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





                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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



                                   FORM 10-QSB


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



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


                For the quarterly period ended September 30, 2000

                                       OR

          |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

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



                         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

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





Indicate by check mark whether the registrant (1) has filed all reports required
to be  filed by  Section  13 or 15(d) of the  Exchange  Act of 1934  during  the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports) and (2) has been subject to such filing  requirements  for
the past 90 days.
Yes  |X|          No  |_|

The total number of shares of the  registrant's  Common  Stock,  outstanding  on
September 30, 2000, is not applicable.



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



                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                              INDEX TO FORM 10-QSB

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2000



                                                                           PAGE

PART I.    FINANCIAL INFORMATION

Item 1.    Financial Statements

           Balance Sheets
               - September 30, 2000 and December 31, 1999 ..................  1

           Statements of Operations and Accumulated Losses
               - for the three and nine months ended
                 September 30, 2000 and 1999................................. 2

           Statements of Cash Flows
               - for the nine months ended September 30, 2000
                 and 1999.................................................... 3

           Notes to Financial Statements
               - September 30, 2000 and 1999................................  4

Item 2.    Management's Discussion and Analysis
               of Financial Condition and Results of Operations............  18


PART II.   OTHER INFORMATION

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

Item 5.    Other Information...............................................  22

Item 6.    Exhibits and Reports on Form 8-K................................  22

Signature         .........................................................  23

Exhibit Index     .........................................................  24



<PAGE>


PART I.           FINANCIAL INFORMATION
Item 1.           Financial Statements


                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                                 BALANCE SHEETS


                                     ASSETS


<TABLE>
<CAPTION>
                                                            September 30,    December 31,
                                                                2000            1999
                                                            ------------    ------------
                                                             (Unaudited)
<S>                                                         <C>             <C>
Investments in and advances to partnerships .............   $    897,877    $    966,378
Investment in partnership held for sale .................         23,362            --
Cash and cash equivalents ...............................      7,781,601       8,936,520
Acquisition fees, principally paid to related
  parties, net of accumulated amortization of
  $299,436 and $408,934, respectively ...................        230,302         348,795
Property purchase costs, net of accumulated
  amortization of $244,343 and $280,099,
  respectively ..........................................        198,909         252,283
Other assets ............................................          2,547            --
                                                            ------------    ------------

     Total assets .......................................   $  9,134,598    $ 10,503,976
                                                            ============    ============




                        LIABILITIES AND PARTNERS' DEFICIT



Due on investments in partnerships ......................   $  4,920,000    $  7,348,747
Accrued interest payable ................................      9,142,874      22,374,877
Distribution payable ....................................      1,497,450       1,622,237
Accounts payable and accrued expenses ...................         99,822         127,692
                                                            ------------    ------------

     Total liabilities ..................................     15,660,146      31,473,553
                                                            ------------    ------------


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 ...............     (7,569,859)     (6,072,409)
    Offering costs ......................................     (5,278,980)     (5,278,980)
    Accumulated losses ..................................    (43,693,709)    (59,635,188)
                                                            ------------    ------------

      Total partners' deficit ...........................     (6,525,548)    (20,969,577)
                                                            ------------    ------------

      Total liabilities and partners' deficit ...........   $  9,134,598    $ 10,503,976
                                                            ============    ============
</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,
                                                     -----------------------------   -----------------------------
                                                         2000              1999          2000            1999
                                                     ------------    ------------    ------------    ------------

<S>                                                  <C>             <C>             <C>             <C>
Share of income (loss) from partnerships .........   $    125,867    $   (309,832)   $    795,528    $  1,860,598
                                                     ------------    ------------    ------------    ------------

Other revenue and expenses:

  Revenue:
    Interest and other income ....................        119,598          83,842         343,444         273,079
                                                     ------------    ------------    ------------    ------------

  Expenses:
    Interest .....................................        134,166         398,694         640,881       1,251,354
    Management fee ...............................         62,499          62,499         187,497         187,497
    General and administrative ...................         53,617          46,746         165,193         163,601
    Professional fees ............................         22,381          29,249          75,844          60,474
    Amortization of deferred costs ...............          7,832          10,751          26,414          33,639
                                                     ------------    ------------    ------------    ------------

                                                          280,495         547,939       1,095,829       1,696,565
                                                     ------------    ------------    ------------    ------------

      Total other revenue and expenses ...........       (160,897)       (464,097)       (752,385)     (1,423,486)
                                                     ------------    ------------    ------------    ------------

(Loss) income before gain on disposition
  of investments in partnerships .................        (35,030)       (773,929)         43,143         437,112

Gain on disposition of investments in partnerships           --              --         5,879,778            --
                                                     ------------    ------------    ------------    ------------

(Loss) income before extraordinary gain
  from extinguishment of debt ....................        (35,030)       (773,929)      5,922,921         437,112

Extraordinary (loss) gain
  from extinguishment of debt ....................        (56,201)      4,771,567      10,018,558       5,296,561
                                                     ------------    ------------    ------------    ------------

Net (loss) income ................................        (91,231)      3,997,638      15,941,479       5,733,673

Accumulated losses, beginning of period ..........    (43,602,478)    (70,977,652)    (59,635,188)    (72,713,687)
                                                     ------------    ------------    ------------    ------------

Accumulated losses, end of period ................   $(43,693,709)   $(66,980,014)   $(43,693,709)   $(66,980,014)
                                                     ============    ============    ============    ============


Net (loss) income allocated
  to General Partners (1.51%) ....................   $     (1,378)   $     60,364    $    240,716    $     86,578
                                                     ============    ============    ============    ============


Net (loss) income allocated
  to Initial and Special Limited Partners (1.49%)    $     (1,359)   $     59,565    $    237,528    $     85,432
                                                     ============    ============    ============    ============


Net (loss) income allocated
  to Additional Limited Partners (97%) ...........   $    (88,494)   $  3,877,709    $ 15,463,235    $  5,561,663
                                                     ============    ============    ============    ============


Net (loss) income per unit of Additional Limited
  Partner Interest based on 50,000 units
  outstanding ....................................   $      (1.77)   $      77.55    $     309.26    $     111.23
                                                     ============    ============    ============    ============
</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,
                                                                                  ----------------------------
                                                                                      2000            1999
                                                                                  ------------    ------------
<S>                                                                               <C>             <C>
Cash flows from operating activities:
  Net income ..................................................................   $ 15,941,479    $  5,733,673

  Adjustments to reconcile net income to net cash used in operating activities:
    Share of income from partnerships .........................................       (795,528)     (1,860,598)
    Amortization of deferred costs ............................................         26,413          33,639
    Gain on disposition of investments in partnerships ........................     (5,879,778)           --
    Extraordinary gain from extinguishment of debt ............................    (10,018,558)     (5,296,561)

