<PAGE>

                                   FORM 10-QSB
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


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


For the quarterly period ended     September 30, 1998
                                   ------------------


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


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




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



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



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


     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, and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X]   No [ ]   

     State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.


     Not applicable                            Not applicable
--------------------------         ---------------------------------------
        (Class)                      (Outstanding at September 30, 1998)
<PAGE>


                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                              INDEX TO FORM 10-QSB

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1998



                                                            PAGE
                                                            ----

PART I.   Financial Information (Unaudited)

Item 1.   Financial Statements

          Balance Sheets - September 30, 1998 and
            December 31, 1997 . . . . . . . . . . . . .        1

          Statements of Operations and Accumulated
            Losses - for the three and nine
            months ended September 30, 1998 and 1997  .        2

          Statements of Cash Flows - for the nine
            months ended September 30, 1998 and 1997  .        4

          Notes to Financial Statements - 
            September 30, 1998 and 1997 . . . . . . . .        5

Item 2.   Management's Discussion and Analysis of Financial
            Condition and Results of Operations . . . .        17

PART II.  Other Information

Item 3.   Defaults Upon Senior Securities . . . . . . .        22

Item 6.   Exhibits and Reports on Form 8-K  . . . . . .        23

Signature   . . . . . . . . . . . . . . . . . . . . . .        24

Exhibit Index . . . . . . . . . . . . . . . . . . . . .        25
<PAGE>
PART I.   FINANCIAL INFORMATION
          ---------------------
ITEM 1.   FINANCIAL STATEMENTS
          ---------------------

                  CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                                   BALANCE SHEETS

                                       ASSETS
<TABLE>
<CAPTION>
                                                                                                September 30,    December 31,
                                                                                                    1998            1997
                                                                                                ------------     ------------
                                                                                                 (Unaudited)
<S>                                                                                             <C>              <C>
Investments in and advances to partnerships                                                     $  3,929,634     $  4,737,362
Partnership interests held in escrow                                                                 921,914          917,927
Cash and cash equivalents                                                                         12,991,892        7,969,815
Acquisition fees, principally paid to related parties, net of
  accumulated amortization of $409,354 and $388,811, respectively                                    412,333          432,876
Property purchase costs, net of accumulated amortization of 
  $267,370 and $253,580, respectively                                                                284,232          298,022
Other assets                                                                                          39,918           91,028
                                                                                                ------------     ------------

      Total assets                                                                              $ 18,579,923     $ 14,447,030
                                                                                                ============     ============

                       LIABILITIES AND PARTNERS' DEFICIT

Due on investments in partnerships                                                              $ 18,225,662     $ 17,359,614
Accrued interest payable                                                                          31,629,153       30,245,542
Accounts payable and accrued expenses                                                                131,694           80,433
                                                                                                ------------     ------------
      Total liabilities                                                                           49,986,509       47,685,589
                                                                                                ------------     ------------

Commitments and contingencies

Partners' capital (deficit):

  Capital paid in:
    General Partners                                                                                   2,000            2,000
    Limited Partners                                                                              50,015,000       50,015,000
                                                                                                ------------     ------------
                                                                                                  50,017,000       50,017,000

  Less:
    Accumulated distributions to partners                                                         (2,253,712)      (2,253,712)
    Offering costs                                                                                (5,278,980)      (5,278,980)
    Accumulated losses                                                                           (73,890,894)     (75,722,867)
                                                                                                ------------     ------------
      Total partners' deficit                                                                    (31,406,586)     (33,238,559)
                                                                                                ------------     ------------

      Total liabilities and partners' deficit                                                   $ 18,579,923     $ 14,447,030
                                                                                                ============     ============
</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,
                                                              -----------------------------     -----------------------------
                                                                  1998             1997             1998             1997
                                                              ------------     ------------     ------------     ------------
<S>                                                           <C>              <C>              <C>              <C>
Share of income from partnerships                             $    325,353     $  2,549,254     $  4,821,560     $  2,875,864
                                                              ------------     ------------     ------------     ------------

Other revenue and expenses:

  Revenue:
    Interest and other income                                      173,289          102,310          407,504          224,433
                                                              ------------     ------------     ------------     ------------

  Expenses:
    Interest                                                       963,953        1,355,885        2,891,859        4,128,827
    Management fee                                                  62,499           62,499          187,497          187,497
    General and administrative                                      62,385           55,309          201,632          159,623
    Professional fees                                               22,733           25,524           81,770          334,153
    Amortization                                                    11,445           12,518           34,333           37,554
                                                              ------------     ------------     ------------     ------------
                                                                 1,123,015        1,511,735        3,397,091        4,847,654
                                                              ------------     ------------     ------------     ------------
       Total other revenue and expenses                           (949,726)      (1,409,425)      (2,989,587)      (4,623,221)
                                                              ------------     ------------     ------------     ------------

(Loss) income before gain on disposition of
  investments in partnerships                                     (624,373)       1,139,829        1,831,973       (1,747,357)

Gain on disposition of investments in partnerships                      --               --               --        4,903,873
                                                              ------------     ------------     ------------     ------------
(Loss) income before extraordinary gain from
  extinguishment of debt                                          (624,373)       1,139,829        1,831,973        3,156,516

Extraordinary gain from extinguishment of debt                          --               --               --        1,653,096
                                                              ------------     ------------     ------------     ------------
Net (loss) income                                                 (624,373)       1,139,829        1,831,973        4,809,612

Accumulated losses, beginning of period                        (73,266,521)     (75,731,024)     (75,722,867)     (79,400,807)
                                                              ------------     ------------     ------------     ------------
Accumulated losses, end of period                             $(73,890,894)    $(74,591,195)    $(73,890,894)    $(74,591,195)
                                                              ============     ============     ============     ============
</TABLE>

                                   (Continued)

                  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 OPERATIONS

                        AND ACCUMULATED LOSSES - Continued

                                     (Unaudited)

<TABLE>
<CAPTION>

                                                               For the three months ended         For the nine months ended
                                                                      September 30,                     September 30,
                                                              -----------------------------     -----------------------------
                                                                  1998             1997             1998             1997
                                                              ------------     ------------     ------------     ------------
<S>                                                           <C>              <C>              <C>              <C>
Net (loss) income allocated to General Partners
  (1.51%)                                                     $     (9,428)    $     17,211     $     27,663     $     72,625
                                                              ============     ============     ============     ============

Net (loss) income allocated to Initial and Special
  Limited Partners (1.49%)                                    $     (9,303)    $     16,983     $     27,296     $     71,663
                                                              ============     ============     ============     ============

Net (loss) income allocated to Additional Limited
  Partners (97%)                                              $   (605,642)    $  1,105,635     $  1,777,014     $  4,665,324
                                                              ============     ============     ============     ============

Net (loss) income per unit of Additional Limited
  Partnership Interest based on 50,000 units
  outstanding                                                 $     (12.11)    $      22.11     $      35.54     $      93.31
                                                              ============     ============     ============     ============
</TABLE>






















