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


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


For the quarterly period ended     March 31, 1998
                                   --------------

Commission file number                0-23766
                                   --------------


                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP
   --------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)



          Maryland                                      52-1388957
------------------------------------              ------------------------
(State or other jurisdiction of                   (I.R.S. Employer
incorporation or organization)                    Identification No.)



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



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


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

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


     Not applicable                            Not applicable
--------------------------         ---------------------------------------
        (Class)                       (Outstanding at March 31, 1998)
<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                              INDEX TO FORM 10-QSB

                      FOR THE QUARTER ENDED MARCH 31, 1998



                                                                 Page
                                                                 ----

PART I.   Financial Information (Unaudited)

Item 1.   Financial Statements

          Consolidated Balance Sheets - March 31, 1998 and
            December 31, 1997 . . . . . . . . . . . . . . . .        1

          Consolidated Statements of Operations - for the
            three months ended March 31, 1998 and 1997  . . .        2

          Consolidated Statements of Cash Flows - for the
            three months ended March 31, 1998 and 1997  . . .        3

          Notes to Consolidated Financial Statements  . . . .        4

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

PART II.  Other Information

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

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

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

Exhibit Index   . . . . . . . . . . . . . . . . . . . . . . .       14
<PAGE>
PART I.   FINANCIAL INFORMATION
          ---------------------
ITEM 1.   FINANCIAL STATEMENTS
          --------------------

                  CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                            CONSOLIDATED BALANCE SHEETS

                                     ASSETS


<TABLE>
<CAPTION>
                                                                                                March 31,      December 31,
                                                                                                  1998            1997
                                                                                              -------------    ------------
                                                                                               (Unaudited)
<S>                                                                                           <C>              <C>
Investments in and advances to partnerships                                                   $     513,479    $     612,145
Cash and cash equivalents                                                                         1,884,356        1,798,455
Acquisition fees, principally paid to related parties, net of
  accumulated amortization of $119,638 and $117,156,
  respectively                                                                                      178,263          180,745
Property purchase costs, net of accumulated amortization of
  $120,331 and $117,875, respectively                                                               174,357          176,813
Other assets                                                                                          4,377            5,900
                                                                                              -------------    -------------

      Total assets                                                                            $   2,754,832    $   2,774,058
                                                                                              =============    =============

                      LIABILITIES AND PARTNERS' DEFICIT

Due on investments in partnerships                                                            $   2,522,600    $   2,522,600
Accrued interest payable                                                                          5,718,416        5,495,200
Accounts payable and accrued expenses                                                                56,384           56,987
                                                                                              -------------    -------------
      Total liabilities                                                                           8,297,400        8,074,787
                                                                                              -------------    -------------
Commitments and contingencies

Partners' capital (deficit):

  Capital paid in:
    General Partners                                                                                  2,000            2,000
    Limited Partners                                                                             21,202,500       21,202,500
                                                                                              -------------    -------------
                                                                                                 21,204,500       21,204,500

  Less:
    Offering costs                                                                               (2,570,535)      (2,570,535)
    Accumulated losses                                                                          (24,176,533)     (23,934,694)
                                                                                              -------------    -------------
      Total partners' deficit                                                                    (5,542,568)      (5,300,729)
                                                                                              -------------    -------------

      Total liabilities and partners' deficit                                                 $   2,754,832    $   2,774,058
                                                                                              =============    =============
</TABLE>

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

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

                  CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                                               For the three months ended
                                                                                                        March 31,
                                                                                              ----------------------------
                                                                                                  1998             1997
                                                                                              ------------     ------------
<S>                                                                                           <C>              <C>
Share of income from partnerships                                                             $     32,557     $     51,023
                                                                                              ------------     ------------
Other revenue and expenses:
  Revenue:
    Interest and other income                                                                       28,017           58,228
                                                                                              ------------     ------------
  Expenses:
    Interest                                                                                       223,216          240,290
    General and administrative                                                                      28,250           38,236
    Management fee                                                                                  24,482           24,482
    Professional fees                                                                               21,527           15,785
    Amortization                                                                                     4,938            4,939
                                                                                              ------------     ------------
                                                                                                   302,413          323,732
                                                                                              ------------     ------------
       Total other revenue and expenses                                                           (274,396)        (265,504)
                                                                                              ------------     ------------

Net loss before extraordinary gain on disposition
  of investment in partnership or forgiveness of accrued interest                                 (241,839)        (214,481)

Extraordinary gain on disposition of investment
  in partnership or forgiveness of accrued interest                                                     --        2,727,260
                                                                                              ------------     ------------
Net (loss) income                                                                                 (241,839)       2,512,779