    Changes in assets and liabilities:
      (Increase) decrease in other assets .....................................         (2,547)          3,781
      Increase in accrued interest payable ....................................        640,880       1,251,354
      Payment of purchase money note interest .................................       (231,201)        (25,322)
      (Decrease) increase in accounts payable and accrued expenses ............        (27,870)          5,305
                                                                                  ------------    ------------

        Net cash used in operating activities .................................       (346,710)       (154,729)
                                                                                  ------------    ------------

Cash flows from investing activities:
  Receipt of distributions from partnerships ..................................        864,028       4,224,591
  Proceeds from disposition of investments in partnerships ....................      5,993,661            --
  Advances made to local partnerships .........................................           --          (120,642)
  Collection of advances made to local partnerships ...........................           --           120,642
                                                                                  ------------    ------------

        Net cash provided by investing activities .............................      6,857,689       4,224,591
                                                                                  ------------    ------------

Cash flows from financing activities:
  Payoff of purchase money notes and related interest .........................     (5,993,661)     (1,410,000)
  Payment of purchase money note principal and related interest ...............        (50,000)     (2,843,061)
  Distribution to Additional Limited Partners .................................     (1,622,237)           --
                                                                                  ------------    ------------

        Net cash used in financing activities .................................     (7,665,898)     (4,253,061)
                                                                                  ------------    ------------

Net decrease in cash and cash equivalents .....................................     (1,154,919)       (183,199)

Cash and cash equivalents, beginning of period ................................      8,936,520       7,596,031
                                                                                  ------------    ------------

Cash and cash equivalents, end of period ......................................   $  7,781,601    $  7,412,832
                                                                                  ============    ============



Supplemental disclosure of cash flow information:
  Cash paid during the period for interest ....................................   $  3,976,115    $  4,096,626
                                                                                  ============    ============
</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, 2000 and 1999

                                   (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, 2000,  and the results of its operations for the three and nine
months ended September 30, 2000 and 1999, and its cash flows for the nine months
ended  September 30, 2000 and 1999.  The results of  operations  for the interim
periods ended September 30, 2000, 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
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  accounting  principles  generally  accepted in the
United  States 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, 1999.


2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

a.       DUE ON INVESTMENTS IN PARTNERSHIPS AND ACCRUED INTEREST PAYABLE
         ---------------------------------------------------------------

         The Partnership's  obligations with respect to its investments in Local
Partnerships,  in the form of purchase money notes having an aggregate principal
balance of  $4,920,000  plus  aggregate  accrued  interest of  $9,142,874  as of
September  30,  2000,  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 the principal amounts of $1,050,000 and $950,000 matured
on December  31, 1996 and 1997,  respectively,  and were  extended to January 5,
2001,  but were paid off, at a discount,  on September 30, 1999.  Purchase money
notes in the  aggregate  principal  amount of  $2,380,000  matured on January 1,
1998, and were written off on October 5, 1999 when the related local partnership
interests, held by the Partnership,  were transferred to the noteholders in full
satisfaction  of the purchase  money notes'  principal and accrued  interest.  A
purchase  money note in the principal  amount of  $3,150,000  matured on June 1,
1998,  and has not been paid or extended.  Purchase  money notes in the original
principal  amounts of $4,600,000 and  $1,927,500,  with  maturities  extended to
August 31, 2003, were paid off, at a discount, on May 31, 2000. A purchase money
note in the  original  principal  amount of  $1,450,000  matured on September 1,
1998, was partially  paid, and has been extended to September 1, 2003.  Purchase
money notes in the aggregate  principal amount of $840,178 matured on January 1,
1999 and were paid off, at a discount,  on  February 5, 1999.  A purchase  money
note in the original  principal  amount of $500,000  matured on January 1, 1999,
and was partially  transferred to the noteholder,  with the balance  extended to
January 1, 2004, 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
is

                                       -4-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2000 and 1999

                                   (Unaudited)


2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

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 respective 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  adversely  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 the Partnership's  interest in one of these Local Partnerships would not
have a material adverse impact on the financial condition of the Partnership.

         The following  chart presents  information  related to a purchase money
note which has matured and which remains  unpaid or unextended as of November 7,
2000.  Excluded from the following  chart are purchase money notes which matured
through September 30, 2000, and which have been paid off, cancelled, or extended
on or before November 7, 2000.

<TABLE>
<CAPTION>
                                                                         Aggregate                 Carrying Amount
                                               Aggregate                  Accrued                  of Partnership's
                                               Principal                  Interest                 Investments in
                   Number of                    Balance                   Balance                  and Advances to
   Purchase        Underlying                    as of                     as of                   Underlying Local
  Money Note         Local       Percentage    September    Percentage   September    Percentage   Partnerships as of    Percentage
(PMN) MATURITY    PARTNERSHIPS    OF TOTAL      30, 2000     OF TOTAL     30, 2000     OF TOTAL    SEPTEMBER 30, 2000     OF TOTAL
--------------    ------------   ----------    -----------  ---------    ----------   ----------   ------------------    ----------
<S>               <C>            <C>           <C>          <C>          <C>          <C>          <C>                   <C>
2nd Quarter 1998      1                7%      $3,150,000         64%    $5,880,309        64%        $     --                --%
                   ====            =====       ==========      =====     ==========     =====         ========             =====

Total, Local
  Partnerships        15             100%      $4,920,000        100%    $9,142,874       100%        $897,877               100%
                    ====           =====       ==========      =====     ==========     =====         ========             =====
</TABLE>


         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,  paying off certain purchase money notes at a
discounted  price,  extending  the due dates of certain  purchase  money  notes,
refinancing the respective properties' underlying debt or selling the underlying
real estate and using the Partnership's share of the proceeds to pay or buy down
certain purchase money note  obligations.  Although the Managing General Partner
has had some success applying these strategies in the past, the Managing General
Partner cannot assure that these strategies will be successful in the future. If
the Managing  General  Partner is unable to negotiate an extension or discounted
payoff,  in the event that the purchase money notes remain unpaid upon maturity,
the noteholders may have the right to foreclose on the Partnership's interest in
the related Local Partnerships. In the event of a foreclosure, the excess of the
nonrecourse   indebtedness   over  the  carrying  amount  of  the  Partnership's
investment  in the related Local  Partnership  would be deemed  cancellation  of
indebtedness  income which would be taxable to Limited Partners at a federal tax
rate  of  up  to  39.6%.  Additionally,  in  the  event  of a  foreclosure,  the
Partnership  would lose its investment in the Local  Partnership and,  likewise,
its share of any future cash flow distributed by

                                       -5-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2000 and 1999

                                   (Unaudited)


2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

the Local Partnership from rental operations, mortgage debt refinancings, or the
sale of the real estate.  Of the 15 Local  Partnerships in which the Partnership
is  invested  as of  September  30,  2000,  the one  Local  Partnership  with an
associated  purchase  money note which has matured and which  remains  unpaid or
unextended as of November 7, 2000,  represented none of the Partnership's  total
distributions  received from Local  Partnerships and none of the share of income
from Local Partnerships for the immediately preceding two calendar years.