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

                                        -3-
<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,
                                                                                                -----------------------------
                                                                                                    1998             1997
                                                                                                ------------     ------------
<S>                                                                                             <C>              <C>
Cash flows from operating activities:
  Net income                                                                                    $  1,831,973     $  4,809,612

  Adjustments to reconcile net income to net cash used in
    operating activities:
    Share of income from partnerships                                                             (4,821,560)      (2,875,864)
    Amortization of deferred costs                                                                    34,333           37,554
    Amortization of discount on purchase money notes                                               1,116,048        2,331,761
    Payment of purchase money note interest                                                         (392,200)        (172,404)
    Gain on disposition of investments in partnerships                                                    --       (4,903,873)
    Extraordinary gain from extinguishment of debt                                                        --       (1,653,096)

    Changes in assets and liabilities:
      Decrease (increase) in other assets                                                             51,110          (23,816)
      Increase in accrued interest payable                                                         1,775,811        1,797,066
      Increase in accounts payable and accrued expenses                                               51,261            2,122
                                                                                                ------------     ------------
         Net cash used in operating activities                                                      (353,224)        (650,938)
                                                                                                ------------     ------------
Cash flows from investing activities:
  Receipt of distributions from partnerships                                                       5,775,301        3,587,928
  Proceeds from disposition of investments in partnerships                                                --        5,693,131
  Advances to partnerships                                                                          (789,000)        (147,250)
  Repayment of advances to partnerships                                                              639,000          147,250
                                                                                                ------------     ------------
         Net cash provided by investing activities                                                 5,625,301        9,281,059
                                                                                                ------------     ------------
Cash flows from financing activities:
  Pay-off of purchase money note and related interest                                                     --       (1,385,154)
  Payment of purchase money note principal                                                          (250,000)              --
                                                                                                ------------     ------------
         Net cash used in financing activities                                                      (250,000)      (1,385,154)
                                                                                                ------------     ------------
Net increase in cash and cash equivalents                                                          5,022,077        7,244,967
Cash and cash equivalents, beginning of period                                                     7,969,815        2,128,849
                                                                                                ------------     ------------
Cash and cash equivalents, end of period                                                        $ 12,991,892     $  9,373,816
                                                                                                ============     ============
Supplemental disclosure of cash flow information:
  Cash paid during the period for interest                                                      $    392,200     $    264,558
                                                                                                ============     ============
</TABLE>

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

                                      -4-
<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           SEPTEMBER 30, 1998 AND 1997

                                   (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, 1998, and the results of its operations for the three and nine
months ended September 30, 1998 and 1997, and its cash flows for the nine months
ended September 30, 1998 and 1997.  The results of operations for the interim
period ended September 30, 1998, are not necessarily indicative of the results
to be expected for the full year.

     The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles and with the
instructions to Form 10-QSB.  Certain information and accounting policies and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles 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-K at December 31, 1997.


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

     The Partnership's obligations with respect to its investments in Local
Partnerships, in the form of purchase money notes having a principal balance of
$18,597,678 (exclusive of unamortized discount on purchase money notes of
$372,016) plus accrued interest of $31,629,153 as of September 30, 1998, are
payable in full upon the earliest of:  (1) sale or refinancing of the respective
Local Partnership's rental property; (2) payment in full of the respective Local
Partnership's permanent loan; or (3) maturity.  Purchase money notes in an
aggregate principal amount of $1,050,000 matured on December 31, 1996, and have
been extended to January 2, 2000, as discussed below.  Purchase money notes in
the aggregate principal amount of $1,050,000 and $950,000 matured on December
31, 1996 and December 31, 1997, respectively, and were paid off on October 5,
1998, as discussed below.  Purchase money notes in the aggregate principal
amount of $950,000 matured on December 31, 1997 and were extended to January 5,
2001, as discussed below.  Purchase money notes in the aggregate principal
amount of $2,380,000 and $3,150,000 matured on January 1, 1998 and June 1, 1998,
respectively, and have not been paid or extended, as discussed below.  Purchase
money notes in the aggregate principal amount of $4,600,000 and $1,927,500
matured on August 31, 1998 and have been extended to February 28, 2001 and
August 31, 2003, respectively, as discussed below.  Purchase money notes in the
aggregate principal amount of $1,450,000 matured on September 1, 1998, and the
Managing General Partner is currently formalizing an agreement to extend these
notes until September 1, 2003, as discussed below.  Purchase money notes in the
aggregate principal amount of $1,314,868 mature on January 1, 1999, as discussed
below.

     The purchase money notes, which are nonrecourse to the Partnership, are
generally secured by the Partnership's interest in the respective Local
Partnerships.  There is no assurance that the underlying properties will have
sufficient appreciation and equity to enable the Partnership to pay the purchase
money notes' principal and accrued interest when due.  If a purchase money note

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

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)

2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

is not paid in accordance with its terms, the Partnership will either have to
renegotiate the terms of repayment or risk losing its partnership interest in
the Local Partnership.  The Partnership's inability to pay certain of the
purchase money note principal and accrued interest balances when due, and the
resulting uncertainty regarding the Partnership's continued ownership interest
in the related Local Partnerships, does not impact the Partnership's financial
condition because the purchase money notes are nonrecourse and secured solely by
the Partnership's interest in the related Local Partnerships.  Therefore, should
the investment in any of the Local Partnerships with maturing purchase money
notes not produce sufficient value to satisfy the related purchase money notes,
the Partnership's exposure to loss is limited because the amount of the
nonrecourse indebtedness of each of the maturing purchase money notes exceeds
the carrying amount of the investment in and advances to each of the related
Local Partnerships.  Thus, even a complete loss of one of these Local
Partnerships would not have a material impact on the financial condition of the
Partnership.  See further discussion of certain purchase money notes, below.

     Interest expense on the Partnership's purchase money notes was $963,953 and
$2,891,859 for the three and nine months ended September 30, 1998, respectively,
and $1,355,885 and $4,128,827 for the three and nine months ended September 30,
1997, respectively.  Amortization of imputed interest on purchase money notes
increased interest expense by $372,016 and $1,116,048 for the three and nine
months ended September 30, 1998, respectively, and by $763,948 and $2,331,761
for the three and nine months ended September 30, 1997, respectively.  The
accrued interest payable on the purchase money notes of $31,629,153 and
$30,245,542 as of September 30, 1998 and December 31, 1997, respectively, is due
on the respective maturity dates of the purchase money notes or earlier, in some
instances, if the pertinent Local Partnership has distributable net cash flow,
as defined in the relevant Local Partnership agreement.

     As of September 30, 1998 and December 31, 1997, the Partnership had
advanced funds totaling $474,410 and $324,410, respectively, to Local
Partnerships.  Interest accrued on these advances was $187,372 as of both
September 30, 1998 and December 31, 1997.  For financial reporting purposes,
these loans have been or will be reduced to zero by the Partnership as a result
of losses from the related Local Partnerships.

