<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     June 30, 1999
                                   -------------

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 June 30, 1999)
<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                              INDEX TO FORM 10-QSB

                       FOR THE QUARTER ENDED JUNE 30, 1999



                                                                 Page
                                                                 ----

PART I.   Financial Information

Item 1.   Financial Statements

          Consolidated Balance Sheets - June 30, 1999 and
            December 31, 1998 . . . . . . . . . . . . . . . .        1

          Consolidated Statements of Operations and Accumulated
            Losses - for the three and six months ended June 30,
            1999 and 1998 . . . . . . . . . . . . . . . . . .        2

          Consolidated Statements of Cash Flows - for the
            six months ended June 30, 1999 and 1998 . . . . .        3

          Notes to Consolidated Financial Statements - June 30, 1999
            and 1998  . . . . . . . . . . . . . . . . . . . .        4

Item 2.   Management's Discussion and Analysis of Financial
            Condition and Results of Operations . . . . . . .       10

PART II.  Other Information

Item 3.   Defaults Upon Senior Securities . . . . . . . . . .       13

Item 5.   Other Information . . . . . . . . . . . . . . . . .       14

Item 6.   Exhibits and Reports on Form 8-K  . . . . . . . . .       14

Signature   . . . . . . . . . . . . . . . . . . . . . . . . .       15

Exhibit Index   . . . . . . . . . . . . . . . . . . . . . . .       16
<PAGE>
PART I.   FINANCIAL INFORMATION
          ---------------------
ITEM 1.   FINANCIAL STATEMENTS
          --------------------

                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                          CONSOLIDATED BALANCE SHEETS

                                    ASSETS

<TABLE>
<CAPTION>
                                                                                                  June 30,      December 31,
                                                                                                    1999           1998
                                                                                                -------------   ------------
                                                                                                 (Unaudited)
<S>                                                                                             <C>             <C>
Investments in and advances to partnerships                                                     $     572,746   $     588,772
Investment in partnership held for sale                                                                32,397         208,549
Cash and cash equivalents                                                                           6,479,073       2,154,057
Acquisition fees, principally paid to related parties, net of
  accumulated amortization of $102,752 and $110,438, respectively                                     128,603         148,172
Property purchase costs, net of accumulated amortization of
  $93,487 and $103,963, respectively                                                                  115,274         135,960
Other assets                                                                                               --          55,663
                                                                                                -------------   -------------

      Total assets                                                                              $   7,328,093   $   3,291,173
                                                                                                =============   =============

                         LIABILITIES AND PARTNERS' DEFICIT

Due on investments in partnerships                                                              $   2,522,600   $   2,522,600
Accrued interest payable                                                                            7,079,421       6,506,531
Accounts payable and accrued expenses                                                                 128,884          77,909
                                                                                                -------------   -------------
      Total liabilities                                                                             9,730,905       9,107,040
                                                                                                -------------   -------------

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:
    Accumulated distributions to partners                                                          (2,496,644)             --
    Offering costs                                                                                 (2,570,535)     (2,570,535)
    Accumulated losses                                                                            (18,540,133)    (24,449,832)
                                                                                                -------------   -------------
      Total partners' deficit                                                                      (2,402,812)     (5,815,867)
                                                                                                -------------   -------------
      Total liabilities and partners' deficit                                                   $   7,328,093   $   3,291,173
                                                                                                =============   =============
</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

                                 AND ACCUMULATED LOSSES

                                      (Unaudited)
<TABLE>
<CAPTION>
                                                                  For the three months ended       For the six months ended
                                                                           June 30,                         June 30,
                                                                 ----------------------------    ----------------------------
                                                                     1999            1998            1999            1998
                                                                 ------------    ------------    ------------    ------------
<S>                                                              <C>             <C>             <C>             <C>
Share of income from partnerships                                $    253,924    $     96,142    $    359,636    $    128,699
                                                                 ------------    ------------    ------------    ------------
Other revenue and expenses:

  Revenue:
    Interest                                                          102,743          30,363         172,003          58,380
                                                                 ------------    ------------    ------------    ------------
  Expenses:
    Interest                                                          286,445         223,216         572,890         446,432
    General and administrative                                         40,739          28,916          81,234          57,166
    Management fee                                                     24,483          24,483          48,965          48,965
    Professional fees                                                  17,684          10,852          34,281          32,379
    Amortization of deferred costs                                      4,155           4,938           8,309           9,876
                                                                 ------------    ------------    ------------    ------------
                                                                      373,506         292,405         745,679         594,818
                                                                 ------------    ------------    ------------    ------------
      Total other revenue and expenses                               (270,763)       (262,042)       (573,676)       (536,438)
                                                                 ------------    ------------    ------------    ------------

Loss before gain on disposition of investment in partnership          (16,839)       (165,900)       (214,040)       (407,739)

Gain on disposition of investment in partnership                           --              --       6,123,739              --
                                                                 ------------    ------------    ------------    ------------
Net (loss) income                                                     (16,839)       (165,900)      5,909,699        (407,739)

Accumulated losses, beginning of period                           (18,523,294)    (24,176,533)    (24,449,832)    (23,934,694)
                                                                 ------------    ------------    ------------    ------------
Accumulated losses, end of period                                $(18,540,133)   $(24,342,433)   $(18,540,133)   $(24,342,433)
                                                                 ============    ============    ============    ============
Net (loss) income allocated to General Partners (1.51%)          $       (254)   $     (2,505)   $     89,236    $     (6,157)
                                                                 ============    ============    ============    ============
Net (loss) income allocated to Initial and Special
  Limited Partners (2.49%)                                       $       (419)   $     (4,131)   $    147,152    $    (10,153)
                                                                 ============    ============    ============    ============
Net (loss) income allocated to BAC Holders (96%)                 $    (16,166)   $   (159,264)   $  5,673,311    $   (391,429)
                                                                 ============    ============    ============    ============
Net (loss) income per BAC based on 21,158 and 21,195
  BACs outstanding at June 30, 1999 and 1998, respectively       $      (0.76)   $      (7.51)   $     268.14    $     (18.47)
                                                                 ============    ============    ============    ============
</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 six months ended
                                                                                                          June 30,
                                                                                                ----------------------------
                                                                                                    1999            1998
                                                                                                ------------    ------------
<S>                                                                                             <C>             <C>
Cash flows from operating activities:
  Net income (loss)                                                                             $  5,909,699    $    (407,739)

  Adjustments to reconcile net income (loss) to net cash provided by (used in)
    operating activities:
    Share of income from partnerships                                                               (359,636)       (128,699)
    Amortization of deferred costs                                                                     8,309           9,876
    Gain on disposition of investment in partnership                                              (6,123,739)             --

    Changes in assets and liabilities:
      Increase in accrued interest receivable on advances to
        partnerships                                                                                 (11,813)        (11,813)
      Decrease in other assets                                                                        55,663              66
      Increase in accrued interest payable                                                           572,890         446,432
      Increase in accounts payable and accrued expenses                                               50,975           5,282
                                                                                                ------------    ------------
         Net cash provided by (used in) operating activities                                         102,348         (86,595)
                                                                                                ------------    ------------

Cash flows from investing activities:
  Receipt of distributions from partnerships                                                         349,222         189,294
  Proceeds from disposition of investment in partnership                                           6,370,090              --
  Collection of advances made to local partnerships                                                       --          38,349
                                                                                                ------------    ------------
         Net cash provided by investing activities                                                 6,719,312         227,643
                                                                                                ------------    ------------

Cash flows from financing activities:
  Distribution to BAC Holders                                                                     (2,496,644)             --
                                                                                                ------------    ------------

Net increase in cash and cash equivalents                                                          4,325,016         141,048

Cash and cash equivalents, beginning of period                                                     2,154,057       1,798,455
                                                                                                ------------    ------------

Cash and cash equivalents, end of period                                                        $  6,479,073    $  1,939,503
                                                                                                ============    ============

</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

                             JUNE 30, 1999 AND 1998

                                   (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 June 30, 1999, and the results of its operations for the three and six months
ended June 30, 1999 and 1998, and its cash flows for the six months ended June
30, 1999 and 1998.  The results of operations for the interim period ended June
30, 1999, 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-KSB at December 31, 1998.


