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


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



                                   FORM 10-QSB


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



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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002


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



                         Commission file number 0-23766


                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP
             Organized pursuant to the Laws of the State of Maryland


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



        Internal Revenue Service - Employer Identification No. 52-1388957

                 11200 Rockville Pike, Rockville, Maryland 20852

                                 (301) 468-9200


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





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





--------------------------------------------------------------------------------
<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                              INDEX TO FORM 10-QSB

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2002


                                                                           Page

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

        Balance Sheets
          - September 30, 2002 and December 31, 2001.......................  1

        Statements of Operations and Accumulated Losses
          - for the three and nine months ended September 30, 2002
            and 2001 ......................................................  2

        Statements of Cash Flows
          - for the nine months ended September 30, 2002 and 2001..........  3

        Notes to  Financial Statements
          - September 30, 2002 and 2001....................................  4

Item 2. Management's Discussion and Analysis of Financial Condition
          and Results of Operations........................................  9

Item 3. Controls and Procedures............................................  11


PART II - OTHER INFORMATION

Item 3. Defaults Upon Senior Securities....................................  11

Item 5. Other Information..................................................  11

Item 6. Exhibits and Reports on Form 8-K...................................  12

Signature..................................................................  13

Certifications of Quarterly Report Pursuant to 18 U.S.C. Section 1350......  14



<PAGE>
PART I. FINANCIAL INFORMATION
        ---------------------
Item 1. Financial Statements
        ---------------------

                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                                 BALANCE SHEETS


                                     ASSETS

<TABLE>
<CAPTION>
                                                                                      September 30,   December 31,
                                                                                          2002           2001
                                                                                      ------------    ------------
                                                                                       (Unaudited)
<S>                                                                                   <C>             <C>
Investments in and advances to partnerships .......................................   $  1,238,445    $  1,136,970
Cash and cash equivalents .........................................................      3,875,992       3,774,659
Acquisition fees, principally paid to related parties,
  net of accumulated amortization of $127,813 and $122,029, respectively ..........        103,542         109,326
Property purchase costs,
  net of accumulated amortization of $116,558 and $111,339 respectively ...........         92,202          97,421
Other assets ......................................................................            152             126
                                                                                      ------------    ------------

      Total assets ................................................................   $  5,310,333    $  5,118,502
                                                                                      ============    ============



                        LIABILITIES AND PARTNERS' CAPITAL


Due on investments in partnerships ................................................   $  1,047,600    $  1,047,600
Accrued interest payable ..........................................................      1,763,591       1,594,216
Accounts payable and accrued expenses .............................................         60,141          45,537
                                                                                      ------------    ------------

      Total liabilities ...........................................................      2,871,332       2,687,353
                                                                                      ------------    ------------

Commitments and contingencies

Partners' capital:

  Capital paid in:
    General Partners ..............................................................          2,000           2,000
    Limited Partners ..............................................................     21,202,500      21,202,500
                                                                                      ------------    ------------

                                                                                        21,204,500      21,204,500

  Less:
    Accumulated distributions to partners .........................................     (4,908,656)     (4,908,656)
    Offering costs ................................................................     (2,570,535)     (2,570,535)
    Accumulated losses ............................................................    (11,286,308)    (11,294,160)
                                                                                      ------------    ------------

      Total partners' capital .....................................................      2,439,001       2,431,149
                                                                                      ------------    ------------

      Total liabilities and partners' capital .....................................   $  5,310,333    $  5,118,502
                                                                                      ============    ============
</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-85 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,
                                                    ----------------------------    ----------------------------
                                                        2002            2001            2002            2001
                                                    ------------    ------------    ------------    ------------
<S>                                                 <C>             <C>             <C>             <C>
Share of income from partnerships ...............   $    239,692    $    129,782    $    358,991    $    434,717
                                                    ------------    ------------    ------------    ------------

Other revenue and expenses:

  Revenue:
    Interest ....................................         18,558          67,564          54,610         256,971
    Gain from extinguishment of debt ............           --         5,190,030            --         5,236,945
                                                    ------------    ------------    ------------    ------------