                             Arrowhead and Moorings
                             -----------------------

     On May 7, 1998, the local managing general partner of Arrowhead Apartments
Associates Limited Partnership (Arrowhead) and Moorings Apartments Associates
Limited Partnership (Moorings) closed on refinancings of the first mortgages of
the Local Partnerships.  In connection with the refinancings, on March 19, 1998,
the Partnership advanced loan application fees and deposits for refinancing
costs totaling $14,000 each for Arrowhead and Moorings.  On May 7, 1998, the
Partnership advanced additional amounts for rate lock fees for Arrowhead and
Moorings of $140,000 and $166,000, respectively.  These advances were repaid
from the proceeds of the refinancing.  The remaining proceeds were subsequently
used to pay, at a discount, purchase money note obligations of the related Local
Partnerships.  These discounted payoffs will result in cancellation of
indebtedness income for the Partnership's 1998 tax year.  Additionally, the
Partnership received $1,542,691 and $3,850,304 as of November 13, 1998 from
Arrowhead and Moorings, respectively, from the proceeds of the refinancings. 
The refinancing proceeds received by the Partnership during and subsequent to

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

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)

2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

closing exceeded the Partnership's remaining investments in the respective Local
Partnerships by approximately $1.3 million and $3.0 million for Arrowhead and
Moorings, respectively, and were included in share of income from partnerships
during the second quarter of 1998 in the consolidated statements of operations.

     During the quarter ended September 30, 1998, the Managing General Partner
and/or its affiliates earned net fees of $331,073 for services performed in
connection with the refinancing of the mortgage loan related to Moorings.  These
fees were paid on August 7, 1998. 

                               Beech Hill I and II
                               -------------------

     The Partnership defaulted on its purchase money notes aggregating
$2,380,000 related to Beech Hill Development Co. (Beech Hill I) and Beech Hill
Development Co. II (Beech Hill II) on August 1, 1995 when the notes matured and
were not paid.  On March 29, 1996, the noteholders agreed to extend the purchase
money note due dates to January 1, 1998.  Under the agreement, the Partnership
pays the noteholders of Beech Hill I and Beech Hill II all annual cash flow
distributions received from the related Local Partnerships in excess of $5,000
and $2,500, respectively.  There were no annual cash flow distributions made to
the Partnership from the related Local Partnerships during the three and nine
months ended September 30, 1998 and 1997.

     Under the extension agreement, documents transferring the Partnership's
interests in Beech Hill I and Beech Hill II to the noteholders were placed in
escrow to be released to the noteholders upon a future default by the
Partnership on the respective purchase money notes.  On January 1, 1998, the
Partnership defaulted on its purchase money notes related to Beech Hill I and
Beech Hill II when the notes, as extended, matured and were not paid.  The
default amount included principal and accrued interest of $1,480,000 and
$1,687,578, respectively, for Beech Hill I and $900,000 and $1,072,113,
respectively, for Beech Hill II.  As of November 13, 1998, the Partnership's
interests in Beech Hill I and Beech Hill II have not been transferred to the
noteholders, and the transfer documents remain in escrow.  As of November 13,
1998, principal and accrued interest totaling $1,480,000 and $1,800,707,
respectively, related to Beech Hill I and $900,000 and $1,140,908, respectively,
related to Beech Hill II were due.

     Due to the impending likely transfer of the Partnership's interest in the
Local Partnerships to the noteholders, the Partnership's bases in these Local
Partnerships as of September 30, 1998, which were $517,673 and $404,241 for
Beech Hill I and Beech Hill II, respectively, were classified as partnership
interests held in escrow in the accompanying financial statements.

     The purchase money notes related to Beech Hill I and Beech Hill II are
nonrecourse and secured solely by the Partnership's interests in the related
Local Partnerships.  The release of the Partnership's purchase money note
obligations as a result of the impending likely loss of ownership interest in
the Local Partnerships will result in a net financial statement gain of
approximately $2.8 million and $1.7 million for Beech Hill I and Beech Hill II,
respectively, when taken out of escrow.  The federal tax gains are estimated to
be approximately $4.7 million and $3.0 million for Beech Hill I and Beech Hill
II, respectively.


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

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)

2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

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

     The Partnership defaulted on its two purchase money notes relating to Chevy
Chase Park, Limited (Chevy Chase) on December 31, 1996 when the notes matured
and were not paid.  The aggregate default amount included principal and accrued
interest of $2,100,000 and $3,553,912, respectively.  The Managing General
Partner successfully negotiated an extension of one of the purchase money notes
(First Chase Note) in the principal amount of $1,050,000 effective December 1,
1997.  In connection with the extension agreement, the Partnership made interest
payments to the noteholder.  Under the terms of the extension agreement, the
maturity date is January 2, 2000.  Additionally, the Partnership has the right
and option, but not the obligation, to extend the maturity date to January 5,
2001 by making an additional payment to the noteholder on or before January 2,
1999.  Such payment shall be applied to accrued interest.  The Partnership, if
it exercises this option to further extend the maturity date, shall thereafter
have the option to purchase the purchase money note for a specified amount if it
gives notice of such exercise by January 5, 2000.

     On February 10, 1998, the Partnership was served with a complaint by the
two holders of the second purchase money note (Second Chase Note) filing suit
against the Partnership, the Managing General Partner and C.R.H.C., Incorporated
(CRHC), an affiliate of the Managing General Partner, for damages and seeking
foreclosure on the Partnership's interest in the Local Partnership.  On July 29,
1998, the parties agreed to a settlement which involves a discounted payoff to
the holders of the Second Chase Note, subject to the Partnership's satisfaction
with the results of its due diligence.  On October 5, 1998, pursuant to such
settlement agreement, the Partnership paid the holders of the Second Chase Note
a discounted amount in full settlement of the Second Chase Note and the lawsuit.
In connection with this settlement, the local general partners withdrew from the
Local Partnership assigning their interests (which were converted to a limited
partner interest) in the Local Partnership to the Partnership, and the property
management agent, which is an affiliate of the local general partners, agreed to
a termination of the property management agreement effective April 1, 1999. 
CRHC is the sole remaining general partner of the Local Partnership.  Further,
the Partnership received the interests of the local general partners, the
holders of the Second Chase Note, and their respective affiliates in the First
Chase Note, which is approximately 10.808%.

     The Managing General Partner and CRHC are exploring various options to
refinance the U. S. Department of Housing and Urban Development (HUD) Section
236 interest rate subsidized mortgage loan related to Chevy Chase. 
Additionally, the Managing General Partner commissioned a rental market study
and is evaluating the feasibility of converting the property to market-rate.  No
conclusion has been reached as of November 13, 1998.  At this time, there is no
assurance that the property will be converted, nor is there any assurance that a
refinancing of the mortgage loan will occur.

