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


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



                                   FORM 10-QSB


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



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

                  For the quarterly period ended March 31, 2003


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



                         Commission file number 0-23766


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


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



        Internal Revenue Service - Employer Identification No. 52-1388957

                 11200 Rockville Pike, Rockville, Maryland 20852

                                 (301) 468-9200


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





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

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

                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                              INDEX TO FORM 10-QSB

                      FOR THE QUARTER ENDED MARCH 31, 2003



                                                                        Page


Part I - FINANCIAL INFORMATION

Item 1.  Financial Statements

         Balance Sheets
           - March 31, 2003 and December 31, 2002........................ 1

         Statements of Operations and Accumulated Losses
           - for the three months ended March 31, 2003 and 2002 ......... 2

         Statements of Cash Flows
           - for the three months ended March 31, 2003 and 2002.......... 3

         Notes to  Financial Statements
           - March 31, 2003 and 2002..................................... 4

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

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


Part II - OTHER INFORMATION

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

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

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

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

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


<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements


                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                                 BALANCE SHEETS


                                     ASSETS

<TABLE>
<CAPTION>
                                                                                       March 31,      December 31,
                                                                                          2003           2002
                                                                                      ------------    -----------
                                                                                      (Unaudited)
<S>                                                                                   <C>             <C>
Investments in and advances to partnerships .......................................   $    840,242    $    816,821
Cash and cash equivalents .........................................................      3,671,768       3,913,467
Acquisition fees, principally paid to related parties,
  net of accumulated amortization of $106,672 and $105,111, respectively ..........         80,736          82,297
Property purchase costs,
  net of accumulated amortization of $92,627 and $91,285 respectively .............         68,463          69,806
Other assets ......................................................................             84             140
                                                                                      ------------    ------------

      Total assets ................................................................   $  4,661,293    $  4,882,531
                                                                                      ============    ============



                        LIABILITIES AND PARTNERS' CAPITAL


Due on investments in partnerships ................................................   $  1,047,600    $  1,047,600
Accrued interest payable ..........................................................      1,880,981       1,820,049
Accounts payable and accrued expenses .............................................         73,550         103,505
                                                                                      ------------    ------------

      Total liabilities ...........................................................      3,002,131       2,971,154
                                                                                      ------------    ------------

Commitments and contingencies

Partners' capital:

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

                                                                                        21,204,500      21,204,500

  Less:
    Accumulated distributions to partners .........................................     (4,908,656)     (4,908,656)
    Offering costs ................................................................     (2,570,535)     (2,570,535)
    Accumulated losses ............................................................    (12,066,147)    (11,813,932)
                                                                                      ------------    ------------

      Total partners' capital .....................................................      1,659,162       1,911,377
                                                                                      ------------    ------------

      Total liabilities and partners' capital .....................................   $  4,661,293    $  4,882,531
                                                                                      ============    ============
</TABLE>

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

                                       -1-

<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements


                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                            STATEMENTS OF OPERATIONS

                             AND ACCUMULATED LOSSES

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                               For the three months ended
                                                                                        March 31,
                                                                              ----------------------------
                                                                                  2003            2002
                                                                              ------------    ------------
<S>                                                                           <C>             <C>
Share of (loss) income from partnerships ..................................   $    (83,735)   $    138,243
                                                                              ------------    ------------

Other revenue and expenses:

  Revenue:
    Interest ..............................................................         15,067          17,631
                                                                              ------------    ------------

  Expenses:
    Interest ..............................................................         60,932          56,458
    General and administrative ............................................         49,981          33,785
    Management fee ........................................................         24,480          24,480
    Professional fees .....................................................         45,250          18,250
    Amortization of deferred costs ........................................          2,904           3,668
                                                                              ------------    ------------

                                                                                   183,547         136,641
                                                                              ------------    ------------

      Total other revenue and expenses ....................................       (168,480)       (119,010)
                                                                              ------------    ------------

Net (loss) income .........................................................       (252,215)         19,233

Accumulated losses, beginning of period ...................................    (11,813,932)    (11,294,160)
                                                                              ------------    ------------

Accumulated losses, end of period .........................................   $(12,066,147)   $(11,274,927)
                                                                              ============    ============