                                                          18,558       5,257,594          54,610       5,493,916
                                                    ------------    ------------    ------------    ------------

  Expenses:
    Interest ....................................         56,459         201,050         169,375         934,926
    General and administrative ..................         33,688          29,236          97,181          98,212
    Management fee ..............................         24,480          24,480          73,440          73,440
    Professional fees ...........................         18,250          17,138          54,750          51,413
    Amortization of deferred costs ..............          3,668           3,668          11,003          11,003
                                                    ------------    ------------    ------------    ------------

                                                         136,545         275,572         405,749       1,168,994
                                                    ------------    ------------    ------------    ------------

      Total other revenue and expenses ..........       (117,987)      4,982,022        (351,139)      4,324,922
                                                    ------------    ------------    ------------    ------------

Net income ......................................        121,705       5,111,804           7,852       4,759,639

Accumulated losses, beginning of period .........    (11,408,013)    (16,286,858)    (11,294,160)    (15,934,693)
                                                    ------------    ------------    ------------    ------------

Accumulated losses, end of period ...............   $(11,286,308)   $(11,175,054)   $(11,286,308)   $(11,175,054)
                                                    ============    ============    ============    ============


Net income allocated
  to General Partners (1.51%) ...................   $      1,838    $     77,188    $        119    $     71,871
                                                    ============    ============    ============    ============

Net income allocated
  to Initial and Special Limited Partners (2.49%)   $      3,030    $    127,284    $        196    $    118,515
                                                    ============    ============    ============    ============

Net income allocated to BAC Holders (96%) .......   $    116,837    $  4,907,332    $      7,538    $  4,569,253
                                                    ============    ============    ============    ============

Net income per BAC,
  based on 21,158 BACs outstanding ..............   $       5.52    $     231.94    $       0.36    $     215.96
                                                    ============    ============    ============    ============
</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-85 LIMITED PARTNERSHIP

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                   For the nine months ended
                                                                                          September 30,
                                                                                   --------------------------
                                                                                      2002            2001
                                                                                   ----------     -----------
<S>                                                                                <C>            <C>
Cash flows from operating activities:
  Net income ...................................................................   $     7,852    $ 4,759,639

  Adjustments  to  reconcile  net  income  to net cash  (used  in)  provided  by
    operating activities:
    Share of income from partnerships ..........................................      (358,991)      (434,717)
    Gain from extinguishment of debt ...........................................          --       (5,236.945)
    Amortization of deferred costs .............................................        11,003         11,003

    Changes in assets and liabilities:
      Increase in accrued interest receivable on advances to partnerships ......       (17,719)       (17,719)
      (Increase) decrease in other assets ......................................           (26)         2,618
      Increase in accrued interest payable .....................................       169,375        934,926
      Increase (decrease) in accounts payable and accrued expenses .............        14,604         (3,182)
                                                                                   -----------    -----------

        Net cash (used in) provided by operating activities ....................      (173,902)        15,623
                                                                                   -----------    -----------

Cash flows from investing activities:
  Receipt of distributions from partnerships ...................................       275,235        650,938
  Additional investment in partnership .........................................          --         (575,000)
                                                                                   -----------    -----------

        Net cash provided by investing activities ..............................       275,235         75,938
                                                                                   -----------    -----------

Cash flow used in financing activities:
  Payoff of purchase money note and related interest ...........................          --       (4,750,000)
                                                                                   -----------    -----------

Net increase (decrease) in cash and cash equivalents ...........................       101,333     (4,658,439)

Cash and cash equivalents, beginning of period .................................     3,774,659      8,501,288
                                                                                   -----------    -----------

Cash and cash equivalents, end of period .......................................   $ 3,875,992    $ 3,842,849
                                                                                   ===========    ===========



Supplemental disclosure of cash flow information:
  Cash paid during the period for interest .....................................   $      --      $ 3,275,000
                                                                                   ===========    ===========
</TABLE>


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

                                       -3-

<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2002 and 2001

                                   (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-85 Limited Partnership (the Partnership) as
of September 30, 2002,  and the results of its operations for the three and nine
months ended September 30, 2002 and 2001, and its cash flows for the nine months
ended  September 30, 2002 and 2001.  The results of  operations  for the interim
period ended September 30, 2002, are not  necessarily  indicative of the results
to be expected for the full year.