                      Country Place I and Country Place II
                      ------------------------------------

     On May 5, 1997, the local managing general partner of Blackburn Limited
Partnership (Country Place I) and Second Blackburn Limited Partnership (Country
Place II) and the Managing General Partner submitted an application to refinance
the first mortgage loans of the Local Partnerships.  On July 18, 1997, the

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

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)

2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

Partnership and the lender signed a loan commitment and the Partnership paid
loan commitment fees of $74,250 and $45,000 for Country Place I and Country
Place II, respectively.  On August 1, 1997, the local managing general partner
closed on the refinancing loans.  In connection with the refinancings, on August
4, 1997, the Partnership received $1,889,909 and $609,428 related to Country
Place I and Country Place II, respectively.  Additionally, on August 14, 1997,
the Partnership received $471,106 and $159,211 which related to the release of
funds held in escrow for Country Place I and Country Place II, respectively. 
The refinancing proceeds received by the Partnership during and subsequent to
closing exceeded the Partnership's remaining investments in the respective Local
Partnerships by approximately $3.1 million, and are included in share of income
from partnerships during the third quarter of 1997 in the statements of
operations.

                                   Deer Grove
                                   ----------

     On March 18, 1997, the local managing general partner of Palatine-
Barrington Associates Limited Partnership (Deer Grove) sold the property, a 448-
unit apartment complex located in Palatine, Illinois.  The sale of the property
generated cash proceeds to the Partnership of $3.4 million at closing.  The sale
resulted in a net financial statement gain in 1997 of approximately $3.4
million.  The federal tax gain was approximately $17.8 million.

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

     The Managing General Partner of Four Winds West Company Limited (Four Winds
West) is currently negotiating with the noteholders to extend the maturity date
of a purchase money note related to this Local Partnership.  The purchase money
note in the aggregate principal amount of $462,178 is currently due to mature on
January 1, 1999.  There is no assurance that a final agreement for an extension
will be obtained.

                              Frenchman's Wharf II
                              --------------------

     The Partnership defaulted on its purchase money notes related to
Frenchman's Wharf Associates II Limited Partnership (Frenchman's Wharf II) on
June 1, 1998 when the notes matured and were not paid.  The default included
principal and accrued interest of $3,150,000 and $5,071,731, respectively.  The
purchase money notes, initially due to mature on June 1, 1988, were extended to
mature on June 1, 1998.  As of November 13, 1998, principal and accrued interest
totaling $3,150,000 and $5,221,722, respectively, were due.  In conjunction with
the four-year workout agreement for the Local Partnership's mortgage loan, the
Partnership is currently negotiating with the noteholders to extend the notes to
be coterminous with the workout arrangement, which is scheduled to expire on May
31, 2000.  As of November 13, 1998, the noteholders had not consented to an
extension agreement and there is no assurance that any agreement will be reached
with the noteholders.  There is no assurance that the Partnership will be able
to retain its interest in Frenchman's Wharf II.  The uncertainty regarding the
continued ownership of the Partnership's interest in Frenchman's Wharf II does
not impact the Partnership's financial condition, as discussed above.



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

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)

2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

     The report of the auditors on the financial statements of Frenchman's Wharf
II for the year ended December 31, 1997 indicated that substantial doubt exists
about the ability of the Local Partnership to continue as a going concern due to
the Local Partnership's default on its mortgage and the expiration of its
Section 8 Rental Housing Assistance Payments (HAP) contract with HUD on November
30, 1998.  The uncertainty about the Local Partnership's continued ownership of
the property does not impact the Partnership's financial condition, as discussed
above.

                           Posada Vallarta Apartments
                           --------------------------

     The Managing General Partner and the local managing general partner of
Posada Associates Limited Partnership (Posada Vallarta Apartments) refinanced
the property's mortgage loan on May 26, 1998.  This refinancing resulted in a
discounted payoff of the Local Partnership's former mortgage, which will result
in cancellation of indebtedness income for the
Partnership's 1998 tax year.  In connection with such refinancing, the
Partnership advanced the Local Partnership $450,000 for application and rate
lock fees.  As of November 13, 1998, $300,000 of the advances had been repaid to
the Partnership.

                                    Princeton
                                    ---------

     The Managing General Partner is currently negotiating with the noteholders
to extend the maturity date of a purchase money note related to Princeton
Community Village Associates (Princeton).  The purchase money note, in the
aggregate principal amount of $500,000, is currently due to mature on January l,
1999.  During September 1998, Managing General Partner received an offer from a
third party to purchase its partnership interest in the related Local
Partnership.  The offer is currently being reviewed.  There is no assurance
either that the purchase offer will be accepted or that a final agreement for an
extension of the purchase money note will be obtained. 

            Rolling Green at Fall River and Rolling Green at Amherst
            --------------------------------------------------------

     The Partnership defaulted on its purchase money notes relating to Roberts
Fall River Associates (Rolling Green at Fall River) and Roberts Amherst
Associates (Rolling Green at Amherst) on August 31, 1998 when the notes matured
and were not paid.  The default amount included principal and accrued interest
of $4,600,000 and $8,750,764, respectively, for Rolling Green at Fall River and
$1,927,500 and $2,661,561, respectively, for Rolling Green at Amherst.  The
Managing General Partner and the trustees representing the noteholders agreed to
extend the maturity dates of the purchase money notes to February 28, 2001,
subject to a further extension to August 31, 2003 if the Local Partnerships
complete a refinancing of their mortgage loans, which has occurred in the case
of Rolling Green at Amherst.  However, the noteholders have the right to
accelerate the maturity of the notes upon not less than one year's prior notice.
Accordingly, the purchase money notes for Rolling Green at Fall River and
Rolling Green at Amherst presently mature on February 28, 2001 and August 31,
2003, respectively, subject to the respective noteholder's right to accelerate
the maturity.  As part of the agreement, the Partnership agreed that all loans
proceeds payable to the Partnership by the respective Local Partnerships, as

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

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)

2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

well as all net cash flow payable to the Partnership from the respective Local
Partnerships in excess of $10,000 per year, shall be applied to the balance of
the respective purchase money note.  The Partnership further agreed to waive
certain rights granted in the respective Local Partnerships' limited partnership
agreements.

                                  Tanglewood II
                                  -------------

     On February 19, 1997, Tanglewood II, a 192-unit apartment complex located
in Westwego, Louisiana was sold.  The sale of the property generated sufficient
proceeds to the Partnership to retire, at a discount, the Partnership's purchase
money note obligation with respect to the
property.  The sale resulted in a net financial statement gain in 1997 of
approximately $3.2 million, of which approximately $1.7 million resulted from
the retirement of the purchase money note obligation with respect to the
property.  The federal tax gain was approximately $4.9 million.

                                   Troy Manor
                                   ----------

     Purchase money notes in the aggregate principal amount of $378,000 related
to the Partnership's investment in Troy Apartments Limited (Troy Manor) mature
on January 1, 1999.  The Managing General Partner anticipates negotiating an
extension of the maturity date with the noteholders.