         The  Managing  General  Partner  continues  to address the maturity and
impending  maturity of its debt  obligations and to seek  strategies  which will
provide the most favorable outcome to the limited partners.  However,  there can
be no assurance that these strategies will be successful.

         Interest expense on the Partnership's purchase money notes was $134,166
and  $640,881 for the three and nine month  periods  ended  September  30, 2000,
respectively,  and $398,694 and  $1,251,354 for the three and nine month periods
ended  September 30, 1999,  respectively.  The accrued  interest  payable on the
purchase money notes of $9,142,874 and  $22,374,877 as of September 30, 2000 and
December 31, 1999, respectively,  is due on the respective maturity dates of the
purchase money notes or earlier,  in some instances,  if (and to the extent of a
portion thereof) the related Local  Partnership has distributable net cash flow,
as defined in the relevant Local Partnership agreements.

                               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 notes' due dates to January 1, 1998. Under the agreement,  the Partnership
paid 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,   to  be  applied  against  the  notes.  Cash  flow
distributions  of $0 and  $30,694  were  paid  directly  by Beech  Hill I to the
purchase  money  noteholders  during the years ended December 31, 1999 and 1998,
respectively.  Cash flow  distributions  of $0 and $29,687 were paid directly by
Beech Hill II to the purchase money noteholders  during the years ended December
31, 1999 and 1998, respectively. Annual cash flow distributions of $0 and $5,000
from Beech Hill I, and $0 and $2,500  from Beech Hill II, were  received  during
the years ended December 31, 1999 and 1998, respectively.

         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.  On  September  30,  1999,  the  noteholders
instructed the escrow agent to release to them the transfer documents on October
5, 1999, and the escrow agent complied with those instructions. Accordingly, the
Partnership's

                                       -6-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2000 and 1999

                                   (Unaudited)

2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

interests in Beech Hill I and Beech Hill II were  transferred to the noteholders
on October 5, 1999.  As of that date,  principal and accrued  interest  totaling
$1,480,000 and  $1,891,535,  respectively,  related to Beech Hill I and $900,000
and $1,185,119, respectively, related to Beech Hill II were due.

         The purchase money notes related to Beech Hill I and Beech Hill II were
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  loss  of  ownership  interest  in  the  Local
Partnerships  resulted  in  extraordinary  gain from  extinguishment  of debt of
approximately  $2.4 million and $1.5 million for Beech Hill I and Beech Hill II,
respectively,  for  financial  statement  purposes  in 1999.  The release of the
Partnership's  purchase  money note  obligations  resulted  in  cancellation  of
indebtedness  income of  approximately  $3.4  million and $2.1 million for Beech
Hill I and Beech Hill II, respectively, for federal tax purposes in 1999.

                                   CHEVY CHASE

         The  Partnership  defaulted on its two purchase  money notes related 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 an interest payment to the noteholder.  The agreement extended the maturity
date to January 2, 2000.  On December 17, 1998,  the  Partnership  exercised its
right, pursuant to the extension agreement,  to further extend the maturity date
to January 5, 2001 by making an additional payment, applied to accrued interest,
to the noteholder.

         On February 10, 1998,  the  Partnership  was served with a complaint by
the two holders of the second  purchase  money note (Second  Chase Note) 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 involved 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 combined one percent  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, was terminated 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
interest total is approximately  10.808%. On May 28, 1999, the Partnership filed
suit  against  the  holder of the  First  Chase  Note,  seeking  payment  of the
Partnership's  10.808%  share of  payments  made on the First  Chase  Note since
October 1, 1997. On September 30, 1999, as part of the

                                       -7-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2000 and 1999

                                   (Unaudited)

2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

settlement of the litigation, the Partnership paid off, at a discount, the First
Chase  Note.  The  discounted   payoff  resulted  in  extraordinary   gain  from
extinguishment  of debt of  approximately  $2.4 million for financial  statement
purposes in 1999.  The  discounted  payoff  also  resulted  in  cancellation  of
indebtedness  income of  approximately  $2.4 million for federal tax purposes in
1999.

         On December 30, 1999,  the  Partnership  was served with a complaint by
certain alleged  beneficiaries  of the First Chase Note for, among other relief,
their  portion of payments made to First March Realty  Corporation  on the First
Chase Note. The Managing  General  Partner  cross-  claimed  against First March
Realty  Corporation.  The litigation has been settled,  with no liability to the
Partnership.

                                 FOUR WINDS WEST

         The  Partnership  defaulted on its purchase  money note related to Four
Winds West  Company  Limited  (Four Winds West) on January 1, 1999 when the note
matured and was not paid.  The default  amount  included  principal  and accrued
interest of  $462,178  and  $532,673,  respectively.  On  February 5, 1999,  the
Partnership  paid off, at a discount,  the  purchase  money note related to Four
Winds  West.  The  discounted   payoff  resulted  in  extraordinary   gain  from
extinguishment  of  debt  of  approximately  $305,000  for  financial  statement
purposes in 1999.  The  discounted  payoff  also  resulted  in  cancellation  of
indebtedness income of approximately $305,000 for federal tax purposes in 1999.

                              FRENCHMAN'S WHARF II

         The  Partnership  defaulted  on its  purchase  money  note  related  to
Frenchman's Wharf Associates II Limited  Partnership  (Frenchman's  Wharf II) on
June 1, 1998 when the note matured and was not paid. The default amount included
principal and accrued interest of $3,150,000 and $5,071,731, respectively. As of
November  7, 2000,  principal  and  accrued  interest  totaling  $3,150,000  and
$5,915,811, respectively, were due. The purchase money note was initially due to
mature on June 1, 1988,  but was extended to mature on June 1, 1998. The holders
of the purchase money note initiated  foreclosure  proceedings this summer,  but
have  indicated  they will not  pursue  the  lawsuit  while  efforts to sell the
property are underway.