     The  accompanying  unaudited  financial  statements  have been  prepared in
conformity with accounting principles generally accepted in the United States of
America  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 of America 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, 2001.

     In April 2002, the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No. 145 (the  Statement),  "Recission  of FASB
Statements  No.  4, 44,  and 64,  ...."  The  Statement  rescinds  Statement  of
Financial  Accounting  Standards No. 4, which required all gains and losses from
extinguishment  of debt to be  aggregated  and, if  material,  classified  as an
extraordinary  item.  Accordingly,  gains from extinguishment of debt previously
reported as  extraordinary  for the three months ended March 31, 2001, have been
reclassified  in the  accompanying  statements  of  operations to conform to the
presentation required by the Statement.


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

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

                              Purchase money notes
                              --------------------

     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  $873,000  plus  aggregate  accrued  interest  of  $1,688,191  as of
September  30,  2002,  are  payable  in full upon the  earliest  of: (i) sale or
refinancing of the respective Local Partnership's rental property;  (ii) payment
in full of the respective Local Partnership's permanent loan; or (iii) maturity.
The  purchase  money  note  related  to  Paradise  Associates,   L.P.  (Paradise
Foothills),  in the principal  amount of $230,000,  matured on January 30, 1996,
but has not been paid or extended,  as discussed  below. The purchase money note
related to Mesa Partners  Limited  Partnership  (The  Pointe),  in the principal
amount of $643,000, matures June 30, 2003.

     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

                                       -4-

<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2002 and 2001

                                   (Unaudited)


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

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  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 matured or 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 matured or 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.  In the  event  that a
purchase money note remains  unpaid upon  maturity,  the noteholder may have the
right  to  foreclose  on  the  Partnership's   interest  in  the  related  Local
Partnership.  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 38.6%.
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.

     Interest  expense on the  Partnership's  purchase money notes for the three
and nine month  periods  ended  September  30, 2002 was  $56,459  and  $169,375,
respectively,  and $201,050  and  $934,926 for the three and nine month  periods
ended  September 30, 2001,  respectively.  The accrued  interest  payable on the
purchase  money notes of $1,688,191  and $1,518,816 as of September 30, 2002 and
December 31, 2001, 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 agreement.

                               Paradise Foothills
                               ------------------

     The  Partnership  defaulted on its purchase money note relating to Paradise
Foothills  when the note  matured on January  30,  1996,  and was not paid.  The
default amount included principal and accrued interest of $230,000 and $371,464,
respectively. As of November 1, 2002, principal and accrued interest of $230,000
and $915,155,  respectively,  were due. The Managing General Partner proposed an
extension  of the  purchase  money  note  maturity  date  until  May  31,  2003,
coterminous with the expiration of the related Local  Partnership's  provisional
workout  agreement  related to its mortgage  loan.  As of November 1, 2002,  the
Managing  General Partner  continues to await a response from the purchase money
noteholder.  There is no assurance that the Managing  General Partner will reach
an agreement of any kind with the  noteholder.  The  Partnership did not receive
any  distributions  from Paradise  Foothills during the nine month periods ended
September  30,  2002 and 2001,  nor was there any  income or loss from the Local
Partnership  included in share of income from  partnerships in the statements of
operations for the periods then ended.

                                       -5-

<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2002 and 2001

                                   (Unaudited)


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

     The local managing  general  partner is exploring  options to refinance the
mortgage loan. As of November 1, 2002, the local  managing  general  partner has
not received a commitment for a refinancing.