                                    Westgate
                                    --------

     The Partnership defaulted on its purchase money note relating to Westgate
Tower Limited Dividend Housing Associates (Westgate) on September 1, 1998 when
the note matured and was not paid.  The default included principal and accrued
interest of $1,450,000 and $1,957,500, respectively.  As of November 13, 1998,
principal and accrued interest of $1,450,000 and $1,981,098, respectively were
due.  The noteholders have accepted the Managing General Partner's request for a
five year extension with respect to this purchase money note.  As of November
13, 1998, the parties are working toward formalizing the extension.  There is no
assurance that the parties will agree on the final form of the documentation. 
Accordingly, there can be no assurance that the Partnership will be able to
retain its interest in the Local Partnership.  The uncertainty about the
continued ownership of the Partnership's interest in the related Local
Partnership does not impact the Partnership's financial condition, as discussed
above.

                                  Wexford Ridge
                                  -------------

     The Partnership defaulted on its three purchase money notes relating to
Wexford Ridge Associates (Wexford Ridge) on December 31, 1997 when the notes
matured and were not paid.  The aggregate default amount included principal and
accrued interest of $1,900,000 and $3,478,549, respectively.  The Managing
General Partner successfully negotiated an extension on one of the purchase
money notes (First Wexford Note) in the principal amount of $950,000 effective
April 9, 1998.  In connection with the extension agreement, the Partnership made
interest payments to the noteholder.  Under the terms of the extension

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

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)

2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

agreement, the maturity date is January 5, 2001.  Additionally, the Partnership
has the right and option, but not the obligation, to extend the maturity date to
January 5, 2002 by making an additional payment to the noteholder on or before
January 5, 2000.  Such payment shall be applied to accrued interest.  The
Partnership, if it exercises this option to further extend the maturity date,
shall thereafter have the option to purchase the purchase money note if it gives
notice of such exercise by January 5, 2001.

     On April 7, 1998, the Partnership was served with a complaint by the holder
of the second and third purchase money notes (collectively, Second and Third
Wexford Notes) filing suit against the Partnership, the Managing General Partner
and C.R.H.C., Incorporated (CRHC), an affiliate of the Managing General Partner,
for damages and seeking foreclosure on the Partnership's interest in the Local
Partnership.  On July 29, 1998, the parties agreed to a settlement which
involves a discounted payoff to the holder of the Second and Third Wexford
Notes, subject to the Partnership's satisfaction with the results of its due
diligence.  On October 5, 1998, pursuant to such settlement agreement, the
Partnership paid the holders of the Second and Third Wexford Notes a discounted
amount in full settlement of the Second and Third Wexford Notes and the lawsuit.
In connection with this settlement, the local general partner withdrew from the
Local Partnership assigning his interest (which was converted to a limited
partner interest) in the Local Partnership to the Partnership, and the property
management agent, which is an affiliate of the local general partner, agreed to
a termination of the property management agreement effective April 1, 1999. 
CRHC is the sole remaining general partner of the Local Partnership.  Further,
the Partnership received the interests of the local general partner, the holder
of the Second and Third Wexford Notes, and their respective affiliates in the
First Wexford Note, which is approximately 4.85%.

     The Managing General Partner and CRHC are exploring various options to
refinance the U. S. Department of Housing and Urban Development (HUD) Section
236 interest rate subsidized mortgage loan related to Wexford Ridge. 
Additionally, the Managing General Partner commissioned a rental market study
and is evaluating the feasibility of converting the property to market-rate.  No
conclusion has been reached as of November 13, 1998.  At this time, there is no
assurance that the property will be converted, nor is there any assurance that a
refinancing of the mortgage loan will occur.

                           Combined Local Partnerships
                           ---------------------------

     The following are combined statements of operations for the 20 Local
Partnerships in which the Partnership is invested as of both September 30, 1998
and 1997.  The 1997 results include Tanglewood II and Deer Grove through the
respective dates of sale.  The statements have been compiled from information
supplied by the management agents of the projects and are unaudited.










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

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)

2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

                         COMBINED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                              For the three months ended         For the nine months ended
                                                                     September 30,                      September 30,
                                                             -----------------------------     -----------------------------
                                                                 1998             1997             1998             1997
                                                             ------------     ------------     ------------     ------------
<S>                                                          <C>              <C>              <C>              <C>
Revenue:
  Rental revenue                                             $  6,058,020     $  5,950,900     $ 18,857,383     $ 19,545,622
  Other                                                           311,679          306,968          916,673          954,510
                                                             ------------     ------------     ------------     ------------
                                                                6,369,699        6,257,868       19,774,056       20,500,132
                                                             ------------     ------------     ------------     ------------

Expenses:
  Operating                                                     4,032,865        4,309,183       12,513,478       13,577,085
  Interest                                                      1,752,413        1,626,397        5,257,248        5,319,965
  Depreciation and amortization                                 1,241,975        1,206,744        3,725,932        3,786,008
                                                             ------------     ------------     ------------     ------------
                                                                7,027,253        7,142,324       21,496,658       22,683,058
                                                             ------------     ------------     ------------     ------------
Net loss                                                     $   (657,554)    $   (884,456)    $ (1,722,602)    $(2,182,926)
                                                             ============     ============     ============     ============

</TABLE>

     As of September 30, 1998 and December 31, 1997, the Partnership's share of
cumulative losses to date for 12 of the 20 Local Partnerships exceeded the
amount of the Partnership's investments in and advances to those Local
Partnerships by $25,105,297 and $23,324,214, 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.


3.   AFFORDABLE HOUSING LEGISLATION

     President Clinton signed the Fiscal Year 1998 HUD appropriations bill into
law, effective October 1, 1997.  The legislation allowed all Section 8 HAP
contracts with rents at less than 120% of fair market rents which expire between
October 1997 and September 1998 to be renewed for one year.  In the event that
these rents exceed 120% of fair market rents, these rents will be reduced to
120% of fair market rents.  At the beginning of Fiscal Year 1999 (October 1,
1998), all expiring contracts with rents exceeding comparable market rents and
whose mortgages are insured by the Federal Housing Administration (FHA) will be
subject to the Mark-to-Market legislation.

     Mark-to-Market implementation will reduce rental income at properties which
are currently subsidized at higher-than-market rental rates, and will therefore
lower cash flow available to meet mortgage payments and operating expenses. 
Each affected property will undergo debt restructuring according to terms

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

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)

3.   AFFORDABLE HOUSING LEGISLATION - Continued

determined by an individual property and operations evaluation.  This will
involve reducing the first mortgage loan balance to an amount supportable by the
property, taking into account the property's operating expenses and reduced
income.  The balance of the amount written down from the first mortgage will be
converted to a non-performing but accruing (soft) second mortgage.