                                       -8-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2000 and 1999

                                   (Unaudited)

2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

         In 1996, HUD sold the mortgage loan to a third party lender.  The local
managing  general  partner has obtained a forbearance  agreement from the lender
until  January  31,  2001,  with two 30-day  extension  periods  available.  The
forbearance agreement allows for the discounted payoff of the mortgage loan. The
Partnership  recently  received  an offer to  purchase  the  property,  which is
currently  being  analyzed.  Unless  the  sale  can be  consummated  within  the
forbearance period, it appears likely that the first mortgage lender will obtain
the Frenchman's  Wharf real estate through  deed-in-lieu of foreclosure in early
2001.

          In the event of a  foreclosure  by the holders of the  purchase  money
note, or by the first mortgage lender,  the Partnership  would lose its share of
any  future  cash  flow  distributed  by  the  Local   Partnership  from  rental
operations,  mortgage debt refinancings,  or the sale of the real estate. Should
the Partnership lose its ownership interest in Frenchman's Wharf II, there would
be no adverse  impact on the  Partnership's  financial  condition,  as discussed
above.  However,  there will be an adverse  tax  impact on the  partners  in the
Partnership.   The  total  federal  tax  gain  from   cancellation  of  mortgage
indebtedness and purchase money note  indebtedness  related to Frenchman's Wharf
II is estimated to be approximately $16.3 million for the year 2001.

                                    PRINCETON

         The  Partnership  defaulted  on its  purchase  money  note  related  to
Princeton  Community Village Associates  (Princeton) on January 1, 1999 when the
note matured and was not paid. The default amount included principal and accrued
interest  of  $500,000  and  $1,422,064,  respectively.  On August 9, 1999,  the
noteholder filed a complaint seeking  declaratory  judgment that the Partnership
has forfeited its interest in Princeton to the  noteholders.  The litigation was
settled  effective  January 1, 2000,  when the Managing  General Partner entered
into an agreement with the noteholder  which granted the noteholder four options
to purchase the Partnership's  98.99% limited partnership  interest in Princeton
over a three and one-half  year  period,  in exchange  for the  cancellation  of
pro-rata  portions of the then outstanding  balance of the purchase money notes.
As part of the  agreement,  the  noteholder  extended the  maturity  date of the
purchase  money note to January 1, 2004, and the  Partnership  made a payment to
the noteholder on April 21, 2000,  which was applied  against  accrued  interest
payable on the purchase money note.

         On May 31,  2000,  pursuant  to the option  agreement,  the  noteholder
purchased a 26% interest in Princeton from the  Partnership,  the  consideration
for which was the cancellation of a like percentage of the outstanding  purchase
money  note   principal   and  accrued   interest  of  $130,000  and   $363,072,
respectively, resulting in net extraordinary gain from extinguishment of debt of
$484,862  for  financial  statement  purposes  in 2000  and in  cancellation  of
indebtedness income of $1,960,030 for federal tax purposes in 2000.

         Due to the  impending  and likely  transfer of the remaining 74% of the
Partnership's  investment in Princeton over the next three years, the investment
in and advances to partnerships plus net unamortized amounts of acquisition fees
and property  purchase costs related to Princeton,  which totaled $23,362,  have
been   reclassified  to  investment  in  partnerships   held  for  sale  in  the
accompanying balance sheet at September 30, 2000.


                                       -9-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2000 and 1999

                                   (Unaudited)


2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

            ROLLING GREEN AT FALL RIVER AND ROLLING GREEN AT AMHERST

         The  Partnership  defaulted  on its  purchase  money  notes  related 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 amounts  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  $3,661,147,  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
refinance  their  mortgage  loans,   which   refinancings  had  previously  been
completed.  However, the noteholders had the right to accelerate the maturity of
the notes upon not less than one year's prior notice.  As part of the agreement,
the Partnership  agreed that all refinancing  mortgage loan proceeds  payable to
the Partnership by the respective  Local  Partnerships,  as 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  notes,  and  further  agreed  to  waive  certain  rights  granted  in the
respective Local Partnerships' limited partnership agreements. The mortgage loan
on  Rolling  Green at Fall  River  was  refinanced  in March  1999;  refinancing
proceeds of $2,725,257  were used to pay down purchase  money note principal and
capitalized  interest  in March  1999.  The  mortgage  loan on Rolling  Green at
Amherst was refinanced in August 1998;  refinancing  proceeds of $1,503,496 were
used to pay down purchase money note principal and capitalized interest in 1998.

         On May 31, 2000,  Rolling  Green at Fall River sold its  property.  The
entire sale proceeds to the Partnership were used to pay off, at a discount, the
Partnership's  purchase money note obligation  related to its investment in this
Local  Partnership.  The sale resulted in gain on  disposition  of investment in
partnership of $3,542,933, and in extraordinary gain from extinguishment of debt
of $7,746,946  for financial  statement  purposes in 2000. The total federal tax
gain related to Rolling  Green at Fall River is  estimated  to be  approximately
$16.8 million in 2000. The Managing  General Partner of the  Partnership  and/or
its affiliates will not receive any fees relating to the sale.

         On May 31, 2000, Rolling Green at Amherst sold its property. The entire
sale  proceeds  to the  Partnership  were used to pay off,  at a  discount,  the
Partnership's  purchase money note obligation  related to its investment in this
local  partnership.  The sale resulted in gain on  disposition  of investment in
partnership of $2,336,845, and in extraordinary gain from extinguishment of debt
of $1,786,750  for financial  statement  purposes in 2000.  (A  distribution  of
surplus cash was made by the local managing  general  partner  subsequent to the
sale date, in September 2000.  Substantially all of the distribution was applied
to  the  purchase  money  note  obligation  with  the  effect  of  reducing  the
extraordinary gain from extinguishment of debt previously recognized.) The total
federal  tax gain  related  to  Rolling  Green at  Amherst  is  estimated  to be
approximately  $6.3  million  in  2000.  The  Managing  General  Partner  of the
Partnership  and/or its  affiliates  will not receive  any fees  relating to the
sale.

                                      -10-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2000 and 1999

                                   (Unaudited)

2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

                                   TROY MANOR

         The  Partnership  defaulted on its purchase  money note related to Troy
Apartments Limited (Troy Manor) on January 1, 1999 when the note matured and was
not paid. The default amount included principal and accrued interest of $378,000
and $227,420,  respectively. On February 5, 1999, the Partnership paid off, at a
discount,  the purchase money note related to Troy Manor. The discounted  payoff
resulted in  extraordinary  gain from  extinguishment  of debt of  approximately
$220,000 for financial  statement  purposes in 1999. The discounted  payoff also
resulted in cancellation of indebtedness  income of  approximately  $220,000 for
federal tax purposes in 1999.