     The  amount  due to a  local  general  partner  of  Paradise  Foothills  of
$174,600,  plus accrued  interest of $75,400 at September 30, 2002, will be paid
upon the occurrence of specified events, as outlined in the Local  Partnership's
partnership agreement.

                                 Willow Creek II
                                 ---------------

     The Partnership defaulted on its two purchase money notes related to Willow
Creek II on  January  14,  2001 when the notes  matured  and were not paid.  The
default amount included  aggregate  principal and accrued interest of $1,475,000
and $7,583,743,  respectively.  In September 2001, the Partnership  paid off the
notes at a discount.  The discounted payoff resulted in gain from extinguishment
of debt of $5,190,030 for financial  statement  purposes and in  cancellation of
indebtedness income of $5,190,030 for federal tax purposes in 2001.

b.   Additional investment in Local Partnership
     ------------------------------------------

     The Partnership has an investment in Sheridan West L.P. (Semper), the Local
Partnership which owns Semper Village Apartments in Westminster,  Colorado.  The
Local Partnership, in turn, was the maker of two purchase money notes related to
the acquisition of the property. The security for these two purchase money notes
included the  Partnership's  limited partner interest in Semper.  In conjunction
with the discounted  payoff of these two purchase money notes, in December 2000,
the Partnership agreed to make an additional  investment in Semper in the amount
of $574,000,  which amount was disbursed to Semper in January 2001.  Semper,  in
turn,  paid off the two purchase  money notes at a discount in January 2001. The
discounted   payoff  of  the  purchase   money  notes   resulted  in  gain  from
extinguishment of debt of $46,915 for financial statement purposes in 2001.

     The  Partnership  also  agreed to  purchase  for $1,000  the 0.01%  general
partner  interest in Semper held by the  developer  and original  local  general
partner of Semper.  This agreement was made in December 2000, and the funds were
disbursed in January 2001. The Local Partnership has converted the 0.01% general
partner interest to a limited partner  interest,  so the Partnership now holds a
99.00% limited partner interest in Semper.

c.   Advance to Local Partnership
     ----------------------------

     Mesa  Partners  Limited  Partnership  (The Pointe),  which owns  apartments
located in El Paso,  Texas,  modified its mortgage  loan in 1987.  In connection
with the mortgage loan  modification,  the Partnership  advanced $262,500 to the
Local  Partnership  in 1987.  Repayment of this advance,  which  accrues  simple
interest  at  nine  percent  per  annum,  is  expected  to  occur  upon  sale or
refinancing of the property's  mortgage loan, which matures July 10, 2003. As of
September  30, 2002 and December 31, 2001,  accrued  interest on the advance was
$358,032 and $340,313, respectively.

                                       -6-

<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2002 and 2001

                                   (Unaudited)


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

d.   Summarized financial information
     --------------------------------

     Combined  statements of operations for the four Local Partnerships in which
the  Partnership  was invested as of September  30, 2002 and 2001,  follow.  The
combined  statements  have  been  compiled  from  information  supplied  by  the
management agents of the projects and are unaudited.


                        COMBINED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                 For the three months ended        For the nine months ended
                                                       September 30,                     September 30,
                                                 --------------------------        -------------------------
                                                    2002             2001             2002            2001
                                                 ----------       ----------       ----------      ----------
          <S>                                    <C>              <C>              <C>             <C>
          Revenue:
            Rental                               $1,497,670       $1,545,730       $4,536,449      $4,633,868
            Other                                   109,375           98,643          281,990         290,335
                                                 ----------       ----------       ----------      ----------

               Total revenue                      1,607,045        1,644,373        4,818,439       4,924,203
                                                 ----------       ----------       ----------      ----------

          Expenses:
            Operating                               854,650          783,543        2,291,211       2,296,627
            Interest                                496,488          507,926        1,489,471       1,523,779
            Depreciation and amortization           283,953          277,160          851,861         831,487
                                                 ----------       ----------       ----------      ----------

               Total expenses                     1,635,091        1,568,629        4,632,543       4,651,893
                                                 ----------       ----------       ----------      ----------