Accumulated losses, beginning of period                                                        (23,934,694)     (26,162,735)
                                                                                              ------------     ------------
Accumulated losses, end of period                                                             $(24,176,533)    $(23,649,956)
                                                                                              ============     ============

(Loss) income allocated to General Partners (1.51%)                                           $     (3,652)    $     37,943
                                                                                              ============     ============
(Loss) income allocated to Initial and Special Limited Partners (2.49%)                       $     (6,022)    $     62,568
                                                                                              ============     ============

(Loss) income allocated to BAC Holders (96%)                                                  $   (232,165)    $  2,412,268
                                                                                              ============     ============

(Loss) income per BAC based on 21,195 BACs outstanding                                        $     (10.95)    $     113.81
                                                                                              ============     ============
</TABLE>

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

                                   - 2 -
<PAGE>
PART I.   FINANCIAL INFORMATION
          ---------------------
ITEM 1.   FINANCIAL STATEMENTS
          --------------------

                  CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                (Unaudited)

<TABLE>
<CAPTION>

                                                                                               For the three months ended
                                                                                                        March 31,
                                                                                              ----------------------------
                                                                                                  1998             1997
                                                                                              ------------     ------------
<S>                                                                                           <C>              <C>
Cash flows from operating activities:
  Net (loss) income                                                                           $   (241,839)    $  2,512,779

  Adjustments to reconcile net income to net cash used in operating
    activities:
    Share of income from partnerships                                                              (32,557)         (51,023)
    Increase in accrued interest receivable on advances to
      partnerships                                                                                  (5,907)          (5,905)
    Amortization of deferred costs                                                                   4,938            4,939
    Payment of purchase money note interest                                                             --         (122,888)
    Extraordinary gain on disposition of investment in partnership                                      --       (2,727,260)

    Changes in assets and liabilities:
      Decrease in other assets                                                                       1,523            1,468
      Increase in accrued interest payable                                                         223,216          240,290
      (Decrease) increase in accounts payable and accrued expenses                                    (603)          14,460
                                                                                              ------------     ------------
         Net cash used in operating activities                                                     (51,229)        (133,140)
                                                                                              ------------     ------------
Cash flows from investing activities:
  Receipt of distributions from partnerships                                                        98,781          122,888
  Repayment of advances from partnerships                                                           38,349               --
                                                                                              ------------     ------------
         Net cash provided by investing activities                                                 137,130          122,888
                                                                                              ------------     ------------

Net increase (decrease) in cash and cash equivalents                                                85,901          (10,252)

Cash and cash equivalents, beginning of period                                                   1,798,455        1,266,939
                                                                                              ------------     ------------

Cash and cash equivalents, end of period                                                      $  1,884,356     $  1,256,687
                                                                                              ============     ============


Supplemental disclosure of cash flow information:
  Cash paid during the year for interest                                                      $         --     $    122,888
                                                                                              ============     ============

</TABLE>

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

                                     - 3 -
<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (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 March 31, 1998, and the results of its operations and its cash flows for the
three months ended March 31, 1998 and 1997.  The results of operations for the
interim period ended March 31, 1998, are not necessarily indicative of the
results to be expected for the full year.

     The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles and with the
instructions to Form 10-QSB.  Certain information and accounting policies and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such instructions.  These condensed financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Partnership's annual report on Form 10-K at December 31, 1997.


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

     The Partnership's obligations with respect to its investments in Local
Partnerships, in the form of purchase money notes having a principal balance of
$2,348,000 plus accrued interest of $5,643,016 as of March 31, 1998, are payable
in full upon the earliest of: (1) sale or refinancing of the respective Local
Partnership's rental property; (2) payment in full of the respective Local
Partnership's permanent loan; or (3) maturity.  A purchase money note in the
principal amount of $230,000 matured on January 30, 1996 but has not been paid
or extended.  Purchase money notes having a principal balance of $250,000 and
$1,250,000 matured on January 1, 1997 and February 1, 1997, respectively, and
the Partnership's obligation with respect to these notes has been satisfied. 
The remaining purchase money notes mature from 2001 to 2003. 

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



                                       -4-
<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

     Interest expense on the Partnership's purchase money notes for the three
months ended March 31, 1998 and 1997 was $223,216 and $240,290, respectively. 
The accrued interest on the purchase money notes of $5,643,016 and $5,419,800 as
of March 31, 1998 and December 31, 1997, respectively, is due on the respective
maturity dates of the purchase money notes or earlier, in some instances, if the
pertinent Local Partnership has distributable net cash flow, as defined in the
relevant Local Partnership agreements.