Net (loss) income allocated to General Partners (1.51%) ...................   $     (3,808)   $        290
                                                                              ============    ============


Net (loss) income allocated to Initial and Special Limited Partners (2.49%)   $     (6,280)   $        479
                                                                              ============    ============


Net (loss) income allocated to BAC Holders (96%) ..........................   $   (242,127)   $     18,464
                                                                              ============    ============


Net (loss) income per BAC, based on 21,158 BACs outstanding ...............   $     (11.44)   $       0.87
                                                                              ============    ============
</TABLE>

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

                                       -2-

<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements

                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                   For the three months ended
                                                                                            March 31,
                                                                                   --------------------------
                                                                                      2003            2002
                                                                                   ----------      ----------
<S>                                                                                <C>            <C>
Cash flows from operating activities:
  Net (loss) income ............................................................   $  (252,215)   $    19,233

  Adjustments  to  reconcile  net  (loss)  income to net cash used in  operating
    activities:
    Share of loss (income) from partnerships ...................................        83,735       (138,243)
    Amortization of deferred costs .............................................         2,904          3,668

    Changes in assets and liabilities:
      Increase in accrued interest receivable on advances to partnerships ......        (7,156)        (5,907)
      Decrease (increase) in other assets ......................................            56           (287)
      Increase in accrued interest payable .....................................        60,932         56,458
      Decrease in accounts payable and accrued expenses ........................       (29,955)        (5,117)
                                                                                   -----------    -----------

        Net cash used in operating activities ..................................      (141,699)       (70,195)
                                                                                   -----------    -----------

Cash flows from investing activities:
  Advance to local partnership .................................................      (100,000)            --
  Receipt of distributions from partnerships ...................................            --        132,675
                                                                                   -----------    -----------

        Net cash (used in) provided by investing activities ....................      (100,000)       132,675
                                                                                   -----------    -----------

Net (decrease) increase in cash and cash equivalents ...........................      (241,699)        62,480

Cash and cash equivalents, beginning of period .................................     3,913,467      3,774,659
                                                                                   -----------    -----------

Cash and cash equivalents, end of period .......................................   $ 3,671,768    $ 3,837,139
                                                                                   ===========    ===========
</TABLE>

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

                                       -3-

<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             March 31, 2003 and 2002

                                   (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, 2003,  and the results of its operations and its cash flows for the
three months ended March 31, 2003 and 2002.  The results of  operations  for the
interim  period  ended March 31, 2003,  are not  necessarily  indicative  of the
results to be expected for the full year.

     The  accompanying  unaudited  financial  statements  have been  prepared in
conformity with accounting principles generally accepted in the United States of
America  and with the  instructions  to Form  10-QSB.  Certain  information  and
accounting  policies and  footnote  disclosures  normally  included in financial
statements prepared in conformity with accounting  principles generally accepted
in the United States of America have been condensed or omitted  pursuant to such
instructions. These condensed financial statements should be read in conjunction
with the financial  statements and notes thereto  included in the  Partnership's
annual report on Form 10-KSB at December 31, 2002.

     In January  2003,  the  Financial  Accounting  Standards  Board issued FASB
Interpretation No. 46 (FIN 46), Consolidation of Variable Interest Entities. FIN
46 clarifies the application of Accounting  Research  Bulletin 51,  Consolidated
Financial Statements, for certain entities that do not have sufficient equity at
risk for the entity to finance its activities  without  additional  subordinated
financial  support from other  parties or in which equity  investors do not have
the  characteristics  of a controlling  financial interest  ("variable  interest
entities").  Variable  interest  entities  within  the  scope  of FIN 46 will be
required  to  be  consolidated  by  their  primary   beneficiary.   The  primary
beneficiary  of a variable  interest  entity is  determined to be the party that
absorbs a majority of the entity's  expected losses,  receives a majority of its
expected  returns,  or both.  FIN 46 applies  immediately  to variable  interest
entities  created after January 31, 2003, and to variable  interest  entities in
which an enterprise obtains an interest after that date. It applies in the first
fiscal  year or interim  period  beginning  after  June 15,  2003,  to  variable
interest  entities  in which an  enterprise  holds a variable  interest  that it
acquired before February 1, 2003. The Managing General Partner is in the process
of  determining  what impact,  if any, the adoption of the  provisions of FIN 46
will have on the  Partnership's  financial  condition  and results of operations
related to the Partnership's investments in Local Partnerships, and has complied
with  the  disclosure  requirements  of FIN 46 in these  consolidated  financial
statements.