                                    WESTGATE

         In June,  1998,  the  holder of the  purchase  money  note  related  to
Westgate  Tower Limited  Dividend  Housing  Associates  (Westgate)  accepted the
Managing  General  Partner's  offer to extend the maturity  date of the purchase
money note for five years from its scheduled maturity date of September 1, 1998.
In May 2000, the Partnership and the noteholder  signed documents  extending the
maturity date of the purchase money note to September 1, 2003, in exchange for a
payment applied against the outstanding  principal balance of the purchase money
note.

                                  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. The First Wexford Note was paid off, at a discount,  on September
30,  1999.  The  discounted   payoff   resulted  in   extraordinary   gain  from
extinguishment  of debt of  approximately  $2.4 million for financial  statement
purposes in 1999.  The  discounted  payoff  also  resulted  in  cancellation  of
indebtedness  income of  approximately  $2.4 million for federal tax purposes in
1999.

         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) against the  Partnership,  the Managing General Partner and
C.R.H.C., Incorporated (CRHC), an affiliate of the Managing General Partner, for
damages and foreclosure on the Partnership's  interest in the Local Partnership.
On July 29, 1998, the parties agreed to a settlement which involved 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 holder 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 one percent  interest  (which was  converted to a limited  partner
interest)  in  the  Local  Partnership  to the  Partnership,  and  the  property
management agent, which is an

                                      -11-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2000 and 1999

                                   (Unaudited)

2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

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%. On May 28, 1999, the Partnership filed suit against the
holder of the First Wexford Note,  seeking  payment of the  Partnership's  4.85%
share of  payments  made on the First  Wexford  Note since  October 1, 1997.  On
September 30, 1999, as part of the settlement of the litigation, the Partnership
paid off, at a discount, the First Wexford Note (see above).

         On December 15, 1999, the Local Partnership sold its property.
See Note 2.c., below, for further information concerning the sale.

b.       ADVANCES TO LOCAL PARTNERSHIPS

         As of both  September 30, 2000 and December 31, 1999,  the  Partnership
had advanced funds to Local Partnerships totaling $474,410.  Interest accrued on
these advances was $187,372 as of both September 30, 2000 and December 31, 1999.
For financial reporting  purposes,  these loans have been reduced to zero by the
Partnership as a result of losses from the related Local Partnerships.

                                   CHEVY CHASE

         On January 7, 1999, the Partnership advanced $120,642 to Chevy Chase to
cover required  repairs and maintenance  expenses pending  reimbursement  from a
capital  improvement  escrow. The advance was repaid to the Partnership on April
8, 1999.

                              FRENCHMAN'S WHARF II

         To cover  operating  deficits  incurred in prior years for  Frenchman's
Wharf II, the Partnership  advanced funds totaling $324,410 as of both September
30, 2000 and December 31, 1999. No advances have been made to Frenchman's  Wharf
II since  March  1987,  and the  Partnership  does not  expect  to  advance  any
additional funds to the Local  Partnership.  These loans,  together with accrued
interest of $187,372 as of both  September  30, 2000 and December 31, 1999,  are
payable from cash flow of  Frenchman's  Wharf II after payment of first mortgage
debt service and after satisfaction by the Partnership of certain other interest
obligations on the purchase money notes  relating to the Local  Partnership.  No
interest  has  been  accrued  since  1992  due  to  the  uncertainty  of  future
collection.  For financial reporting purposes,  these loans have been reduced to
zero by the  Partnership  as a result of losses at the Local  Partnership  level
during prior years. See Note 2.a., above,  concerning the potential  foreclosure
on the real estate in early 2001.

                           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

                                      -12-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2000 and 1999

                                   (Unaudited)

2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

loan on May 26, 1998.  In  connection  with such  refinancing,  the  Partnership
advanced the Local  Partnership  $450,000 for application and rate lock fees. As
of both  September 30, 2000 and December 31, 1999,  $300,000 of the advances had
been repaid to the Partnership.  For financial reporting purposes, the remaining
advance has been reduced to zero by the Partnership as a result of losses at the
Local Partnership level.

c.       PROPERTY MATTERS

                                   CHEVY CHASE

         The Managing  General  Partner and the local managing  general  partner
(CRHC,  an affiliate  of the Managing  General  Partner,  see Note 2.b.,  above)
considered  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,  or to enter the  Mark-up-to-Market  program.  The local
managing  general  partner agreed to HUD's analysis of the property and proposal
for  Mark-up-to-Market,  and the property has entered into the Mark-up-to-Market
program for a five year term,  subject to the annual  availability of funding by
Congress.   HUD's  analysis  indicated  that  gross  rents  should  increase  by
approximately $475,000 per year.

                              FRENCHMAN'S WHARF II

         The report of the auditors on the financial  statements of  Frenchman's
Wharf II for the year ended December 31, 1999 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 loan and the expiration
of its Section 8 Rental Housing Assistance Payments (HAP) contract with HUD. The
HAP contract  subsequently was extended for another year. See Note 2.a.,  above,
concerning the potential foreclosure on the real estate in early 2001.

                                ORANGEWOOD PLAZA

         The 1983  construction  loan  related to  Orangewood  Plaza,  a 40-unit
apartment building in Orange Cove, California, was never formally converted to a
permanent loan. It is anticipated that this loan will be restructured,  and that
the  restructuring  may result in  cancellation  of  indebtedness  income to the
Partnership  of  approximately  $163,000  for  federal  tax  purposes  in  2000.
Additionally,  the Partnership had pledged its interest in the Local Partnership
as security on a promissory  note, in the amount of $170,000,  made by the Local
Partnership. The note, which matured on August 5, 1998, is currently in default.
The parties are currently  negotiating a  restructuring  of this loan,  which is
anticipated  to  be  formalized   concurrent  with  the   restructuring  of  the
construction  loan.  There is no  assurance  that either  restructuring  will be
consummated.  Accordingly,  there is no assurance that the  Partnership  will be
able to retain its  interest in  Orangewood  Plaza.  This  uncertainty  does not
adversely impact the Partnership's financial condition, as discussed above.

                                      -13-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2000 and 1999

                                   (Unaudited)

2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

                                    PRINCETON

         Princeton  defaulted on its project subsidy loan. The maturity date was
extended five years to January 1, 2004, as part of litigation  settled effective
January 1, 2000, when the Managing  General  Partner and the noteholder  entered
into an agreement  extending  the maturity  date of the purchase  money note, as
discussed above.

            ROLLING GREEN AT FALL RIVER AND ROLLING GREEN AT AMHERST

     On May 31, 2000,  Rolling  Green at Fall River and Rolling Green at Amherst
were sold. See Note 2.a., above, for further information concerning these sales.