          Net (loss) income                      $  (28,046)      $   75,744       $  185,896      $  272,310
                                                 ==========       ==========       ==========      ==========
</TABLE>


     As of September 30, 2002 and 2001,  the  Partnership's  share of cumulative
losses  to date for two of the Local  Partnerships  exceeded  the  amount of the
Partnership's  investments  in and  advances  to  those  Local  Partnerships  by
$6,968,772  and  $6,724,934,  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.   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 $25,773 and
$70,623  for the  three  and  nine  month  periods  ended  September  30,  2002,
respectively, and $17,180 and $69,012 for the three and nine month periods ended
September  30, 2001,  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.

                                       -7-

<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                           September 30, 2002 and 2001

                                   (Unaudited)


3.   RELATED PARTY TRANSACTIONS - Continued

     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 $24,480 for
each of the three month periods ended  September 30, 2002 and 2001,  and $73,440
for each of the nine month periods ended September 30, 2002 and 2001.

                                      # # #

                                       -8-

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

     Capital  Realty  Investors-85   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.

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

     The Partnership's liquidity, with unrestricted cash resources of $3,875,992
as of September 30, 2002, along with anticipated  future cash distributions from
Local  Partnerships,  is  expected  to be  adequate  to  meet  its  current  and
anticipated operating cash needs. As of November 1, 2002, 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  $873,000  plus  aggregate  accrued  interest  of  $1,688,191  as of
September  30,  2002,  are  payable  in full upon the  earliest  of: (i) sale or
refinancing of the respective Local Partnership's rental property;  (ii) payment
in full of the respective Local Partnership's permanent loan; or (iii) maturity.
The  purchase  money  note  related  to  Paradise  Associates,   L.P.  (Paradise
Foothills),  in the principal  amount of $230,000,  matured on January 30, 1996,
but has not been paid or  extended.  The  purchase  money  note  related to Mesa
Partners Limited  Partnership (The Pointe), in the principal amount of $643,000,
matures  June 30,  2003.  See Note  2.a.  of the notes to  financial  statements
contained  in Part I, Item 1,  hereof,  for  additional  information  concerning
purchase money notes.

     The purchase money notes,  which are  nonrecourse to the  Partnership,  are
generally  secured  by  the  Partnership's  interest  in  the  respective  Local
Partnerships.  There is no assurance  that the underlying  properties  will have
sufficient appreciation and equity to enable the Partnership to pay the purchase
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 matured or 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 matured or 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.  In the  event  that a
purchase money note remains  unpaid upon  maturity,  the noteholder may have the
right  to  foreclose  on  the  Partnership's   interest  in  the  related  Local
Partnership.  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 38.6%.
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.

                                       -9-

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

     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, or
refinancing   the  respective   properties'   underlying   debt  and  using  the
Partnership's  share of the  proceeds  to pay off or pay down  certain  purchase
money note obligations.

     Included in due on investments in  partnerships  is $174,600 due to a local
general  partner  related to Paradise  Foothills at both  September 30, 2002 and
2001;  accrued  interest  payable thereon was $75,400 at both September 30, 2002
and 2001.  These amounts will be paid upon the  occurrence of certain  specified
events, as outlined in the respective Local Partnership's partnership agreement.

     The Partnership closely monitors its cash flow and liquidity position in an
effort to ensure that sufficient  cash is available for operating  requirements.
For the nine month period ended September 30, 2002, the receipt of distributions
from Local Partnerships was adequate to support operating cash requirements; for
the nine month period ended September 30, 2001,  operating  activities  provided
positive cash flow. Cash and cash  equivalents  increased  during the nine month
period ended  September  30, 2002,  as the receipt of  distributions  from Local
Partnerships exceeded net cash used in operating activities.

     The  Managing  General  Partner  currently  intends  to  retain  all of the
Partnership's   remaining   undistributed  cash  for  the  possible   repayment,
prepayment or retirement of the Partnership's  outstanding  purchase money notes
related  to  the  Local  Partnerships,  and  for  operating  cash  reserves.  No
distributions  were  declared or paid by the  Partnership  during the nine month
period ended September 30, 2002.