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

a.   Due on investments in 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 $7,004,021 as of June 30, 1999, 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.  The remaining purchase money notes mature in 2001 and 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 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 adversely impact the Partnership's
financial condition because the purchase money notes are nonrecourse and secured
solely by the Partnership's interest in the related Local Partnerships.
Therefore, should the investment in any of the Local Partnerships with maturing
purchase money notes not produce sufficient value to satisfy the related
purchase money notes, the Partnership's exposure to loss is limited because the
amount of the nonrecourse indebtedness of each of the maturing purchase money
notes exceeds the carrying amount of the investment in and advances to each of
the related Local Partnerships.  Thus, even a complete loss of one of these

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             JUNE 30, 1999 AND 1998

                                  (Unaudited)


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

Local Partnerships would not have a material adverse impact on the financial
condition of the Partnership.

     Interest expense on the Partnership's purchase money notes for the three
and six months ended June 30, 1999 was $286,445 and $572,890, respectively, and
$223,216 and $446,432 for the three and six months ended June 30, 1998,
respectively.  The accrued interest payable on the purchase money notes of
$7,004,021 and $6,431,131 as of June 30, 1999 and December 31, 1998, respect-
ively, 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
pertinent Local Partnership has distributable net cash flow, as defined in the
relevant Local Partnership agreements.

                               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 July 30, 1999, principal and accrued
interest totaling $230,000 and $609,705, respectively, were due.  The Managing
General Partner made an offer for 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 July 30, 1999, 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.  Should the
noteholder begin foreclosure proceedings on the Partnership's interest in the
Local Partnership, the Managing General Partner intends to vigorously contest
such action.  Due to a possible foreclosure by the noteholder, 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 adversely
impact the Partnership's financial condition, as discussed above.  In the event
of a foreclosure, the excess of the nonrecourse indebtedness over the carrying
amount of the Partnership's investment in the related Local Partnership would be
deemed cancellation of indebtedness income which would be taxable to Limited
Partners at a federal tax rate of up to 39.6%.  Additionally, in the event of a
foreclosure, the Partnership would lose its investment in the Local Partnership
and, likewise, its share of future cash flow distributed by the Local
Partnership from rental operations, sales or refinancings.  The Partnership did
not receive any distributions from Paradise Foothills during the six months
ended June 30, 1999 and 1998, and its aggregate share of income from this Local
Partnership was $0 and $0 for the three and six months ended June 30, 1999,
respectively, and $0 and $0 for the three and six months ended June 30, 1998,
respectively.







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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             JUNE 30, 1999 AND 1998

                                   (Unaudited)


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

b.   Advances to Local Partnerships
     ------------------------------

                                   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 June 30, 1999 and December 31, 1998,
accrued interest was $281,251 and $269,438, respectively.

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

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

c.   Property matters
     ----------------

                           Devonshire and Springfield
                           --------------------------

     During June 1998, the local managing general partners of Devonshire
Development Limited Partnership (Devonshire) and Springfield Properties Limited
Partnership (Springfield) received offers from third parties to purchase the
respective properties.  The local managing general partners of Devonshire and
Springfield entered into contracts to sell the respective properties to a real
estate investment trust (REIT) (in the case of Springfield) and the REIT's
affiliate (in the case of Devonshire) on or before January 15, 1999.  In
September 1998, prior to the expiration of the due diligence period, the
purchaser, in accordance with its rights under the sale contract, terminated the
sales contract for Devonshire.

     On January 22, 1999, pursuant to the Springfield sale contract,  the local
managing general partner sold Springfield Apartments, located in Redmond,
Washington, to ASN-Washington Holdings (1) Incorporated, an affiliate of the
REIT.  The sale resulted in a financial statement gain of approximately $6.1
million, an estimated Federal tax gain of approximately $9.4 million, and net
cash proceeds of approximately $6.4 million to the Partnership.  As a result of
the sale, CRICO of Springfield, Inc. (CRICO), the local managing general partner
of the Local Partnership and a wholly-owned affiliate of the Managing General
Partner, received an additional management fee of $615,524, pursuant to the
Local Partnership Agreement.