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

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

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

     The  Partnership's  obligations  with respect to its  investments  in Local
Partnerships,  in the  form  of  nonrecourse  purchase  money  notes  having  an
aggregate  principal  balance of $873,000  plus  aggregate  accrued  interest of
$1,805,581  as of March 31, 2003,  are payable in full upon the earliest of: (i)
sale or refinancing of the respective Local Partnership's rental property;  (ii)
payment in full of the respective Local  Partnership's  permanent loan; or (iii)
maturity.

                                       -4-

<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             March 31, 2003 and 2002

                                   (Unaudited)


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

The  purchase  money note  related to Mesa  Partners  Limited  Partnership  (The
Pointe),  in the  principal  amount of  $643,000,  matures  June 30,  2003.  The
remaining purchase money note matures in 2008.

     The purchase money notes,  which are  nonrecourse to the  Partnership,  are
generally  secured  by  the  Partnership's  interest  in  the  respective  Local
Partnerships.  There is no assurance  that the underlying  properties  will have
sufficient appreciation and equity to enable the Partnership to pay the purchase
money notes'  principal and accrued  interest when due. If a purchase money note
is not paid in accordance with its terms,  the  Partnership  will either have to
renegotiate  the terms of repayment or risk losing its  partnership  interest in
the  respective  Local  Partnership.  In the event  that a  purchase  money note
remains unpaid upon maturity,  the noteholder may have the right to foreclose on
the Partnership's interest in the related Local Partnership.

     The  Partnership's  inability to pay certain  purchase money note principal
and accrued interest balances when due, and the resulting  uncertainty regarding
the   Partnership's   continued   ownership   interest  in  the  related   Local
Partnerships,  does not adversely impact the Partnership's  financial  condition
because the  purchase  money  notes are  nonrecourse  and secured  solely by the
Partnership's interest in the related Local Partnerships.  Therefore, should the
investment in any of the Local  Partnerships  with maturing purchase money notes
not produce  sufficient  value to satisfy the related  purchase money notes, the
Partnership's  exposure to loss is limited because the amount of the nonrecourse
indebtedness  of each of the maturing  purchase money notes exceeds the carrying
amount  of the  investment  in,  and  advances  to,  each of the  related  Local
Partnerships. Thus, even a complete loss of the Partnership's interest in one of
these  Local  Partnerships  would  not have a  material  adverse  impact  on the
financial  condition  of the  Partnership.  In the event of a  foreclosure,  the
excess  of  the  nonrecourse  indebtedness  over  the  carrying  amount  of  the
Partnership's  investment  in the  related  Local  Partnership  would be  deemed
cancellation of indebtedness  income, which would be taxable to Limited Partners
at a  federal  tax  rate  of  up to  38.6%.  Additionally,  in  the  event  of a
foreclosure,  the Partnership would lose its investment in the Local Partnership
and,  likewise,  its  share of any  future  cash flow  distributed  by the Local
Partnership from rental operations,  mortgage debt refinancings,  or the sale of
the real estate.

     Interest  expense on the  Partnership's  purchase money notes for the three
month  periods  ended  March  31,  2003  and  2002,  was  $60,932  and  $56,458,
respectively.  The  accrued  interest  payable on the  purchase  money  notes of
$1,805,581  and  $1,744,649  as of  March  31,  2003,  and  December  31,  2002,
respectively,  is due on the  respective  maturity  dates of the purchase  money
notes or earlier, in some instances, if (and to the extent of a portion thereof)
the related Local Partnership has distributable net cash flow, as defined in the
relevant Local Partnership agreement.

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

     The  Partnership  defaulted on its purchase money note relating to Paradise
Associates  Limited  Partnership  (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.  Effective  March 31,
2003,  the Managing  General  Partner  successfully  negotiated  an agreement to
extend the maturity  date of the purchase  money note to March 31, 2008,  and to
reduce the interest rate. The Partnership did not receive any distributions from
Paradise Foothills

                                       -5-

<PAGE>
                CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             March 31, 2003 and 2002

                                   (Unaudited)


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

during the three month periods ended March 31, 2003 and 2002. An impairment loss
of $39,973, reducing the Partnership's investment in Paradise Foothills to zero,
was recognized on December 31, 2002.