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

     The Partnership's net income for the three month period ended September 30,
2002, decreased from the corresponding period in 2001 primarily due to gain from
extinguishment  of debt  related to Sheridan  West L.P.  (Semper) in 2001.  Also
contributing  to the decrease in net income were a decrease in interest  revenue
due to lower cash and cash equivalent balances and lower interest rates in 2002,
an increase in general and administrative  expenses related to higher reimbursed
payroll costs,  and an increase in professional  fees due to higher audit costs.
Partially  offsetting the decrease in the Partnership's net income for the three
month period ended  September 30, 2002, were an increase in share of income from
partnerships  due to  increase  in basis  related to Semper  and a  decrease  in
interest expense related to the payoff of two purchase money notes in 2001.

     The  Partnership's net income for the nine month period ended September 30,
2002, decreased from the corresponding period in 2001 primarily due to gain from
extinguishment  of debt related to Semper in 2001, and also due to a decrease in
share of income from  partnerships as a result of a decrease in rental income at
one property,  a decrease in interest  revenue,  and an increase in professional
fees, as discussed above. Partially offsetting the decrease in the Partnership's
net income for the nine month period ended  September 30, 2002,  were a decrease
in interest  expense,  also as discussed above, and a slight decrease in general
and administrative expenses.

     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

                                      -10-

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

and nine month  periods  ended  September  30,  2002 did not  include  losses of
$71,267 and $192,668,  respectively,  compared to excluded losses of $60,697 and
$182,098  for the  three  and nine  month  periods  ended  September  30,  2001,
respectively.

     No other  significant  changes in the  Partnership's  operations have taken
place during the nine month period ended September 30, 2002.


Item 3. Controls and Procedures
        -----------------------

     In October 2002,  representatives  of the Managing  General  Partner of the
Partnership  carried out an  evaluation of the  effectiveness  of the design and
operation of the Partnership's  disclosure controls and procedures,  pursuant to
Exchange Act Rules 13a-14 and 15d-14.  Based on that  evaluation,  the Principal
Executive   Officer  and  Principal   Financial   Officer   concluded  that  the
Partnership's  disclosure  controls and procedures are effective to timely alert
them to any  material  information  relating  to the  Partnership  that  must be
included in the Partnership's periodic SEC filings. In addition, there have been
no  significant  changes  in the  Partnership's  internal  controls  or in other
factors that could significantly affect internal controls subsequent to the date
of the most recent evaluation.


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 default on certain
purchase money notes.


Item 5. Other Information
        -----------------

     There is no  established  market for the  purchase  and sale of  Beneficial
Assignee  Certificates  (BACs),   although  various  informal  secondary  market
services exist. Due to the limited markets, however,  investors may be unable to
sell or otherwise dispose of their BACs.

                                  Tender offers
                                  -------------

     On January 26, 2001,  Equity Resources  Lexington Fund Limited  Partnership
(Lexington)  initiated an unregistered tender offer to purchase up to 994 of the
outstanding  BAC units at a price of $125 per unit;  the offer expired  February
26, 2001. On April 23, 2001, Lexington initiated an unregistered tender offer to
purchase up to 589 of the outstanding BAC units at a price of $150 per unit; the
offer  expired  May  22,  2001.  On  June  22,  2001,   Lexington  initiated  an
unregistered  tender offer to purchase up to 330 of the outstanding BAC units at
a price of $225  per  unit;  the  offer  expired  July 22,  2001.  Lexington  is
unaffiliated  with the Partnership or the Managing General  Partner.  The prices
offered  were  determined  solely  at the  discretion  of  Lexington  and do not
necessarily represent the fair market value of each BAC.