     Following the termination of the sales contract for Devonshire, on June 28,
1999, the local managing general partner of Devonshire entered into a contract
with a different, unrelated, third party to sell the property on or before

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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             JUNE 30, 1999 AND 1998

                                    (Unaudited)


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

September 15, 1999.  The contract is subject to normal and customary conditions.
For example, the contract is contingent upon the purchaser's satisfaction with
the results of its due diligence inspection and can be terminated by the
purchaser on or before August 12, 1999.  Further, since the property is
presently encumbered by a loan that cannot yet be prepaid, the contract is also
contingent upon the lender's consent to the purchaser's assumption of the loan.
There is no assurance that the sale of Devonshire will occur.  In the event of a
sale of this property, the Partnership's investment in and advances to
partnerships would be reduced accordingly.  Of the five and six Local
Partnerships in which the Partnership is invested as of June 30, 1999 and
December 31, 1998, respectively, Devonshire represented approximately 0% and 0%,
respectively, of the total investment in and advances to partnerships.  Total
operating cash flow distributions, in the amount of $101,781, received by the
Partnership from Devonshire during 1998 represented approximately 20% of total
operating cash flow distributions received during 1998; a partial operating cash
flow distribution, in the amount of $82,334, received by the Partnership from
Devonshire in May 1999 represented approximately 24% of total operating cash
flow distributions received through June 30, 1999.  The Partnership's share of
income from Devonshire was $26,789 and $53,577 for the three and six months
ended June 30, 1999, respectively, and $4,095 and $8,191 for the three and six
months ended June 30, 1998, respectively.

     Due to the impending and likely sale of the property related to the
Partnership's investment in Devonshire, the net unamortized amounts of
acquisition fees and property purchase costs related to Devonshire, which
totaled $32,397, have been reclassified to investment in partnership held for
sale in the accompanying consolidated balance sheet at June 30, 1999.

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

     Combined statements of operations for the five and six Local Partnerships
in which the Partnership is invested as of June 30, 1999 and 1998, respectively,
follow.  The combined statements have been compiled from information supplied by
the management agents of the projects and are unaudited.


















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

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             JUNE 30, 1999 AND 1998

                                  (Unaudited)


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

                         COMBINED STATEMENTS OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                  For the three months ended       For the six months ended
                                                                           June 30,                         June 30,
                                                                 -----------------------------   -----------------------------
                                                                     1999            1998            1999            1998
                                                                 ------------    ------------    ------------    ------------
<S>                                                              <C>             <C>             <C>             <C>
Revenue:
  Rental                                                         $  1,731,448    $  2,026,762    $  3,546,523    $  4,052,611
  Other                                                                91,370         115,567         190,070         222,954
                                                                 ------------    ------------    ------------    ------------
    Total revenue                                                   1,822,818       2,142,329       3,736,593       4,275,565
                                                                 ------------    ------------    ------------    ------------

Expenses:
  Operating                                                           893,994       1,020,557       1,840,009       2,097,095
  Interest                                                            628,083         783,072       1,307,576       1,566,146
  Depreciation and amortization                                       266,684         358,856         548,871         717,711
                                                                 ------------    ------------    ------------    ------------
    Total expenses                                                  1,788,761       2,162,485       3,696,456       4,380,952
                                                                 ------------    ------------    ------------    ------------
Net income (loss)                                                $     34,057    $    (20,156)   $     40,137    $   (105,387)
                                                                 ============    ============    ============    ============

</TABLE>

     As of June 30, 1999 and December 31, 1998, the Partnership's share of
cumulative losses to date for four of the five and six, respectively, Local
Partnerships exceeded the amount of the Partnership's investments in and
advances to those Local Partnerships by $7,184,160 and $6,984,364, 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 $29,290 and $58,834 for the
three and six months ended June 30, 1999, respectively and $21,652 and $43,564
for the three and six months ended June 30, 1998, respectively, as direct
reimbursement of expenses incurred on behalf of the Partnership.  Such expenses
are included in the accompanying 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 the Managing
General Partner an annual incentive management fee (the Management Fee) after
all other expenses of the Partnership are paid.  The Partnership paid the
Managing General Partner a Management Fee of $24,483 and $48,965 for the three

                                        -8-
<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                             JUNE 30, 1999 AND 1998

                                   (Unaudited)


3.   RELATED-PARTY TRANSACTIONS - Continued

and six months ended June 30, 1999, respectively, and like amounts for the three
and six months ended June 30, 1998, respectively.



















































