For the nine month period ended September 30, 2006, the receipt of distributions
from Local  Partnerships  and the  collection  of sale proceeds were adequate to
support  operating  cash  requirements.  Cash  and  cash  equivalents  increased
$354,875 during the nine month period ended  September 30, 2006,  primarily as a
result of sale proceeds  collected and the receipt of  distributions  from Local
Partnerships, partially offset by the tax distribution

     On January 31, 2005, the Partnership made a cash distribution of $9,582,720
($192 per Unit) to Additional  Limited Partners who were holders of record as of
December 31, 2004.  The  distribution  consisted of proceeds  received  from the
sales of the Partnership's interests in Arrowhead, Moorings, Country Place I and
Country Place II. On April 7, 2005, the Partnership  made a tax  distribution of
$603,970  (approximately  $17.50  per  Unit) on  behalf  of  Additional  Limited
Partners who are not residents of Maryland.  On July 12, 2005,  the  Partnership
made a cash  distribution  of $285,128  ($17.50 per Unit) to Additional  Limited

                                      -15-

<PAGE>
Part I. FINANCIAL INFORMATION
Item 2. Management's Discussion Analysis of Financial Condition
          and Results of Operations - Continued


Partners who were  holders of record and  Maryland  residents as of December 31,
2004.  The  distributions  consisted of proceeds  from the 2004 sales of Country
Place I and Country Place II. On December 22, 2005, the Partnership  made a cash
distribution of $8,734,250  ($175 per unit) to Additional  Limited  Partners who
were  holders of record as of December 1, 2005.  The  distribution  consisted of
proceeds from the 2005 sale of the Partnership's  interest in Mercy Terrace, and
the 2005 sales of the properties  owned by Chevy Chase and Posada  Vallarta.  On
April  4,  2006,  the   Partnership   made  a  tax   distribution   of  $252,862
(approximately  $7.20 per Unit) on behalf of Additional Limited Partners who are
not residents of Ohio.

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

     The  Partnership's  net loss for the three month period ended September 30,
2006,  increased  from the  corresponding  period  in 2005,  primarily  due to a
decrease in share of income from  partnerships  and an increase in  professional
fees,  partially  offset by increases in interest revenue and additional gain on
disposition  of  investment  in  partnerships  and a  decrease  in  general  and
administrative  expenses.  Share of income from  partnerships  decreased in 2006
primarily due to the cessation of income from one property sold in 2005. General
and administrative  expenses decreased primarily due to lower reimbursed payroll
costs. Interest revenue increased due to higher rates in 2006.

     The  Partnership's  net loss for the nine month period ended  September 30,
2006  decreased  from the  corresponding  period  in 2005,  primarily  due to an
increase  in  interest  revenue  and  decreases  in general  and  administrative
expenses and professional fees, partially offset by decreases in share of income
from   partnerships   and  additional  gain  on  disposition  of  investment  in
partnerships.  Interest revenue  increased due to higher rates in 2006.  General
and  administrative  fees decreased  primarily due to lower  reimbursed  payroll
costs.  Professional  fees decreased due to lower audit costs in 2006.  Share of
income from partnerships decreased primarily due to the cessation of income from
two properties sold in 2005.

     For financial reporting purposes, the Partnership,  as a limited partner in
the Local  Partnerships,  does not record losses from the Local  Partnerships in
excess of its  investment  to the  extent  that the  Partnership  has no further
obligation to advance funds or provide financing to the Local Partnerships. As a
result,  the  Partnership's  share of income from partnerships for the three and
nine month periods ended  September 30, 2006,  did not include losses of $19,369
and $58,106,  respectively,  compared to excluded losses of $56,630 and $169,892
for the three and nine month periods ended September 30, 2005, respectively.

     As of October 31, 2006, the  Partnership's  interest in Four Winds West was
transferred to an affiliate of the local managing general partner. See Note 4.c.
Assets held for sale or transfer in Part I Item 1 for further information.

     No other  significant  changes in the  Partnership's  operations have taken
place during the three month period ended September 30, 2006.