                                    Deerfield
                                    ---------

     Deerfield Partners Limited Partnership (Deerfield) was unable to generate
sufficient cash flow to pay its debt service and therefore was unable to meet
its obligations under the terms of its mortgage loan.  The Local Partnership
defaulted on its mortgage loan in 1990.  On November 16, 1995, the Local
Partnership received a notice of default, acceleration and assignment of rents
from the mortgagee.  On February, 27, 1996, Deerfield entered into a term sheet
agreement with the mortgagee pursuant to which Deerfield transferred management
of the property to the mortgagee on April 1, 1996.  Additionally, pursuant to
the term sheet agreement, Deerfield agreed, at the mortgagee's election, to
either voluntarily transfer ownership of the property to the mortgagee, or not
oppose a foreclosure action, occurring no earlier than January 6, 1997, without
further consideration, if the mortgage loan default had not been cured by that
date.  On January 7, 1997, in accordance with the term sheet agreement, the
mortgagee foreclosed on the property.

     The Partnership defaulted on its purchase money notes relating to Deerfield
when the notes matured on January 1, 1997 and were not paid.  The default amount
included principal and accrued interest of $250,000 and $623,068, respectively. 
Since the purchase money notes were nonrecourse and secured solely by the
Partnership's interest in the related Local Partnership, the Partnership's
obligation regarding the purchase money notes was retired in conjunction with
the transfer of ownership in Deerfield to the mortgagee, as discussed above. 
The Partnership's investment in Deerfield had previously been reduced to zero as
a result of losses from the Local Partnership during prior years.  Acquisition
fees and property purchase costs relating to Deerfield were previously fully
amortized in order to record the investment at its net realizable value.  As a
result of the foreclosure on the Deerfield property, the Partnership's purchase
money note obligation was forgiven and resulted in a net financial statement
gain of approximately $875,000.  The federal tax gain was approximately $2.4
million.
                               Paradise Foothills
                               ------------------

     The Partnership defaulted on its purchase money note relating to Paradise
Associates, L.P. (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 April 30, 1998, principal and
accrued interest totaling $230,000 and $513,413, respectively, were due.  The
Managing General Partner made an offer for a nine-year extension, and as of
April 30, 1998, the Managing General Partner is awaiting 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.  Additionally,
the holder of the loan secured by the mortgage on Paradise Foothills has

                                       -5-
<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

attempted to terminate the provisional workout agreement related to the
property.  The Managing General Partner is disputing the purported termination,
and since July, 1997, has not received any response from the mortgagee.  Should
the purchase money noteholder or the mortgagee begin foreclosure proceedings on
the Partnership, the Managing General Partner intends to vigorously contest
against such action(s).  However, there can be no assurance that the Partnership
will be able to retain its interest in the Local Partnership.  The uncertainty
regarding the continued ownership of the Partnership's interest in the related
Local Partnership does not impact the Partnership's financial condition, as
discussed above.

                                   The Pointe
                                   ----------

     Mesa Partners Limited Partnership (The Pointe), located in El Paso, Texas,
modified its mortgage loan in 1987.  In connection with the loan modification,
the Partnership loaned $262,500 to the local Partnership in 1987.  Repayment of
this loan, with simple interest at 9% per annum, is expected to occur upon sale
or refinancing of the property.  As of March 31, 1998 and December 31, 1997,
accrued interest was $251,720 and $245,813, respectively.

                                   River Place
                                   -----------

     Purchase money notes relating to River Place, Ltd. (River Place) totaling
$2,500,000 plus accrued interest were originally scheduled to mature on December
31, 1995.  On December 27, 1995, the Managing General Partner entered into an
agreement with the noteholders which granted the noteholders three options to
purchase the Partnership's 98.99% limited partnership interest in River Place
over a two-year period.  Purchase money note interest of $821,528, which accrued
during 1995, was forgiven by the noteholders as part of the agreement.  During
1995 and 1996, the noteholders purchased a 9.9% and 39.6%, respectively,
interest in River Place from the Partnership in exchange for the forgiveness of
purchase money note principal and interest aggregating $1,250,000 and
$1,967,568, respectively.  