     The Section 8 HAP contracts for the following properties expired during the
government's Fiscal Year 1998 and have been renewed as indicated.
















































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

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)

3.   AFFORDABLE HOUSING LEGISLATION - Continued

<TABLE>
<CAPTION>
                                              Units Authorized for           Original                    Renewed
                               Number of     Rental Assistance Under   Expiration of Section 8     Expiration of Section 8
Property                      Rental Units        Section 8                 HAP Contract                HAP Contract
--------                      ------------   -----------------------   -----------------------     -----------------------
<S>                           <C>            <C>                       <C>                         <C>
Beech Hill I                      200                   39                   08/31/98 (1)               02/28/99
Beech Hill II                     120                   24                   08/31/98 (1)               02/28/99
Chevy Chase Park                  232                  228                   03/23/98                   09/22/99
Four Winds West                    62                   62                   04/14/98                   10/14/99
Princeton Community Village       239                   26                   07/01/98                   10/01/99
Wexford Ridge                     246                  242                   09/30/98                   11/30/99

</TABLE>

     (1)  As discussed previously, the Partnership's interests in these Local
          Partnerships are being held in escrow to be transferred to the
          noteholders, at their election, due to non-payment on the related
          purchase money notes.

     The Section 8 HAP contracts for the following properties will expire
during the Government's fiscal year 1999.

<TABLE>
<CAPTION>

                                                                                                         Estimated
                                              Units Authorized for           Original                     Renewed
                               Number of     Rental Assistance Under   Expiration of Section 8     Expiration of Section 8
Property                      Rental Units        Section 8                 HAP Contract                HAP Contract
--------                      ------------   -----------------------   -----------------------     -----------------------
<S>                           <C>            <C>                       <C>                         <C>
Frenchman's
  Wharf II                        324                    31                  11/30/98                   11/30/99

</TABLE>

     With the uncertainty of continued project-based Section 8 subsidies for
properties with expiring HAP contracts, there is no assurance that these rental
properties will be able to maintain the rental income and occupancy levels
necessary to pay operating costs and debt service.  It is difficult to predict
the impact on the Local Partnerships and the resulting impact on the Partnership
at this time.


4.   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 managing the Partnership.  The Partnership paid $47,329 and $154,357 for the
three and nine months ended September 30, 1998, respectively and $42,841 and
$115,194 for the three and nine months ended September 30, 1997, respectively,
as direct reimbursement of expenses incurred on behalf of the Partnership.  Such
expenses are included in the accompanying statements of operations as general

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

                          NOTES TO FINANCIAL STATEMENTS

                                   (Unaudited)

4.   RELATED-PARTY TRANSACTION - Continued

and administrative expenses.  Additionally, in accordance with the terms of the
Partnership Agreement, the Partnership is obligated to pay the Managing General
Partner an annual incentive management fee (the Management Fee) after all other
expenses of the Partnership are paid.  The Partnership paid the Managing General
Partner a Management Fee of $62,499 and $187,497 for the three and nine months
ended September 30, 1998, respectively, and like amounts for the three and nine
months ended September 30, 1997.

     The Managing General Partner and/or its affiliates may receive a fee of not
more than 2% of the sales price of an investment in a Local Partnership or the
property it owns, payable under certain conditions upon the sale of an
investment in a Local Partnership or the property it owns.  The payment of the
fee is subject to certain restrictions, including the achievement of a certain
level of sales proceeds and making certain minimum distributions to limited
partners.  The Managing General Partner and/or its affiliates earned net fees
for services relating to the refinancing of Moorings of $331,073 on May 7, 1998.
On August 7, 1998, the Partnership paid these fees. 







































                                      -16-
<PAGE>
PART I.   FINANCIAL INFORMATION
          ---------------------
ITEM 2.   MANAGEMENT'S DISCUSSION AND 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 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, terms of
governmental regulations that affect the Partnership and interpretations of
those regulations, the competitive environment in which the Partnership
operates, and the availability of working capital.

                                     General
                                     -------

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

     Some of the rental properties owned by the Local Partnerships are dependent
on the receipt of project-based rental Housing Assistance Payments (HAP)
provided by the U.S. Department of Housing and Urban Development (HUD) pursuant
to Section 8 HAP contracts.  President Clinton signed the Fiscal Year 1998 HUD
appropriations bill into law, effective October 1, 1997.  The legislation
allowed all Section 8 contracts with rents at less than 120% of fair market
rents which expire between October 1997 and September 1998 to be renewed for one
year.  In the event that these rents exceed 120% of fair market rents, these
rents will be reduced to 120% of fair market rents.  At the beginning of Fiscal
Year 1999 (October 1, 1998), all expiring contracts with rents exceeding
comparable market rents and whose mortgages are insured by the Federal Housing
Administration (FHA) are subject to the Mark-to-Market legislation.

     Mark-to-Market implementation will reduce rental income at properties which
are currently subsidized at higher-than-market rental rates, and will therefore
lower cash flow available to meet mortgage payments and operating expenses. 
Each affected property will undergo debt restructuring according to terms
determined by an individual property and operations evaluation.  This will
involve reducing the first mortgage loan balance to an amount supportable by the
property, taking into account the property's operating expenses and reduced
income.  The balance of the amount written down from the first mortgage will be
converted to a non-performing but accruing (soft) second mortgage.
     Under current law, the write down of an FHA-insured mortgage under Mark-to
Market would trigger cancellation of debt income to the partners, a taxable
event, even though no actual cash is received.  The newly created second
mortgage will accrue interest at a rate below market; however, the Internal
Revenue Service issued a ruling in July 1998 that the below market rate of
interest will not generate additional ordinary income.  Each property subject to
Mark-to-Market will be affected in a different manner, and it is very difficult

                                      -17-
<PAGE>
PART I.   FINANCIAL INFORMATION
          ---------------------
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

to predict the exact form of restructuring or potential tax liabilities to the
additional limited partners at this time.

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

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

     The Partnership's liquidity, with unrestricted cash resources of
$12,991,892 (or approximately $252.04 per Additional Limited Partner unit) and
$7,969,815 (or approximately $154.61 per Additional Limited Partner unit) as of
September 30, 1998 and December 31, 1997, respectively, along with anticipated
future cash distributions from the Local Partnerships, are expected to meet its
current and anticipated operating cash needs.  However, see the discussion below
regarding the upcoming maturity of many of the Partnership's purchase money
notes.  