     On May 14, 2001,  Bond Purchase,  L.L.C.  (Bond)  initiated an unregistered
tender offer to purchase up to 1,000 of the  outstanding BAC units at a price of
$156 per unit;  the offer expired  September 30, 2001. On October 4, 2001,  Bond
initiated an unregistered  tender offer to purchase up to 930 of the outstanding
BAC units at a price of $247 per unit; the offer expired November 15, 2001. Bond
is unaffiliated with the Partnership or the Managing General Partner. The prices
offered were determined  solely at the discretion of Bond and do not necessarily
represent the fair market value of each BAC.

                                      -11-

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

     Although  previously  the Managing  General  Partner had not  expressed any
opinion toward any offer for the purchase of BACs such as those described above,
on May 25, 2001, and July 9, 2001, the Managing  General Partner sent letters to
all BAC holders  recommending  that the May 14 tender offer by Bond and the June
22 tender offer by Lexington be rejected as inadequate in price.

     On June 8, 2001, Peachtree Partners  (Peachtree)  initiated an unregistered
tender  offer to  purchase a limited  number of the  outstanding  BAC units at a
price  of  $200  per  unit;  the  offer  expired  July  6,  2001.  Peachtree  in
unaffiliated  with the Partnership or 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 BAC.

     During 2001, a number of investors sold their BAC units in the  Partnership
to other investors, as a result of unregistered tender offers. If more than five
percent of the total  outstanding  BAC units in the  Partnership are transferred
due to sale in any one calendar year (not counting  certain  exempt  transfers),
the  Partnership  could  be  taxed  as a  "publicly  traded  partnership,"  with
potentially  severe tax  implications  for the  Partnership  and its  investors.
Specifically,  the Partnership  could be taxed as a corporation  and, if so, the
income and losses from the  Partnership  would no longer be considered a passive
activity.  From January 1, 2001, through June 27, 2001, the Partnership received
sale  transfer  requests for  approximately  4.6% of the total  outstanding  BAC
units.  Accordingly,  to remain  within the five percent safe harbor,  effective
June 27, 2001, the Managing General Partner halted  recognition of any transfers
that would exceed the safe harbor limit through  December 31, 2001. As a result,
transfers of BAC units due to sales  transactions  were not being  recognized by
the Partnership between June 28, 2001 and December 31, 2001. The halt was lifted
effective  January 1, 2002.  For the calendar year 2002 to November 1, 2002, BAC
units  transferred  have  not  exceeded  4.9%  of the  total  outstanding  BACs;
therefore, the Partnership has not halted recognition of transfers.


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

     a.   Exhibits

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

              99                Certification of Periodic Financial Report
                                Pursuant to 18 U.S.C. Section 1350

     b.   No reports of on Form 8-K were  filed with the  Commission  during the
          quarter ended September 30, 2002.

All other Items are not applicable.

                                      -12-

<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-85 LIMITED
                                    PARTNERSHIP
                                  ----------------------------------------------
                                  (Registrant)

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




November 1, 2002                       by: /s/Michael J. Tuszka
----------------                           -------------------------------------
DATE                                       Michael J. Tuszka
                                             Vice President
                                             and Chief Accounting Officer
                                             (Principal Financial Officer
                                             and Principal Accounting Officer)

                                      -13-

<PAGE>



                        CERTIFICATION OF QUARTERLY REPORT
  PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE
                           SARBANES-OXLEY ACT OF 2002


     I, Michael J. Tuszka, certify that:

     1.   I have reviewed this quarterly report on Form 10-QSB of CAPITAL REALTY
          INVESTORS-85 LIMITED PARTNERSHIP;

     2.   Based on my  knowledge,  this  quarterly  report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this quarterly report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this quarterly report;

     4.   The registrant's  other certifying  officers and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities,  particularly  during  the  period in which  this  quarterly
          report is being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee of the  registrant's  board of directors  (or persons
          performing the equivalent functions):

     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,  summarize,  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and


                                      -14-

<PAGE>

     6.   The  registrant's  other  certifying  officers and I have indicated in
          this quarterly report whether or not there were significant changes in
          internal controls or in other factors that could significantly  affect
          internal   controls   subsequent  to  the  date  of  our  most  recent
          evaluation,   including   any   corrective   actions  with  regard  to
          significant deficiencies and material weaknesses.