     The  amount  due to a  local  general  partner  of  Paradise  Foothills  of
$174,600,  plus accrued interest of $75,400 at March 31, 2003, will be paid upon
the  occurrence  of  specified  events,  as  outlined  in the  respective  Local
Partnership's partnership agreement.

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

     The purchase money note related to The Pointe,  in the principal  amount of
$643,000,  matures June 30,  2003.  The  Managing  General  Partner is exploring
various  options  to pay off,  pay down,  or extend  the  maturity  date of, the
purchase money note. There can be no assurance about which course of action will
be chosen,  or whether it will be successful,  or whether the  Partnership  will
retain its interest in the related Local Partnership.

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

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

     In connection with the refinancing of the mortgage loan secured by Paradise
Foothills  in  March  2003,  the  Partnership  advanced  $100,000  to the  Local
Partnership  for closing costs and to  facilitate  the repayment of the existing
mortgage loan. The partners modified the Local Partnership agreement to give the
new loan priority in repayment from sale or refinancing  proceeds over all other
partner loans. For financial reporting  purposes,  this loan has been reduced to
zero by the  Partnership  as a result  of  previously  suspended  losses  at the
related Local Partnership level.

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

     Mesa  Partners  Limited  Partnership  (The Pointe),  which owns  apartments
located in El Paso,  Texas,  modified its mortgage  loan in 1987.  In connection
with the mortgage loan  modification,  the Partnership  advanced $262,500 to the
Local  Partnership in 1987.  Repayment of this loan,  with simple interest at 9%
per annum, is expected to occur upon sale or refinancing of the property.  As of
March 31,  2003,  and  December  31,  2002,  accrued  interest  was $371,095 and
$363,938, respectively.

c.   Property Matters
     ----------------

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

     The local managing general partner of Paradise Foothills has refinanced the
property's  first mortgage loan. The new loan matures in 2006,  with options for
two one-year extensions.

                                       -6-

<PAGE>
                CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             March 31, 2003 and 2002

                                   (Unaudited)


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued

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

     The local managing  general  partner of The Pointe is exploring  options to
refinance the property's first mortgage loan, which matures July 10, 2003. There
can be no assurance that the property's  first mortgage loan will be refinanced,
or whether  the  Partnership  will  retain its  interest  in the  related  Local
Partnership.

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

     Combined  statements of operations for the four Local Partnerships in which
the Partnership was invested as of March 31, 2003 and 2002, follow. The combined
statements have been compiled from information supplied by the management agents
of the projects and are unaudited.

                        COMBINED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                   For the three months ended
                                                            March 31,
                                                  ---------------------------
                                                     2003             2002
                                                  ----------       ----------

     Revenue:
       Rental                                     $1,514,403       $1,572,227
       Other                                          88,999          107,553
                                                  ----------       ----------

          Total revenue                            1,603,402        1,679,780
                                                  ----------       ----------

     Expenses:
       Operating                                     876,701          818,606
       Interest                                      496,035          496,491
       Depreciation and amortization                 287,264          283,954
                                                  ----------       ----------

          Total expenses                           1,660,000        1,599,051
                                                  ----------       ----------

     Net (loss) income                            $  (56,598)      $   80,729
                                                  ==========       ==========


     As of March 31, 2003 and 2002, the Partnership's share of cumulative losses
to  date  for  two  of  the  Local  Partnerships  exceeded  the  amount  of  the
Partnership's  investments  in and  advances  to  those  Local  Partnerships  by
$7,049,725  and  $6,840,328,  respectively.  As the  Partnership  has no further
obligation  to advance funds or provide  financing to these Local  Partnerships,
the  excess  losses  have  not  been  reflected  in the  accompanying  financial
statements.