     The Partnership's obligations with respect to its investments in Local
Partnerships, in the form of purchase money notes having a principal balance of
$18,597,678 (exclusive of unamortized discount on purchase money notes of
$372,016) plus accrued interest of $31,629,153 as of September 30, 1998, are
payable in full upon the earliest of:  (1) sale or refinancing of the respective
Local Partnership's rental property; (2) payment in full of the respective Local
Partnership's permanent loan; or (3) maturity.  Purchase money notes in an
aggregate principal amount of $1,050,000 matured on December 31, 1996, and have
been extended to January 2, 2000, as discussed below.  Purchase money notes in
the aggregate principal amount of $1,050,000 and $950,000 matured on December
31, 1996 and December 31, 1997, respectively, and were paid off on October 5,
1998, as discussed below.  Purchase money notes in the aggregate principal
amount of $950,000 matured on December 31, 1997 and were extended to January 5,
2001, as discussed below.  Purchase money notes in the aggregate principal
amount of $2,380,000 and $3,150,000 matured on January 1, 1998 and June 1, 1998,
respectively, and have not been paid or extended, as discussed below.  Purchase
money notes in the aggregate principal amount of $4,600,000 and $1,927,500
matured on August 31, 1998 and have been extended to February 28, 2001 and
August 31, 2003, respectively, as discussed below.  Purchase money notes in the
aggregate principal amount of $1,450,000 matured on September 1, 1998, and the
Managing General Partner is currently formalizing an agreement to extend these
notes until September 1, 2003, as discussed below.  Purchase money notes in the
aggregate principal amount of $1,314,868 mature on January 1, 1999, as discussed
below.  See the notes to the financial statements for additional information
pertaining to these purchase money notes.

     The purchase money notes, which are nonrecourse to the Partnership, are
generally secured by the Partnership's interest in the respective Local
Partnerships.  There is no assurance that the underlying properties will have
sufficient appreciation and equity to enable the Partnership to pay the purchase

                                      -18-
<PAGE>
PART I.   FINANCIAL INFORMATION
          ---------------------
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

money notes' principal and accrued interest when due.  If a purchase money note
is not paid in accordance with its terms, the Partnership will either have to
renegotiate the terms of repayment or risk losing its partnership interest in
the Local Partnership.   The Partnership's inability to pay certain of the
purchase money note principal and accrued interest balances when due, and the
resulting uncertainty regarding the Partnership's continued ownership interest
in the related Local Partnerships, does not impact the Partnership's financial
condition because the purchase money notes are nonrecourse and secured solely by
the Partnership's interest in the related Local Partnerships.  Therefore, should
the investment in any of the Local Partnerships with maturing purchase money
notes not produce sufficient value to satisfy the related purchase money notes,
the Partnership's exposure to loss is limited because the amount of the
nonrecourse indebtedness of each of the maturing purchase money notes exceeds
the carrying amount of the investment in and advances to each of the related
Local Partnerships.  Thus, even a complete loss of one of these Local
Partnerships would not have a material impact on the financial condition of the
Partnership.  See further discussion of certain purchase money notes in the
notes to the financial statements.

     The Managing General Partner is continuing to investigate possible
alternatives to reduce the Partnership's debt obligations.  These alternatives
include, among others, retaining the cash available for distribution to meet the
purchase money note requirements, buying out certain purchase money notes at a
discounted price, extending the due dates of certain purchase money notes, or
refinancing the respective properties' underlying debt and using the
Partnership's share of the proceeds to pay or buy down certain purchase money
note obligations.  See the notes to the financial statements for alternatives
relating to specific properties. 

     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 months ended September 30, 1998 and 1997, the receipt of
distributions from Local Partnerships were adequate to support operating cash
requirements.

     The Managing General Partner plans to distribute $500,000 (or $10 per
Additional Limited Partner Unit) to the Additional Limited Partners from
proceeds generated from the refinancing of Arrowhead and Moorings mortgage loans
by November 30, 1998 to the holders of record as of September 30, 1998.  The
Managing General Partner intends to retain all of the Partnership's remaining
undistributed proceeds for the possible repayment, prepayment or retirement of
the Partnership's outstanding purchase money notes related to other Local
Partnerships. 

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

     The Partnership recognized a net loss for the three months ended September
30, 1998 as opposed to net income during the corresponding period in 1997
primarily due to the receipt in 1997 of refinancing proceeds from Country Place
I and Country Place II which were in excess of the Partnership's investment in
the respective Local Partnerships.  Partially offsetting the Partnership's net
loss was a decrease in interest expense due to a decrease in amortization of
imputed interest, and an increase in interest income due to higher cash and cash
equivalent balances.


                                      -19-
<PAGE>
PART I.   FINANCIAL INFORMATION
          ---------------------
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

     The Partnership's net income for the nine months ended September 30, 1998
decreased from the corresponding period in 1997 primarily due to gain on
disposition of investments in partnerships and an extraordinary gain from
extinguishment of debt related to the Tanglewood II and Deer Grove sales in
1997.  Partially offsetting the decrease in the Partnership's net income was an
increase in share of income from partnerships primarily due to the receipt of
proceeds from the refinancing of the first mortgages of Arrowhead and Moorings
during the second quarter of 1998, an increase in interest income due to higher
cash and cash equivalent balances, and a decrease in interest expense, as
discussed above.  Also offsetting the decrease in the Partnership's net income
was a decrease in professional fees due to legal costs incurred for litigation
involving Arrowhead and Moorings in 1997.

     For financial reporting purposes, the Partnership, as a limited partner in
the Local Partnerships, does not record losses from the Local Partnerships in
excess of its investment to the extent that the Partnership has no further
obligation to advance funds or provide financing to the Local Partnerships.  As
a result, the Partnership's recognized losses for the three and nine months
ended September 30, 1998 did not include losses of $593,694 and $1,781,083,
respectively, compared to excluded losses of $668,957 and $2,263,290, for the
three and nine months ended September 30, 1997, respectively.

     No other significant changes in the Partnership's operations have taken
place during this period.

                            Year 2000 Computer Issue
                            ------------------------

     The Year 2000 ("Y2K") computer issue refers to the inability of many
computer systems in use today to recognize "00" in the date field as the year
2000 and to recognize the year 2000 as a leap year.  The Y2K problem arose
because, for many years, computer software programs, including programs embedded
in hardware, utilized only the last two digits to specify the year with the
assumption that the first two digits were "19."  As a result, such programs may
not be able to recognize and process dates beyond 1999; rather they may
recognize and process "00," "01," "02,", etc., incorrectly as 1900, 1901, 1902,
instead of as 2000, 2001, 2002.  In the opinion of computer experts, this could
cause such programs to create erroneous results, malfunction, or fail completely
unless corrective measures are taken.

     The Partnership utilizes software and related computer technologies
essential to its operations that will be affected by the Y2K issue.  To address
the issue, the Managing General Partner has developed and is currently
implementing a plan (the "Y2K Project") designed to ensure that the Y2K date
change will not have an adverse impact on the Partnership's operations.  The Y2K
Project is on schedule and the Managing General Partner expects completion by
the end of 1999.