     On February 18, 1997, certain of the noteholders holding notes with an
outstanding principal and accrued interest balance of $650,000 and $1,348,641,
respectively, foreclosed on 25.73% of the Partnership's remaining 49.49%
interest in River Place, resulting in a net financial statement gain of
approximately $1.4 million, and a federal tax gain of approximately $1.9 million
in 1997.  On February 21, 1997, certain of the noteholders purchased the
Partnership's remaining 23.76% interest in River Place from the Partnership in
exchange for the forgiveness of purchase money note principal and accrued
interest of $600,000 and $434,616, respectively, resulting in a net financial
statement gain of approximately $468,000, and a federal tax gain of
approximately $900,000 in 1997.  As a result of the noteholders' purchase of the
Partnership's remaining interest in River Place, the Partnership no longer has
an ownership interest in the Local Partnership.  In accordance with the purchase
option agreement, CRHC, Inc., an affiliate of the Managing General Partner,





                                       -6-
<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                    (Unaudited)


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

transferred its .01% general partner interest in River Place to the noteholders
and/or their assignees.  Pursuant to the agreement, the noteholders or an
affiliate paid a fee into escrow to the Partnership of $35,000.  This fee, and
interest accrued thereon totaling $1,353, were released to the Partnership in
accordance with the purchase option agreement, on March 17, 1997.

                                   Springfield
                                   -----------

     The Partnership had previously made advances to Springfield Properties
Limited Partnership (Springfield) related to its mortgage loan.  The balance of
these loans, which was $38,349 as of December 31, 1997, was repaid to the
Partnership on March 13, 1998.

     The following are combined statements of operations for the Local
Partnerships in which the Partnership had invested as of March 31, 1998 and
1997, respectively.  The 1997 financial statements contain information for River
Place and Deerfield through the respective dates of sale and foreclosure.  The
statements are 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
                                                  March 31,
                                        -----------------------------
                                            1998             1997
                                        ------------     ------------
<S>                                     <C>              <C>
Revenue:
  Rental revenue                        $  2,025,849     $  2,158,679
  Other                                      107,387          103,618
                                        ------------     ------------
                                           2,133,236        2,262,297
                                        ------------     ------------

Expenses:
  Operating                                1,076,538        1,189,421
  Interest                                   783,074          761,802
  Depreciation and amortization              358,855          392,332
                                        ------------     ------------
                                           2,218,467        2,343,555
                                        ------------     ------------
Net loss                                $    (85,231)    $    (81,258)
                                        ============     ============

</TABLE>



                                       -7-
<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                   (Unaudited)


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

     As of both March 31, 1998 and December 31, 1997, the Partnership's share of
cumulative losses to date for four of the six Local Partnerships exceeds the
amount of the Partnership's investments in and advances to those Local
Partnerships by $7,639,534 and $7,522,459, 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
consolidated 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 managing the Partnership.  The Partnership paid $21,912 and $15,015 for the
three months ended March 31, 1998 and 1997, respectively, as direct reimburse-
ment of expenses incurred on behalf of the Partnership.  Such expenses are
included in the consolidated statements of operations as general and
administrative expenses.  Additionally, in accordance with the terms of the
Partnership Agreement, the Partnership is obligated to pay an annual incentive
management fee (the Management Fee) after all other expenses of the Partnership
are paid.  The Partnership paid the Managing General Partner a Management Fee of
$24,482 for each of the three month-periods ended March 31, 1998 and 1997.

































                                       -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 contains information that may be considered forward looking,
including statements regarding the effect of governmental regulations.  Actual
results may differ materially from those described in the forward looking
statements and will be affected by a variety of factors including national and
local economic conditions, the general level of interest rates, terms of
governmental regulations that affect the Partnership and interpretations of
those regulations, the competitive environment in which the Partnership
operates, and the availability of working capital.

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

     The Partnership's liquidity, with unrestricted cash resources of $1,884,356
and $1,798,455 as of March 31, 1998 and December 31, 1997, respectively, along
with future cash distributions from Local Partnerships, is expected to meet its
current and anticipated operating cash needs.  As of April 30, 1998, there are
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 a principal balance of
$2,348,000 plus accrued interest of $5,643,016 as of March 31, 1998, are payable
in full upon the earliest of: (1) sale or refinancing of the respective Local
Partnership's rental property; (2) payment in full of the respective Local
Partnership's permanent loan; or (3) maturity.  A purchase money note in the
principal amount of $230,000 matured on January 30, 1996 but has not been paid
or extended.  Purchase money notes having a principal balance of $250,000 and
$1,250,000 matured on January 1, 1997 and February 1, 1997, respectively, and
the Partnership's obligation with respect to these notes has been satisfied. 
The remaining purchase money notes mature from 2001 to 2003.  See the notes to
the consolidated financial statements for additional information pertaining to
these purchase money notes.

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


                                       -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, buying out certain purchase money notes at a
discounted price, extending the due dates of certain purchase money notes, or
refinancing the respective properties' underlying debt and using the
Partnership's share of the proceeds to pay or buy down certain purchase money
note obligations.  See  the notes to the consolidated financial statements for
alternatives relating to specific properties.