                                      -16-

<PAGE>
Part I. FINANCIAL INFORMATION
Item 3. Controls and Procedures


     In October 2006,  representatives  of the Managing  General  Partner of the
Partnership  carried out an  evaluation of the  effectiveness  of the design and
operation of the Partnership's  disclosure controls and procedures,  pursuant to
Exchange Act Rules  13a-15 and 15d-15.  The  Managing  General  Partner does not
expect that the  Partnership's  disclosure  controls and procedures will prevent
all error and all fraud.  A control  system,  no matter how well  conceived  and
operated,  can provide only  reasonable  assurance  that the  objectives  of the
control system are met. Further, the design of a control system must reflect the
fact that there are resource  constraints,  and the benefits of controls must be
considered relative to their costs.  Because of the inherent  limitations in all
control systems,  no evaluation of controls can provide absolute  assurance that
all control issues have been detected.  These inherent  limitations  include the
realities that judgments in  decision-making  can be faulty, and that breakdowns
can occur  because  of simple  error or  mistake.  The  design of any  system of
controls also is based in part upon certain  assumptions about the likelihood of
future  events,  and there can be no  assurance  that any design will succeed in
achieving its stated goals under all  potential  future  conditions.  Over time,
controls may become inadequate  because of changes in conditions,  or the degree
of compliance  with the policies or procedures may  deteriorate.  Because of the
inherent  limitations in a cost-effective  control system,  misstatements due to
error or  fraud  may  occur  and not be  detected.  Based  on the  October  2006
evaluation,  and subject to the foregoing,  the Principal  Executive Officer and
Principal Financial Officer concluded that the Partnership's disclosure controls
and  procedures are effective as of the end of the period covered by this report
to alert them in a timely  manner to any  material  information  relating to the
Partnership that must be included in the Partnership's periodic SEC filings, and
particularly  during  the  period in which  this  report is being  prepared.  In
addition,  there have been no significant changes in the Partnership's  internal
control over financial  reporting that occurred  during the  Partnership's  most
recent fiscal quarter that have materially affected, or are reasonably likely to
materially affect, the Partnership's internal control over financial reporting.


Part II. OTHER INFORMATION
Item 3. Defaults Upon Senior Securities

     See Note 3.a. of the notes to  financial  statements  contained  in Part I,
Item 1, hereof,  for  information  concerning the  Partnership's  default on one
purchase money note.


Item 5. Other Information

     There has not been any information  required to be disclosed in a report on
Form 8-K during the quarter ended September 30, 2006, but not reported,  whether
or not otherwise required by this Form 10-QSB at September 30, 2006.

     There  is no  established  market  for the  purchase  and  sale of units of
additional limited partner interest (Units) in the Partnership, although various
informal  secondary market services exist. Due to the limited markets,  however,
investors may be unable to sell or otherwise dispose of their Units.

                                Cash Distribution
                                -----------------

     On January 31, 2005, the Partnership made a cash distribution of $9,582,720
($192 per Unit) to Additional  Limited Partners who were holders of record as of
December 31, 2004.  The  distribution  consisted of proceeds  received  from the
sales of the Partnership's interests in Arrowhead, Moorings, Country Place I and
Country Place II. On April 7, 2005, the Partnership  made a tax  distribution of
$603,970  (approximately  $17.50  per  Unit) on  behalf  of  Additional  Limited
Partners who are not residents of Maryland.  On July 12, 2005,  the  Partnership
made a cash  distribution  of $285,128  ($17.50 per Unit) to Additional  Limited
Partners who were  holders of record and  Maryland  residents as of December 31,
2004.  The  distributions  consisted of proceeds  from the 2004 sales of Country
Place I and Country Place II. On December 22, 2005, the Partnership

                                      -17-

<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information - Continued


made a cash  distribution  of $8,734,250  ($175 per unit) to Additional  Limited
Partners  who were  holders of record as of December 1, 2005.  The  distribution
consisted of proceeds from the 2005 sale of the Partnership's  interest in Mercy
Terrace,  and the 2005 sales of the  properties  owned by Chevy Chase and Posada
Vallarta.  On April 4, 2006, the Partnership made a tax distribution of $252,862
(approximately  $7.20 per Unit) on behalf of Additional Limited Partners who are
not residents of Ohio.


Item 6. Exhibits

Exhibit No.     Description
-----------     -----------

31.1            Certification of Principal Executive Officer, pursuant to
                18 U.S.C. Section 1350, as adopted pursuant to Section 302
                of the Sarbanes-Oxley Act of 2002.

31.2            Certification of Principal Financial Officer, pursuant to
                18 U.S.C. Section 1350, as adopted pursuant to Section 302
                of the Sarbanes-Oxley Act of 2002.

32              Certification of Principal Executive Officer and Principal
                Financial Officer, pursuant to 18 U.S.C. Section 1350, as
                adopted pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.

All other Items are not applicable.

                                      -18-

<PAGE>
                                    SIGNATURE


     In accordance  with the  requirements  of the Exchange Act, the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                  CAPITAL REALTY INVESTORS-II LIMITED
                                    PARTNERSHIP
                                  ----------------------------------------------
                                  (Registrant)

                                  by:  C.R.I., Inc.
                                       -----------------------------------------
                                       Managing General Partner




November 9, 2006                       by:  /s/ H. William Willoughby
----------------                            ------------------------------------
DATE                                        H. William Willoughby,
                                            Director, President, Secretary,
                                              Principal Financial Officer,
                                              and Principal Accounting Officer

                                      -19-

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