                                       -9-
<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, 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 $6,479,073
($293.97 per BAC) and $2,154,057 ($97.57 per BAC) as of June 30, 1999 and
December 31, 1998, respectively, along with anticipated future cash
distributions from Local Partnerships, are expected to be adequate to meet its
current and anticipated operating cash needs.  As of July 30, 1999, 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 a principal balance of
$2,348,000 plus accrued interest of $7,004,021 as of June 30, 1999, 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.  The remaining purchase money notes mature in 2001 and 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 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 adversely impact the Partnership's
financial condition because the purchase money notes are nonrecourse and secured
solely by the Partnership's interest in the related Local Partnerships.
Therefore, should the investment in any of the Local Partnerships with maturing
purchase money notes not produce sufficient value to satisfy the related
purchase money notes, the Partnership's exposure to loss is limited because the
amount of the nonrecourse indebtedness of each of the maturing purchase money
notes exceeds the carrying amount of the investment in and advances to each of
the related Local Partnerships.  Thus, even a complete loss of one of these
Local Partnerships would not have a material adverse impact on the financial
condition of the Partnership.

     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

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

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.

     Included in due on investments in partnerships is $174,600 due to a local
general partner (related to Paradise Foothills) at both June 30, 1999 and
December 31, 1998; accrued interest payable thereon was $75,400 at both June 30,
1999 and December 31, 1998.  These amounts will be paid upon the occurrence of
certain specified events, as outlined in the respective partnership's 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 six months ended June 30, 1999 and 1998, the receipt of distributions
from partnerships was adequate to support operating cash requirements.  Cash and
cash equivalents increased during the six months ended June 30, 1999, primarily
due to proceeds received from the sale of Springfield Apartments, as discussed
in the notes to the consolidated financial statements, partially offset by a
distribution to BAC Holders on May 3, 1999.

     The Managing General Partner distributed $2,496,644 (or $118 per Beneficial
Assignee Certificate) to holders of BACs from the proceeds generated from the
sale of Springfield Apartments on May 3, 1999 to the holders of record as of
January 22, 1999.  The Managing General Partner currently intends to retain all
of the Partnership's remaining undistributed proceeds for the possible
repayment, prepayment or retirement of the Partnership's outstanding purchase
money notes related to the Local Partnerships; however, the Managing General
Partner will review this position later in 1999 if the sale of Devonshire occurs
in the third quarter of 1999.

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

     The Partnership's net loss for the three months ended June 30, 1999
decreased from the corresponding period in 1998 primarily due to an increase in
share of income from partnerships due to higher rental income and lower
operating expenses at one property and the receipt of distributions from Local
Partnerships in which the Partnership's investment had been previously reduced
to zero, and an increase in interest income due to higher cash and cash
equivalents balances during 1999 as a result of the receipt of proceeds from the
sale of Springfield Apartments.  Offsetting the decrease in the Partnership's
net loss were an increase in interest expense due to the compounding of
interest, and an increase in general and administrative expenses, primarily due
to an increase in payroll costs.

     The Partnership recognized net income for the six months ended June 30,
1999, as compared to a net loss during the corresponding period in 1998,
primarily due to gain on disposition of investment in partnership related to the
sale of the Partnership's interest in Springfield Apartments.  Contributing to
the Partnership's net income were increases in share of income from partnerships
and in interest income, both as discussed above.  Partially offsetting these
increases were increases in interest expense and general and administrative
expenses, also as discussed above.



                                      -11-
<PAGE>
PART I.   FINANCIAL INFORMATION
          ---------------------
ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          -------------------------------------------------
               CONDITION AND RESULTS OF OPERATIONS - Continued
               -----------------------------------

     For financial reporting purposes, the Partnership, as a limited partner in
the Local Partnerships, does not record losses from the Local Partnerships in
excess of its investment to the extent that the Partnership has no further
obligation to advance funds or provide financing to the Local Partnerships.  As
a result, the Partnership's recognized losses for the three and six months ended
June 30, 1999 did not include losses of $99,900 and $199,796, respectively,
compared to excluded losses of $117,074 and $234,149 for the three and six
months ended June 30, 1998, respectively.