                                       -7-

<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             March 31, 2003 and 2002

                                   (Unaudited)


3.   RELATED PARTY TRANSACTIONS

     In accordance with the terms of the Partnership Agreement,  the Partnership
is obligated to reimburse the Managing  General  Partner for its direct expenses
in connection with managing the  Partnership.  The Partnership  paid $42,837 and
$25,736 for the three month periods ended March 31, 2003 and 2002, respectively,
to the Managing General Partner as direct  reimbursement of expenses incurred on
behalf of the  Partnership.  Such  expenses  are  included  in the  accompanying
statements of operations as general and administrative expenses.

     In accordance with the terms of the Partnership Agreement,  the Partnership
is obligated to pay the Managing General Partner an annual incentive  management
fee  (Management  Fee) after all other expenses of the Partnership are paid. The
Partnership  paid the Managing  General  Partner a Management Fee of $24,480 for
each of the three month periods ended March 31, 2003 and 2002.

                                      # # #

                                       -8-

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


     Capital  Realty  Investors-85   Limited   Partnership's  (the  Partnership)
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations section contains  information that may be considered forward looking,
including  statements regarding the effect of governmental  regulations.  Actual
results  may differ  materially  from those  described  in the  forward  looking
statements and will be affected by a variety of factors  including  national and
local economic  conditions,  the general level of interest  rates,  governmental
regulations  affecting the Partnership and interpretations of those regulations,
the  competitive   environment  in  which  the  Partnership  operates,  and  the
availability of working capital.

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

     The Partnership's liquidity, with unrestricted cash resources of $3,671,768
as of March 31, 2003,  along with  anticipated  future cash  distributions  from
Local  Partnerships,  is  expected  to be  adequate  to  meet  its  current  and
anticipated  operating cash needs. As of April 28, 2003,  there were no material
commitments for capital expenditures.

     The  Partnership's  obligations  with respect to its  investments  in Local
Partnerships,  in the  form  of  nonrecourse  purchase  money  notes  having  an
aggregate  principal  balance of $873,000  plus  aggregate  accrued  interest of
$1,805,581  as of March 31, 2003,  are payable in full upon the earliest of: (i)
sale or refinancing of the respective Local Partnership's rental property;  (ii)
payment in full of the respective Local  Partnership's  permanent loan; or (iii)
maturity.  The purchase money note related to Mesa Partners Limited  Partnership
(The Pointe),  in the principal  amount of $643,000,  matures June 30, 2003. The
remaining  purchase  money  note  matures  in 2008.  See the notes to  financial
statements for additional information concerning these purchase money notes.

     The purchase money notes,  which are  nonrecourse to the  Partnership,  are
generally  secured  by  the  Partnership's  interest  in  the  respective  Local
Partnerships.  There is no assurance  that the underlying  properties  will have
sufficient appreciation and equity to enable the Partnership to pay the purchase
money notes'  principal and accrued  interest when due. If a purchase money note
is not paid in accordance with its terms,  the  Partnership  will either have to
renegotiate  the terms of repayment or risk losing its  partnership  interest in
the  respective  Local  Partnership.  In the event  that a  purchase  money note
remains unpaid upon maturity,  the noteholder may have the right to foreclose on
the Partnership's interest in the related Local Partnership.

     The  Partnership's  inability  to pay  certain of the  purchase  money note
principal and accrued interest balances when due, and the resulting  uncertainty
regarding the Partnership's  continued  ownership  interest in the related Local
Partnerships,  does not adversely impact the Partnership's  financial  condition
because the  purchase  money  notes are  nonrecourse  and secured  solely by the
Partnership's interest in the related Local Partnerships.  Therefore, should the
investment in any of the Local  Partnerships  with maturing purchase money notes
not produce  sufficient  value to satisfy the related  purchase money notes, the
Partnership's  exposure to loss is limited because the amount of the nonrecourse
indebtedness  of each of the maturing  purchase money notes exceeds the carrying
amount  of the  investment  in,  and  advances  to,  each of the  related  Local
Partnerships. Thus, even a complete loss of the Partnership's interest in one of
these  Local  Partnerships  would  not have a  material  adverse  impact  on the
financial  condition  of the  Partnership.  In the event of a  foreclosure,  the
excess  of  the  nonrecourse  indebtedness  over  the  carrying  amount  of  the
Partnership's  investment  in the  related  Local  Partnership  would be  deemed
cancellation of indebtedness  income, which would be taxable to Limited Partners
at a  federal  tax  rate  of  up to  38.6%.  Additionally,  in  the  event  of a
foreclosure,  the Partnership would lose its investment in the Local Partnership
and,  likewise,  its  share of any  future  cash flow  distributed  by the Local
Partnership from rental operations,  mortgage debt refinancings,  or the sale of
the real estate.