                                  WEXFORD RIDGE

         On  December  15,  1999,  Wexford  Ridge  sold its  property.  The sale
resulted in a financial  statement gain of $3,070,636  and an estimated  federal
tax gain of approximately $6.3 million to the Partnership in 1999.

d.       SUMMARIZED FINANCIAL INFORMATION

         Combined  statements of operations for the 15 and 20 Local Partnerships
in which  the  Partnership  was  invested  as of  September  30,  2000 and 1999,
respectively,   follow.   The  combined   statements  have  been  compiled  from
information supplied by the management agents of the projects and are unaudited.
The combined  statements of operations  for the nine months ended  September 30,
2000,  include  information for Rolling Green at Fall River and Rolling Green at
Amherst through the dates of sale.

                                      -14-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2000 and 1999

                                   (Unaudited)

2.       INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

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


                                       For the three months ended             For the nine months ended
                                             SEPTEMBER 30,                          SEPTEMBER 30,
                                    --------------------------------       --------------------------------
                                       2000                 1999               2000                 1999
                                    -----------         ------------       ------------         ------------
<S>                                 <C>                 <C>                <C>                  <C>
Revenue:
  Rental                            $ 4,730,118         $  6,528,105       $ 16,005,558         $ 19,830,717
  Other                                 231,457              313,137            653,299              981,061
                                    -----------         ------------       ------------         ------------

    Total revenue                     4,961,575            6,841,242         16,658,857           20,811,778
                                    -----------         ------------       ------------         ------------

Expenses:
  Operating                           3,113,854            4,833,101          9,767,400           13,366,697
  Interest                            1,431,546            1,624,329          4,791,568            4,873,006
  Depreciation and amortization         925,287            1,213,663          3,149,318            3,640,989
                                    -----------         ------------       ------------         ------------

    Total expenses                    5,470,687            7,671,093         17,708,286           21,880,692
                                    -----------         ------------       ------------         ------------

Net loss                            $  (509,112)        $   (829,851)      $ (1,049,429)        $ (1,068,914)
                                    ===========         ============       ============         ============
</TABLE>


         As  of  September  30,  2000  and  1999,  the  Partnership's  share  of
cumulative  losses  to date  for 10 and 9 of the 15 and 20  Local  Partnerships,
respectively,  exceeded  the  amount  of the  Partnership's  investments  in and
advances  to  those  Local   Partnerships   by  $25,721,927   and   $24,799,013,
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

         Some of the  rental  properties  owned by the  Local  Partnerships  are
dependent on the receipt of  project-based  Section 8 Rental Housing  Assistance
Payments (HAP) provided by the U.S.  Department of Housing and Urban Development
(HUD)  pursuant  to  Section 8 HAP  contracts.  Current  legislation  allows all
expired  Section 8 HAP  contracts  with  rents at less than 100% of fair  market
rents to be renewed for one year.  Expiring  Section 8 HAP contracts  with rents
that  exceed 100% of fair  market  rents  could be renewed for one year,  but at
rents  reduced  to 100% of fair  market  rents  (Mark-to-Market).  All  expiring
Section 8 HAP  contracts  with rents  exceeding  comparable  market  rents,  and
properties  with mortgage  loans insured by the Federal  Housing  Administration
(FHA), became subject to the Mark-to-Market legislation.

                                      -15-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2000 and 1999

                                   (Unaudited)

3.       AFFORDABLE HOUSING LEGISLATION - Continued

         Mark-to-Market  implementation  will reduce rental income at properties
that 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 may undergo debt  restructuring  according to
terms determined by an individual property and operations  evaluation.  This may
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 loan will
be converted to a non-performing but accruing (soft) second mortgage loan.

         The Section 8 HAP  contracts  for the  following  properties  initially
expired during the  government's  fiscal year 1998 or 1999 or will expire during
2000, and have been renewed as indicated,  with the renewal  expiring in 2000 or
2001.

<TABLE>
<CAPTION>

                                               Units Authorized        Original           Renewed
                                 Number           for Rental         Expiration of      Expiration of
                               of Rental       Assistance Under        Section 8          Section 8
PROPERTY                         UNITS             SECTION 8         HAP CONTRACT       HAP CONTRACT
--------                       ---------       ----------------      -------------      ------------
<S>                            <C>             <C>                   <C>                <C>
Country Place II                   120                24                08/29/00            (1)
Four Winds West                     62                62                04/14/98        10/14/00 (1)
Frenchman's Wharf II               324                31                11/30/98        11/30/00 (1)
Troy Manor                          50                50                10/29/99        10/29/00 (1)
                                 -----             -----

    Total                          556               167
                                 =====             =====
</TABLE>

(1)      The Managing General Partner expects that these Section 8 HAP Contracts
         will be renewed for one year upon expiration.

         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.  As a  result,  it is not
possible to predict  the impact on the Local  Partnerships'  operations  and the
resulting impact on the Partnership's  investments in the Local  Partnerships at
this time. As of September 30, 2000,  the carrying  amount of the  Partnership's
investments in and advances to Local  Partnerships  with Section 8 HAP contracts
expiring in 2000 was $153,977.

         There  is  a  new  HUD-sponsored   program  generally  referred  to  as
"Mark-up-to-Market."  Under this program,  properties  with  expiring  Section 8
contracts that are located in high-rent areas as defined by HUD are eligible for
rent  increases  which would be necessary to bring  Section 8 rents in line with
market rate rents.  For properties that enter the program and have interest rate
subsidized  FHA loans,  the rents are adjusted to take into account the benefits
the property is already  receiving from the below-market  interest rate by means
of a HUD determined  Interest  Subsidy  Adjustment  Factor.  The purpose of this
program is to incentivize owners of properties with expiring Section 8 contracts
not to convert these properties to market rate housing.  In return for receiving
market rate rents under Mark-up-to-Market,  the property owner must enter into a
five  year  conditional  Section 8  contract  with HUD,  subject  to the  annual
availability of funding by Congress. In addition, property owners who enter into
the  Mark-up-to-Market  program will receive  increased cash flow as the limited
dividend will be increased in an amount equal to the increase in gross revenues.

                                      -16-

<PAGE>
                 CAPITAL REALTY INVESTORS-II LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2000 and 1999

                                   (Unaudited)


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 connection  with managing the  Partnership.  The Partnership
paid $35,040 and $128,913 for the three and nine month periods  ended  September
30,  2000,  respectively,  and $32,459 and $115,576 for the three and nine month
periods ended September 30, 1999, respectively,  to the Managing General Partner
as direct reimbursement of expenses incurred on behalf of the Partnership.  Such
expenses are included in the  accompanying  statements  of operations as general
and administrative expenses.

         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  and  $187,497  for each of the  three  and  nine  month  periods  ended
September 30, 2000 and 1999, respectively.