     The Y2K Project consists of four phases -- Planning, Assessment,
Implementation and Testing.  The Planning Phase began early in 1998 and is
substantially complete.  Under the Planning Phase, the Managing General Partner
conducted an inventory of all internal hardware and software systems, data
interfaces, business operations and non-information technology functions which
may be susceptible to the Y2K issue.  The Managing General Partner expects final
completion of this phase by November 30, 1998.  The Assessment Phase is
currently underway.  Under the Assessment Phase, all applications and functions

                                      -20-
<PAGE>
PART I.   FINANCIAL INFORMATION
          ---------------------
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

identified in the Planning Phase are being analyzed to determine Y2K compliance
and the materiality of each identified risk is being determined.  In the event
of noncompliance, for a material risk, timetables for corrective action, as well
as estimated costs to achieve compliance, are being determined.  Completion of
this phase is expected by December 31, 1998.  The Implementation Phase is also
underway.  Renovation and replacement of existing internal hardware and software
systems has begun and completion is expected by June 1999.  Additionally, the
Managing General Partner is currently working with third party vendors  and
service providers to verify their Y2K compliance.  Final completion of this
phase is expected by June 1999.  The Testing Phase, which will include testing
of internal applications as well as third party systems, is expected to begin
during January 1999 and continue throughout 1999.  Contingency planning is
scheduled to commence during the fourth quarter 1998 and be completed by year-
end 1999.  Although the expense associated with the Y2K Project cannot presently
be determined, the Managing General Partner does not expect it to be material.










































                                      -21-
<PAGE>
PART II.  OTHER INFORMATION
          -----------------
ITEM 3.   DEFAULTS UPON SENIOR SECURITIES
          -------------------------------

                               Beech Hill I and II
                               -------------------

     The Partnership defaulted on its purchase money notes aggregating
$2,380,000 related to Beech Hill Development Co. (Beech Hill I) and Beech Hill
Development Co. II (Beech Hill II) on August 1, 1995 when the notes matured and
were not paid.  On March 29, 1996, the noteholders agreed to extend the purchase
money note due dates to January 1, 1998.  Under the agreement, the Partnership
pays the noteholders of Beech Hill I and Beech Hill II all annual cash flow
distributions received from the related Local Partnerships in excess of $5,000
and $2,500, respectively.  There were no annual cash flow distributions made to
the Partnership from the related Local Partnerships during the three and nine
months ended September 30, 1998 and 1997.

     Under the extension agreement, documents transferring the Partnership's
interests in Beech Hill I and Beech Hill II to the noteholders were placed in
escrow to be released to the noteholders upon a future default by the
Partnership on the respective purchase money notes.  On January 1, 1998, the
Partnership defaulted on its purchase money notes related to Beech Hill I and
Beech Hill II when the notes, as extended, matured and were not paid.  The
default amount included principal and accrued interest of $1,480,000 and
$1,687,578, respectively, for Beech Hill I and $900,000 and $1,072,113,
respectively, for Beech Hill II.  As of November 13, 1998, the Partnership's
interests in Beech Hill I and Beech Hill II have not been transferred to the
noteholders, and the transfer documents remain in escrow.  As of November 13,
1998, principal and accrued interest totaling $1,480,000 and $1,800,707,
respectively, related to Beech Hill I and $900,000 and $1,140,908, respectively,
related to Beech Hill II were due.

     Due to the impending likely transfer of the Partnership's interest in the
Local Partnerships to the noteholders, the Partnership's bases in these Local
Partnerships as of September 30, 1998, which were $517,673 and $404,241 for
Beech Hill I and Beech Hill II, respectively, were classified as partnership
interests held in escrow in the accompanying financial statements.

     The purchase money notes related to Beech Hill I and Beech Hill II are
nonrecourse and secured solely by the Partnership's interests in the related
Local Partnerships.  The release of the Partnership's purchase money note
obligations as a result of the impending likely loss of ownership interest in
the Local Partnerships will result in a net financial statement gain of
approximately $2.8 million and $1.7 million for Beech Hill I and Beech Hill II,
respectively, when taken out of escrow.  The federal tax gains are estimated to
be approximately $4.7 million and $3.0 million for Beech Hill I and Beech Hill
II, respectively.


                              Frenchman's Wharf II
                              --------------------

     The Partnership defaulted on its purchase money notes related to
Frenchman's Wharf Associates II Limited Partnership (Frenchman's Wharf II) on
June 1, 1998 when the notes matured and were not paid.  The default included
principal and accrued interest of $3,150,000 and $5,071,731, respectively.  The
purchase money notes, initially due to mature on June 1, 1988, were extended to
mature on June 1, 1998.  As of November 13, 1998, principal and accrued interest
totaling $3,150,000 and $5,221,722, respectively, were due.  In conjunction with
the four-year workout agreement for the Local Partnership's mortgage loan, the
Partnership is currently negotiating with the noteholders to extend the notes to

                                      -22-
<PAGE>
PART II.  OTHER INFORMATION
          -----------------
ITEM 3.   DEFAULTS UPON SENIOR SECURITIES - Continued
          -------------------------------

be coterminous with the workout arrangement, which is scheduled to expire on May
31, 2000.  As of November 13, 1998, the noteholders had not consented to an
extension agreement and there is no assurance that any agreement will be reached
with the noteholders.  There is no assurance that the Partnership will be able
to retain its interest in Frenchman's Wharf II.  The uncertainty regarding the
continued ownership of the Partnership's interest in Frenchman's Wharf II does
not impact the Partnership's financial condition, as discussed above.

     The report of the auditors on the financial statements of Frenchman's Wharf
II for the year ended December 31, 1997 indicated that substantial doubt exists
about the ability of the Local Partnership to continue as a going concern due to
the Local Partnership's default on its mortgage and the expiration of its
Section 8 Rental Housing Assistance Payments (HAP) contract with HUD on November
30, 1998.  The uncertainty about the Local Partnership's continued ownership of
the property does not impact the Partnership's financial condition, as discussed
above.

                                    Westgate
                                    --------

     The Partnership defaulted on its purchase money note relating to Westgate
Tower Limited Dividend Housing Associates (Westgate) on September 1, 1998 when
the note matured and was not paid.  The default included principal and accrued
interest of $1,450,000 and $1,957,500, respectively.  As of November 13, 1998,
principal and accrued interest of $1,450,000 and $1,981,098, respectively were
due.  The noteholders have accepted the Managing General Partner's request for a
five year extension with respect to this purchase money note.  As of November
13, 1998, the parties are working toward formalizing the extension.  There is no
assurance that the parties will agree on the final form of the documentation. 
Accordingly, there can be no assurance that the Partnership will be able to
retain its interest in the Local Partnership.  The uncertainty about the
continued ownership of the Partnership's interest in the related Local
Partnership does not impact the Partnership's financial condition, as discussed
above.


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K
          --------------------------------

     a.   None

     b.   No Reports on Form 8-K were filed with the Commission during the
          quarter ended September 30, 1998.

     All other items are not applicable.














                                      -23-
<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 13, 1998            by: /s/ Michael J. Tuszka
-----------------                ---------------------------------------
DATE                             Michael J. Tuszka
                                   Vice President
                                   and Chief Accounting Officer
                                   (Principal Financial Officer
                                   and Principal Accounting Officer)







































                                      -24-
<PAGE>


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


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

27        Financial Data Schedule         Filed herewith electronically






















































                                      -25-