                                       -9-

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


     Included in due on investments in  partnerships  is $174,600 due to a local
general partner  related to Paradise  Foothills at both March 31, 2003 and 2002;
accrued  interest  payable  thereon was $75,400 at both March 31, 2003 and 2002.
These amounts will be paid upon the occurrence of certain  specified  events, as
outlined in the respective Local Partnership's partnership agreement.

     The Managing  General  Partner has received  consent from a majority of BAC
Holders for the  liquidation  of the  Partnership.  It is  anticipated  that the
Partnership's obligations, discussed above, would be retired in conjunction with
such Liquidation.  However, the Liquidation is the subject of a pending lawsuit.
The lawsuit  alleges a violation of SEC Rule  14a-4(b)(1) in connection with the
Consent Solicitation under the December 30, 2002 Definitive Proxy Statement (the
Statement)  and a failure to provide  sufficient  information  in the  Statement
concerning  refinancing  the properties  instead of selling them. The Defendants
deny the allegations and intend to defend the action  vigorously.  The Plaintiff
originally sought a preliminary  injunction to halt the voting,  but agreed to a
Joint  Stipulation under which the voting could proceed but the Managing General
Partner  agreed to take no external  action to implement the Plan of Liquidation
pending a decision  by the Court on the  Managing  General  Partner's  Motion to
Dismiss.  On April 21, 2003,  venue of the case was  transferred to the Southern
District of  Maryland,  where the Motion to Dismiss  remains  under  advisement.
There can be no assurance that the Liquidation will be completed pursuant to the
Plan of Liquidation and Dissolution.

     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 month period ended March 31, 2003,  existing cash  resources  were
adequate  to support  operating  cash  requirements.  Cash and cash  equivalents
decreased  during the three month period ended March 31, 2003,  primarily due to
operating expenses paid in cash, and to an advance made to Paradise  Associates,
L.P., as discussed in the notes to financial statements.

     The  Managing  General  Partner  currently  intends  to  retain  all of the
Partnership's   remaining   undistributed  cash  for  the  possible   repayment,
prepayment or retirement of the Partnership's  outstanding  purchase money notes
related to the Local Partnerships and its Plan of Liquidation, and for operating
cash reserves.  No distributions were declared or paid by the Partnership during
the three month period ended March 31, 2003.

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

     The Partnership  recognized net loss of $252,215 for the three month period
ended March 31,  2003,  compared to net income of $19,233 for the  corresponding
period  in  2002,   primarily  due  to  a  decrease  in  share  of  income  from
partnerships, an increase in professional fees related to the preparation of the
Definitive  Proxy  Statement,  and an  increase  in general  and  administrative
expenses  related to higher  reimbursed  payroll costs. The decrease in share of
income from  partnerships  was a result of  reducing a $100,000  loan to a Local
Partnership  to zero as a result  of  previously  suspended  losses at the Local
Partnership  level,  and a result  of first  quarter  2003  operating  losses of
$19,000 at a property  that  reported  first  quarter 2002  operating  income of
$113,000.  The losses were primarily due to a $48,000  decline in rental income,
coupled  with a $59,000  increase in operating  expenses.  The decline in rental
income was caused by  increased  vacancies,  and is  expected to  continue.  The
increase in operating  expenses was caused by cosmetic  repairs to the property,
and is not  expected to  continue.  The share of income from the other  property
which  still has  investment  basis was  $42,000  and  $31,000  during the first
quarter of 2003 and 2002, respectively.

                                      -10-

<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  share of income from partnerships for the three month
periods  ended  March 31, 2003 and 2002,  did not include  losses of $20,268 and
$64,224, respectively.

     No other  significant  changes in the  Partnership's  operations have taken
place during the three month period ended March 31, 2003.