         The Managing General Partner and/or its affiliates may receive a fee of
not more  than two  percent  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.  No such fees were earned by the Managing  General Partner or
its affiliates for the three and nine month periods ended  September 30, 2000 or
1999.


                                      -17-

<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 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.

                                     GENERAL

         Some of the  rental  properties  owned by the  Local  Partnerships  are
financed by state housing  agencies.  The Managing  General  Partner has sold or
refinanced, and will continue to sell or refinance,  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 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 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.

         Some of the  rental  properties  owned by the  Local  Partnerships  are
dependent on the receipt of  project-based  Section 8 Rental Housing  Assistance
Payments (HAP) provided by the U.S.  Department of Housing and Urban Development
(HUD)  pursuant  to  Section 8 HAP  contracts.  Current  legislation  allows all
expired  Section 8 HAP  contracts  with  rents at less than 100% of fair  market
rents to be renewed for one year.  Expiring  Section 8 HAP contracts  with rents
that  exceed 100% of fair  market  rents  could be renewed for one year,  but at
rents  reduced  to 100% of fair  market  rents  (Mark-to-Market).  All  expiring
Section 8 HAP  contracts  with rents  exceeding  comparable  market  rents,  and
properties  with mortgage  loans insured by the Federal  Housing  Administration
(FHA), became subject to the Mark-to-Market legislation.

         Mark-to-Market  implementation  will reduce rental income at properties
that 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 may undergo debt  restructuring  according to
terms determined by an individual property and operations  evaluation.  This may
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 loan will
be converted to a non-performing but accruing (soft) second mortgage loan.

         In many instances,  the  Mark-to-Market  rental rate  restructuring may
require the write down of an  FHA-insured  mortgage  loan,  which would  trigger
cancellation  of  indebtedness  income to the partners,  a taxable  event,  even
though no actual cash is received.  Additionally, if the existing first mortgage
loan is  bifurcated  into a first and second  mortgage  loan,  the newly created
second mortgage loan will accrue interest at a below-market rate;  however,  the
Internal  Revenue  Service  issued a ruling in July 1998 that concluded 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 to predict the exact form of  restructuring,  or potential
tax liabilities to the limited partners, at this time.

                                      -18-

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

         There  is  a  new  HUD-sponsored   program  generally  referred  to  as
"Mark-up-to-Market."  Under this program,  properties  with  expiring  Section 8
contracts that are located in high-rent areas as defined by HUD are eligible for
rent  increases  which would be necessary to bring  Section 8 rents in line with
market rate rents.  For properties that enter the program and have interest rate
subsidized  FHA loans,  the rents are adjusted to take into account the benefits
the property is already  receiving from the below-market  interest rate by means
of a HUD determined  Interest  Subsidy  Adjustment  Factor.  The purpose of this
program is to incentivize owners of properties with expiring Section 8 contracts
not to convert these properties to market rate housing.

         In return for receiving market rate rents under Mark-up-to-Market,  the
property owner must enter into a five year  conditional  Section 8 contract with
HUD,  subject to the annual  availability  of funding by Congress.  In addition,
property  owners who enter into the  Mark-up-to-  Market  program  will  receive
increased cash flow as the limited dividend will be increased in an amount equal
to the increase in gross revenues.

         The Managing General Partner is considering new strategies to deal with
the ever changing  environment of affordable housing policy. The Section 236 and
Section  221(d)(3)  mortgage loans may be eligible for pre-payment in their 18th
year or later.  Properties  with  expiring  Section 8 HAP  contracts  may become
convertible  to  market  rate  apartment  properties.  Currently,  there are few
lenders that will provide  financing either to prepay existing mortgage loans of
these types or provide additional funds to allow a 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
$7,781,601  as of  September  30,  2000,  along  with  anticipated  future  cash
distributions  from the Local  Partnerships,  is expected to be adequate to meet
its current and anticipated  operating cash needs. As of November 7, 2000, there
were no material commitments for capital expenditures.

         The Partnership's  obligations with respect to its investments in Local
Partnerships,  in the form of purchase money notes having an aggregate principal
balance of  $4,920,000  plus  aggregate  accrued  interest of  $9,142,874  as of
September  30,  2000,  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 the principal amounts of $1,050,000 and $950,000 matured
on December  31, 1996 and 1997,  respectively,  and were  extended to January 5,
2001,  but were paid off, at a discount,  on September 30, 1999.  Purchase money
notes in the  aggregate  principal  amount of  $2,380,000  matured on January 1,
1998, and were written off on October 5, 1999 when the related local partnership
interests, held by the Partnership,  were transferred to the noteholders in full
satisfaction  of the purchase  money notes'  principal and accrued  interest.  A
purchase  money note in the principal  amount of  $3,150,000  matured on June 1,
1998,  and has not been paid or extended.  Purchase  money notes in the original
principal  amounts of $4,600,000 and  $1,927,500,  with  maturities  extended to
August 31, 2003, were paid off, at a discount, on May 31, 2000. A purchase money
note in the  original  principal  amount of  $1,450,000  matured on September 1,
1998,  was partially  paid and has been extended to September 1, 2003.  Purchase
money notes in the aggregate  principal amount of $840,178 matured on January 1,
1999 and were paid off, at a discount,  on  February 5, 1999.  A purchase  money
note in the original  principal  amount of $500,000  matured on January 1, 1999,
and was partially  transferred to the noteholder,  with the balance  extended to
January  1,  2004.  See the notes to the  financial  statements  for  additional
information concerning these purchase money notes.


                                      -19-

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

         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
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 respective 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  adversely  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 the Partnership's  interest in one of these Local Partnerships would not
have a material adverse impact on the financial condition of the Partnership.

         The following  chart presents  information  related to a purchase money
note which has matured and which remains  unpaid or unextended as of November 7,
2000.  Excluded from the following  chart are purchase money notes which matured
through September 30, 2000, and which have been paid off, cancelled, or extended
on or before November 7, 2000.