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

     The Partnership utilizes software and related computer technologies
essential to its operations that will be affected by the Y2K issue.  To address
the issue, the Managing General Partner has developed and is currently
implementing a plan (the "Y2K Project") designed to ensure that the Y2K date
change will not have an adverse impact on the Partnership's operations.  The Y2K
Project is on schedule and the Managing General Partner expects completion by
the end of 1999.  The Y2K Project consists of four phases -- Planning,
Assessment, Implementation and Testing.  The Planning Phase began early in 1998
and is complete.  Under the Planning Phase, the Managing General Partner
conducted an inventory of all internal hardware and software systems, data
interfaces, business operations and non-information technology functions which
may be susceptible to the Y2K issue.  This phase was completed at the end of
November, 1998.  Under the next phase, the Assessment Phase, all applications
and functions identified in the Planning Phase were analyzed to determine Y2K
compliance and the materiality of each identified risk.  In the event of
noncompliance, for material risks, timetables for corrective action, as well as
estimated costs to achieve compliance, were determined.  This phase was
completed during the first quarter of 1999.  The Implementation Phase is now
underway.  Renovation and replacement of existing internal hardware and software
systems has begun and completion is expected by August 1999.  Additionally, the
Managing General Partner is currently working with third party vendors, service
providers, Local Partnership managing general partners, and Local Partnership
property managers to verify their Y2K compliance, with completion expected by
August 1999.  The Testing Phase, which will include testing of internal
applications as well as some third party systems, began during January 1999 and
will continue throughout 1999.  Contingency planning commenced during the fourth
quarter 1998 and will be completed by year-end 1999.  The Managing General
Partner does not expect the expense associated with the Y2K Project to be
material.





                                      -12-
<PAGE>
PART II.  OTHER INFORMATION
          -----------------
ITEM 3.   DEFAULTS UPON SENIOR SECURITIES
          -------------------------------

                               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 July 30, 1999, principal and accrued
interest totaling $230,000 and $609,705, respectively, were due.  The Managing
General Partner made an offer for 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 July 30, 1999, 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.  Should the
noteholder begin foreclosure proceedings on the Partnership's interest in the
Local Partnership, the Managing General Partner intends to vigorously contest
such action.  Due to a possible foreclosure by the noteholder, 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 adversely
impact the Partnership's financial condition, as discussed above.  In the event
of a foreclosure, the excess of the nonrecourse indebtedness over the carrying
amount of the Partnership's investment in the related Local Partnership would be
deemed cancellation of indebtedness income which would be taxable to Limited
Partners at a federal tax rate of up to 39.6%.  Additionally, in the event of a
foreclosure, the Partnership would lose its investment in the Local Partnership
and, likewise, its share of future cash flow distributed by the Local
Partnership from rental operations, sales or refinancings.  The Partnership did
not receive any distributions from Paradise Foothills during the six months
ended June 30, 1999 and 1998, and its aggregate share of income from this Local
Partnership was $0 and $0 for the three and six months ended June 30, 1999 and
1998, respectively, and $0 and $0 for the three and six months ended June 30,
1998, respectively.


ITEM 5.   OTHER INFORMATION
          -----------------

     On April 14, 1999, Peachtree Partners (Peachtree), initiated a tender offer
to purchase approximately 1,000 Beneficial Assignee Certificates (BACs) of the
Partnership at a price of $75.00 per BAC.  Peachtree, which is unaffiliated with
the Managing General Partner, stated that it made the offer for the express
purpose of acquiring the BACs for investment purposes only.  The price offered
was determined solely at the discretion of Peachtree and does not necessarily
represent the fair market value of each BAC.  The Peachtree offer expired on May
21, 1999.  Other than the Peachtree tender offer, it is not anticipated that
there will be any formal market for the purchase and sale of BACs in the
Partnership.  As a result, investors may be unable to sell or otherwise dispose
of their interests in the Partnership.










                                      -13-
<PAGE>
PART II.  OTHER INFORMATION
          -----------------
ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K
          --------------------------------

     a.   None

     b.   A report on Form 8-K was dated and filed April 22, 1999; the report
          discussed the cash distribution to Beneficial Assignee Certificate
          (BAC) holders of record on January 22, 1999.  The distribution, which
          was paid on May 3, 1999, was at the rate of $118 per BAC.  The funds
          distributed were a portion of the proceeds received by the Partnership
          from the sale of Springfield Apartments.

     All other items are not applicable.

















































                                      -14-
<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



July 30, 1999                by: /s/ Michael J. Tuszka
--------------                   ----------------------------------------
DATE                             Michael J. Tuszka
                                   Vice President
                                   and Chief Accounting Officer
                                   (Principal Financial Officer
                                   and Principal Accounting Officer)







































                                      -15-
<PAGE>


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


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

27        Financial Data Schedule         Filed herewith electronically






















































                                      -16-