                                    CAPITAL REALTY INVESTORS-85
                                      LIMITED PARTNERSHIP
                                    --------------------------------------------
                                    (Issuer)

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



November 1, 2002                         by:  /s/Michael J. Tuszka
----------------                              ----------------------------------
DATE                                          Michael J. Tuszka,
                                                Vice President
                                                and Chief Accounting Officer
                                                (Principal Financial Officer)


     This  certification  is made solely for purpose of 18 U.S.C.  Section 1350,
subject  to the  knowledge  standard  contained  therein,  and not for any other
purpose.

                                      -15-

<PAGE>
                        CERTIFICATION OF QUARTERLY REPORT
  PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE
                           SARBANES-OXLEY ACT OF 2002


     I, William B. Dockser, certify that:

     1.   I have reviewed this quarterly report on Form 10-QSB of CAPITAL REALTY
          INVESTORS-85 LIMITED PARTNERSHIP;

     2.   Based on my  knowledge,  this  quarterly  report  does not contain any
          untrue  statement of a material  fact or omit to state a material fact
          necessary to make the statements  made, in light of the  circumstances
          under which such  statements were made, not misleading with respect to
          the period covered by this quarterly report;

     3.   Based on my knowledge,  the financial statements,  and other financial
          information  included in this quarterly report,  fairly present in all
          material respects the financial  condition,  results of operations and
          cash flows of the registrant as of, and for, the periods  presented in
          this quarterly report;

     4.   The registrant's  other certifying  officers and I are responsible for
          establishing  and maintaining  disclosure  controls and procedures (as
          defined in Exchange  Act Rules  13a-14 and 15d-14) for the  registrant
          and have:

     a)   designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating  to  the  registrant,   including  its
          consolidated subsidiaries,  is made known to us by others within those
          entities, particularly during the period in which the periodic reports
          are being prepared;

     b)   evaluated the  effectiveness of the registrant's  disclosure  controls
          and procedures as of a date within 90 days prior to the filing date of
          this quarterly report (the "Evaluation Date"); and

     c)   presented  in  this  quarterly   report  our  conclusions   about  the
          effectiveness  of the disclosure  controls and procedures based on our
          evaluation as of the Evaluation Date;

     5.   The registrant's other certifying officers and I have disclosed, based
          on our most recent  evaluation,  to the registrant's  auditors and the
          audit  committee of the  registrant's  board of directors  (or persons
          performing the equivalent functions):


     a)   all  significant  deficiencies  in the design or operation of internal
          controls  which could  adversely  affect the  registrant's  ability to
          record,  process,  summarize,  and  report  financial  data  and  have
          identified for the  registrant's  auditors any material  weaknesses in
          internal controls; and

     b)   any fraud, whether or not material,  that involves management or other
          employees who have a  significant  role in the  registrant's  internal
          controls; and

                                      -16-

<PAGE>

     6.   The  registrant's  other  certifying  officers and I have indicated in
          this quarterly report whether or not there were significant changes in
          internal controls or in other factors that could significantly  affect
          internal   controls   subsequent  to  the  date  of  our  most  recent
          evaluation,   including   any   corrective   actions  with  regard  to
          significant deficiencies and material weaknesses.


                                    CAPITAL REALTY INVESTORS-85
                                      LIMITED PARTNERSHIP
                                    --------------------------------------------
                                    (Issuer)

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



November 1, 2002                         by:  /s/William B. Dockser
----------------                              ----------------------------------
DATE                                          William B. Dockser,
                                                Director, Chairman of the Board,
                                                and Treasurer
                                                (Principal Executive Officer)


     This  certification  is made solely for purpose of 18 U.S.C.  Section 1350,
subject  to the  knowledge  standard  contained  therein,  and not for any other
purpose.



                                      -17-