<TABLE>
<CAPTION>
                                                                         Aggregate                 Carrying Amount
                                               Aggregate                  Accrued                  of Partnership's
                                               Principal                  Interest                 Investments in
                   Number of                    Balance                   Balance                  and Advances to
   Purchase        Underlying                    as of                     as of                   Underlying Local
  Money Note         Local       Percentage    September    Percentage   September    Percentage   Partnerships as of    Percentage
(PMN) MATURITY    PARTNERSHIPS    OF TOTAL      30, 2000     OF TOTAL     30, 2000     OF TOTAL    SEPTEMBER 30, 2000     OF TOTAL
--------------    ------------   ----------    -----------  ---------    ----------   ----------   ------------------    ----------
<S>               <C>            <C>           <C>          <C>          <C>          <C>          <C>
2nd Quarter 1998      1                7%      $3,150,000         64%    $5,880,309        64%        $      --               --%
                   ====            =====       ==========      =====     ==========     =====         =========            =====

Total, Local
  Partnerships        15             100%      $4,920,000        100%    $9,142,874       100%        $ 897,877              100%
                    ====           =====       ==========      =====     ==========     =====         =========            =====
</TABLE>


         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,  paying off certain purchase money notes at a
discounted  price,  extending  the due dates of certain  purchase  money  notes,
refinancing the respective properties' underlying debt or selling the underlying
real estate and using the Partnership's share of the proceeds to pay or buy down
certain purchase money note  obligations.  Although the Managing General Partner
has had some success applying these strategies in the past, the Managing General
Partner cannot assure that these strategies will be successful in the future. If
the Managing  General  Partner is unable to negotiate an extension or discounted
payoff,  in the event that the purchase money notes remain unpaid upon maturity,
the noteholders may have the right to foreclose on the Partnership's interest in
the related Local Partnerships. In the event of a foreclosure, the excess of the
nonrecourse   indebtedness   over  the  carrying  amount  of  the  Partnership's
investment  in the related Local  Partnership  would be deemed  cancellation  of
indebtedness  income which would be taxable to Limited Partners at a federal tax
rate  of  up  to  39.6%.  Additionally,  in  the  event  of a  foreclosure,  the
Partnership  would lose its investment in the Local  Partnership and,  likewise,
its share of any future  cash flow  distributed  by the Local  Partnership  from
rental operations,  mortgage debt refinancings,  or the sale of the real estate.
Of the 15  Local  Partnerships  in  which  the  Partnership  is  invested  as of
September 30, 2000, the one Local Partnership with an associated  purchase money
note which has matured and

                                      -20-

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

which remains unpaid or unextended as of November 7, 2000,  represented  none of
the Partnership's total distributions  received from Local Partnerships and none
of the share of income from Local Partnerships for the immediately preceding two
calendar years.

         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 periods ended September 30, 2000 and 1999, the
receipt  of  distributions  from  Local  Partnerships  was  adequate  to support
operating cash requirements. Cash and cash equivalents decreased during the nine
month period ended September 30, 2000, as the distribution to Additional Limited
Partners,  made in January  2000 out of the proceeds of the 1999 sale of Wexford
Ridge Associates (Wexford Ridge), plus cash used for other financing activities,
exceeded cash flow distributions received from partnerships during the period.

                              RESULTS OF OPERATIONS

         The Partnership  recognized a net loss for the three month period ended
September 30, 2000, as compared to net income during the corresponding period in
1999 primarily due to the extraordinary gain from extinguishment of debt related
to the  discounted  payoffs of the Chevy Chase Park  Limited  (Chevy  Chase) and
Wexford Ridge purchase money notes in September  1999.  Contributing  to the net
loss  were an  additional  extraordinary  loss  related  to the sale of  Roberts
Amherst  Associates  (Rolling Green at Amherst) in May 2000, as discussed in the
notes to  financial  statements,  and an increase in general and  administrative
expenses  related to higher  reimbursed  payroll costs.  Offsetting the net loss
were an increase in share of income from partnerships  primarily due to the sale
in May 2000 of Robert Fall River Associates (Rolling Green at Fall River), which
had recorded a negative  share of income  during the 1999 period,  a decrease in
interest  expense due to lower  purchase  money note balances and an increase in
interest  income  due to higher  cash and cash  equivalent  balances  and higher
interest rates during 2000.

         The  Partnership's net income for the nine month period ended September
30, 2000 increased as compared to the corresponding period in 1999 primarily due
to gain on disposition of investments in  partnerships  and  extraordinary  gain
from extinguishment of debt related to the sales of Rolling Green at Fall River,
Rolling Green at Amherst and the partial transfer of the Partnership's  interest
in Princeton Community Village Associates (Princeton), as discussed in the notes
to the financial  statements.  Contributing to the increase in net income were a
decrease in interest  expense due to lower  purchase  money note balances as the
result of payments, the extinguishment of debt and a decrease in amortization of
deferred  costs  associated  with the sales of  properties,  and an  increase in
interest income as discussed above. Offsetting the increase in the Partnership's
net income was a decrease in share of income from partnerships, primarily due to
the receipt in the first quarter of 1999 of larger  distributions from Arrowhead
Apartments  Associates Limited  Partnership  (Arrowhead) and Moorings Apartments
Associates Limited Partnership  (Moorings) (since the Partnership's  investments
in Arrowhead and Moorings had previously been reduced to zero);  contributing to
the  decrease  in share of income  from  partnerships  was  reduced  income from
Rolling Green at Amherst due to its sale in May 2000.  Higher  professional fees
related  to  the   Princeton   litigation   also  offset  the  increase  in  the
Partnership's net income.

                                      -21-

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

         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, 2000 did not include  losses of $411,392
and  $1,154,693,  respectively,  compared  to excluded  losses of  $509,357  and
$1,269,668  for the three and nine  month  periods  ended  September  30,  1999,
respectively.

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


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

         See Note 2.a. of the notes to financial statements contained in Part I,
Item 1, hereof, for information concerning the Partnership's defaults on certain
purchase money notes.


Item 5.           Other Information

     a.   On  April  2,  2000,  Peachtree  Partners  (Peachtree)   initiated  an
          unregistered  tender  offer  to  purchase  approximately  2,450 of the
          outstanding units of additional limited  partnership  interest (Units)
          in the  Partnership  at a price of $50 per Unit; the offer expired May
          19, 2000. Peachtree is unaffiliated with the Managing General Partner.
          The price offered was determined solely at the discretion of Peachtree
          and does not necessarily represent the fair market value of each Unit.
          There is no  established  market for the purchase and sale of 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 in the Partnership.

     b.   On October 30,  2000,  the  Partnership  made a cash  distribution  of
          $1,497,450  ($30.00  per  Unit) to  Additional  Limited  Partners,  to
          holders of record as of September  30, 2000.  The  distribution  was a
          result of cash resources accumulated from operations and distributions
          from partnerships.


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, 2000.

     All other items are not applicable.

                                      -22-

<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 7, 2000                       by:  /S/ MICHAEL J. TUSZKA
----------------                            ------------------------------------
DATE                                        Michael J. Tuszka
                                            Vice President
                                              and Chief Accounting Officer
                                              (Principal Financial Officer
                                              and Principal Accounting Officer)

                                      -23-

<PAGE>


                                  EXHIBIT INDEX



EXHIBIT                                             METHOD OF FILING
-------                                       -------------------------------

27               Financial Data Schedule      Filed herewith electronically


                                      -24-