     The Partnership has determined that it is not practicable to estimate the
fair value of the purchase money notes, either individually or in the aggregate,
due to:  (1) the lack of an active market for this type of financial instrument,
(2) the variable nature of purchase money note interest payments as a result of
fluctuating cash flow distributions received from the related Local
Partnerships, and (3) the excessive costs associated with an independent
appraisal of the purchase money notes.

     As of March 31, 1998 and December 31, 1997, the Partnership's obligations
with respect to its investments in Local Partnerships included $174,600 due to
local general partners, plus accrued interest on these obligations of $75,400.

     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 three months ended March 31, 1998 and 1997, the receipt of distributions
from partnerships and existing cash resources were adequate to support operating
cash requirements.

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

     The Partnership incurred a net loss for the three months ended March 31,
1998 as opposed to net income during the corresponding period in 1997 primarily
due to the extraordinary gain on disposition of investment and forgiveness of
accrued interest related to the sale and foreclosure of the Partnership's
remaining interest in River Place and Deerfield during 1997, as discussed in the
notes to the consolidated financial statements.  Contributing to the increase in
the Partnership's net loss was a decrease in interest and other income primarily
due to the receipt of cash during 1997 which was previously held in escrow
related to River Place.

     For financial reporting purposes, the Partnership, as a limited partner in
the Local Partnerships, does not record losses from the Local Partnerships in
excess of its investment to the extent that the Partnership has no further
obligation to advance funds or provide financing to the Local Partnerships.  As
a result, the Partnership's recognized losses for the three months ended March
31, 1998 did not include losses of $117,075 compared to excluded losses of
$144,412 for the three months ended March 31, 1997.

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

     The Year 2000 ("Y2K") computer issue refers to the inability of many
computer systems in use today to recognize "00" in the date field as the year
2000 and to recognize the year 2000 as a leap year.  The Y2K problem arose
because, for many years, computer software programs, including programs embedded

                                      -10-
<PAGE>
PART I.   FINANCIAL INFORMATION
          ---------------------
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

in hardware, utilized only the last two digits to specify the year with the
assumption that the first two digits were "19."  As a result, such programs may
not be able to recognize and process dates beyond 1999; rather they may
recognize and  process "00," "01," "02," etc. incorrectly as 1900, 1901, 1902,
instead of as 2000, 2001, 2002.  In the opinion of computer experts, this could
cause such programs to create erroneous results, malfunction, or fail completely
unless corrective measures are taken.

     The Partnership utilizes software and related computer technologies
essential to its operations that will be affected by the Y2K issue.  The
Managing General Partner is studying what actions will be necessary to make its
computer systems Year 2000 compliant; certain upgrades are already scheduled. 
The expense associated with these actions cannot presently be determined, but
the Managing General Partner does not expect it to be material.


PART II.  OTHER INFORMATION
          -----------------
ITEM 3.   DEFAULTS UPON SENIOR SECURITIES
          -------------------------------

     The Partnership defaulted on its purchase money note relating to Paradise
Associates, L.P. (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 April 30, 1998, principal and
accrued interest totaling $230,000 and $513,413, respectively, were due.  The
Managing General Partner made an offer for a nine-year extension, and as of
April 30, 1998, the Managing General Partner is awaiting 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.  Additionally,
the holder of the loan secured by the mortgage on Paradise Foothills has
attempted to terminate the provisional workout agreement related to the
property.  The Managing General Partner is disputing the purported termination,
and since July, 1997, has not received any response from the mortgagee.  Should
the purchase money noteholder or the mortgagee begin foreclosure proceedings on
the Partnership, the Managing General Partner intends to vigorously contest
against such actions.  However, there can be no assurance that the Partnership
will be able to retain its interest in the Local Partnership.  The uncertainty
regarding the continued ownership of the Partnership's interest in the related
Local Partnership does not impact the Partnership's financial condition, as
discussed above.


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

     a.   None

     b.   No Reports on Form 8-K were filed with the Commission during the
          quarter ended March 31, 1998.

     All other items are not applicable.





                                      -11-
<PAGE>
                                   SIGNATURES


     In accordance with the requirements of the Exchange Act of 1934, 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



April 30, 1998               by: /s/ Michael J. Tuszka
-----------------                ---------------------------------
DATE                             Michael J. Tuszka
                                   Vice President
                                   and Chief Accounting Officer
                                   (Principal Financial Officer
                                   and Principal Accounting Officer)









































                                      -12-
<PAGE>


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


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

27        Financial Data Schedule         Filed herewith electronically






















































                                      -13-