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

     In February 2003,  representatives  of the Managing  General Partner of the
Partnership  carried out an  evaluation of the  effectiveness  of the design and
operation of the Partnership's  disclosure controls and procedures,  pursuant to
Exchange Act Rules 13a-14 and 15d-14.  Based on that  evaluation,  the Principal
Executive   Officer  and  Principal   Financial   Officer   concluded  that  the
Partnership's  disclosure controls and procedures are effective to alert them in
a timely manner to any material  information  relating to the  Partnership  that
must be included in the Partnership's  periodic SEC filings. In addition,  there
have been no significant  changes in the  Partnership's  internal controls or in
other factors that could  significantly  affect internal controls  subsequent to
the date of the most recent evaluation.


Part II. OTHER INFORMATION
Item 3. Defaults upon Senior Securities
        -------------------------------

     See Note 2.a. of the notes to  financial  statements  contained  in Part I,
Item 1,  hereof,  for  information  concerning  the  Partnership's  default on a
purchase money note, which default was cured effective March 31, 2003.


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

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

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

     On January 10, 2003,  Equity  Resource  Arlington Fund Limited  Partnership
(Arlington)  initiated an unregistered tender offer to purchase up to 369 of the
outstanding  BAC units at a price of $350 per unit;  the offer expired  February
10, 2003. Arlington is unaffiliated with the Partnership or the Managing General
Partner.  The price offered was determined solely at the discretion of Arlington
and does not necessarily represent the fair market value of each BAC.

     On  January  21,  2003,   Peachtree  Partners   (Peachtree)   initiated  an
unregistered  tender offer to purchase an  unspecified  number of BAC units at a
price of $375  per  unit;  the  offer  expired  March  12,  2003.  Peachtree  is
unaffiliated  with the Partnership or the Managing  General  Partner.  The price
offered  was  determined  solely at the  discretion  of  Peachtree  and does not
necessarily represent the fair market value of each BAC.

                                      -11-

<PAGE>
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
        --------------------------------

     a.   Exhibits

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

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

     b.   No reports of on Form 8-K were  filed with the  Commission  during the
          quarter ended March 31, 2003.

All other Items are not applicable.

                                      -12-

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

     In accordance  with the  requirements  of the Exchange Act, the  registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



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

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




April 28, 2003                         by:  /s/ Michael J. Tuszka
-------------------                         ------------------------------------
DATE                                        Michael J. Tuszka
                                              Vice President
                                              and Chief Accounting Officer
                                              (Principal Financial Officer
                                              and Principal Accounting Officer)

                                      -13-

<PAGE>

                        CERTIFICATION OF QUARTERLY REPORT
  Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the
                           Sarbanes-Oxley Act of 2002


         I, Michael J. Tuszka, certify that:

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

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

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

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

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

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

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

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

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

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


                                      -14-

<PAGE>



         6.       The registrant's other certifying officer and I have indicated
                  in  this  quarterly  report  whether  there  were  significant
                  changes in internal  controls or in other  factors  that could
                  significantly  affect internal controls subsequent to the date
                  of  our  most  recent  evaluation,  including  any  corrective
                  actions with regard to significant  deficiencies  and material
                  weaknesses.


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

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



April 28, 2003                           by:  /s/Michael J. Tuszka
--------------                                ----------------------------------
DATE                                          Michael J. Tuszka,
                                                Vice President
                                                and Chief Accounting Officer
                                                (Principal Financial Officer)


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

                                      -15-

<PAGE>
                        CERTIFICATION OF QUARTERLY REPORT
  Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the
                           Sarbanes-Oxley Act of 2002


         I, William B. Dockser, certify that:

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

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

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

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

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

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

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

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


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

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


                                      -16-

<PAGE>


         6.       The registrant's other certifying officer and I have indicated
                  in  this  quarterly  report  whether  there  were  significant
                  changes in internal  controls or in other  factors  that could
                  significantly  affect internal controls subsequent to the date
                  of  our  most  recent  evaluation,  including  any  corrective
                  actions with regard to significant  deficiencies  and material
                  weaknesses.


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

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



April 28, 2003                           by:  /s/William B. Dockser
--------------                                ----------------------------------
DATE                                          William B. Dockser,
                                                Director, Chairman of the Board,
                                                and Treasurer
                                                (Principal Executive Officer)



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

                                      -17-