SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C.  20549
                                
                           FORM 10-QSB
                                
           Quarterly Report Under Section 13 or 15(d)
             of The Securities Exchange Act of 1934
                                
              For the Quarter Ended:  June 30, 1998
                                
                Commission file number:  0-14264
                                
                                
            AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
(Exact Name of Small Business Issuer as Specified in its Charter)


      State of Minnesota                   41-1525197
(State or other Jurisdiction of         (I.R.S. Employer
Incorporation or Organization)        Identification No.)


  1300 Minnesota World Trade Center, St. Paul, Minnesota 55101
            (Address of Principal Executive Offices)
                                
                          (651) 227-7333
                   (Issuer's telephone number)
                                
                                
                         Not Applicable
 (Former name, former address and former fiscal year, if changed
                       since last report)
                                
Check  whether  the issuer (1) filed all reports required  to  be
filed  by Section 13 or 15(d) of the Securities Exchange  Act  of
1934  during the preceding 12 months (or for such shorter  period
that  the registrant was required to file such reports), and  (2)
has  been  subject to such filing requirements for  the  past  90
days.

                      Yes  [X]       No
                                
         Transitional Small Business Disclosure Format:
                                
                      Yes            No  [X]
                                
                                
                                
                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
                                
                              INDEX
                                
                                
                                                    

PART I.  Financial Information

  Item 1.  Balance Sheet as of June 30, 1998 and December 31, 1997    

           Statements for the Periods ended June 30, 1998 and 1997:

             Income                                     

             Cash Flows                                 

             Changes in Partners' Capital               

           Notes to Financial Statements               

  Item 2.  Management's Discussion and Analysis    

PART II.  Other Information

  Item 1.  Legal Proceedings                          

  Item 2.  Changes in Securities                      

  Item 3.  Defaults Upon Senior Securities            

  Item 4.  Submission of Matters to a Vote of Security  Holders

  Item 5.  Other Information                          

  Item 6.  Exhibits and Reports on Form 8-K           

<PAGE>                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP

                          BALANCE SHEET
                                
               JUNE 30, 1998 AND DECEMBER 31, 1997
                                
                           (Unaudited)
                                
                             ASSETS

                                                     1998            1997

CURRENT ASSETS:
   Cash and Cash Equivalents                    $   386,167     $   333,257
   Receivables                                          842          26,817
                                                 -----------     -----------
        Total Current Assets                        387,009         360,074
                                                 -----------     -----------
INVESTMENTS IN REAL ESTATE:
   Land                                           1,446,391       1,446,391
   Buildings and Equipment                        2,714,725       2,714,725
   Accumulated Depreciation                      (1,440,154)     (1,404,178)
                                                 -----------     -----------
        Net Investments in Real Estate            2,720,962       2,756,938
                                                 -----------     -----------
             Total Assets                       $ 3,107,971     $ 3,117,012
                                                 ===========     ===========
                                
                                
                        LIABILITIES AND PARTNERS' CAPITAL
                                
CURRENT LIABILITIES:
   Payable to AEI Fund Management, Inc.         $     5,173     $     8,546
   Land Remediation Estimate                        211,000         211,000
   Distributions Payable                             68,248          68,211
   Unearned Rent                                      4,343               0
                                                 -----------     -----------
        Total Current Liabilities                   288,764         287,757
                                                 -----------     -----------
PARTNERS' CAPITAL (DEFICIT):
   General Partners                                 (36,405)        (36,304)
   Limited Partners, $1,000 Unit value;
    7,500 Units authorized and issued;
    6,711 Units outstanding                       2,855,612       2,865,559
                                                 -----------     -----------
      Total Partners' Capital                     2,819,207       2,829,255
                                                 -----------     -----------
        Total Liabilities and Partners' Capital $ 3,107,971     $ 3,117,012
                                                 ===========     ===========

 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
                       STATEMENT OF INCOME
                                
                  FOR THE PERIODS ENDED JUNE 30
                                
                           (Unaudited)
                                
                                
                                 Three Months Ended         Six Months Ended
                               6/30/98       6/30/97      6/30/98      6/30/97

INCOME:
   Rent                       $ 116,084     $ 118,972    $ 234,640   $ 257,642
   Investment Income              4,902         5,227        9,573      11,282
                               ---------     ---------    ---------   ---------
        Total Income            120,986       124,199      244,213     268,924
                               ---------     ---------    ---------   ---------

EXPENSES:
   Partnership Administration - 
     Affiliates                  25,139        28,212       52,979      48,142
   Partnership Administration 
     and Property Management - 
     Unrelated Parties            4,896        17,334       15,004      44,579
   Depreciation                  17,988        18,396       35,976      40,164
                               ---------     ---------    ---------   ---------
        Total Expenses           48,023        63,942      103,959     132,885
                               ---------     ---------    ---------   ---------

OPERATING INCOME                 72,963        60,257      140,254     136,039

GAIN ON SALE OF REAL ESTATE           0             0            0     109,147
                               ---------     ---------    ---------   ---------
NET INCOME                    $  72,963     $  60,257    $ 140,254   $ 245,186
                               =========     =========    =========   =========

NET INCOME ALLOCATED:
   General Partners           $     729     $     603    $   1,402   $   2,452
   Limited Partners              72,234        59,654      138,852     242,734
                               ---------     ---------    ---------   ---------
                              $  72,963     $  60,257    $ 140,254   $ 245,186
                               =========     =========    =========   =========

NET INCOME PER
 LIMITED PARTNERSHIP UNIT
 (6,711 and 6,744 weighted average
 Units outstanding in 1998 and 1997,
 respectively)                $   10.76     $    8.84    $   20.69   $   35.99
                               =========     =========    =========   =========


 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
                     STATEMENT OF CASH FLOWS
                                
                  FOR THE PERIODS ENDED JUNE 30
                                
                           (Unaudited)
                                

                                                       1998           1997

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net  Income                                     $   140,254   $   245,186

   Adjustments to Reconcile Net Income to Net Cash
   Provided by Operating Activities:
     Depreciation                                       35,976        40,164
     Gain on Sale of Real Estate                             0      (109,147)
     (Increase) Decrease in Receivables                 25,975        (2,811)
     Increase (Decrease) in Payable to
        AEI Fund Management, Inc.                       (3,373)        7,927
     Increase in Unearned Rent                           4,343        12,459
                                                    -----------   -----------
        Total Adjustments                               62,921       (51,408)
                                                    -----------   -----------
        Net Cash Provided By
        Operating Activities                           203,175       193,778
                                                    -----------   -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Proceeds From Sale of Real Estate                         0       411,993
                                                    -----------   -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Increase (Decrease) in Distributions Payable             37       (23,049)
   Distributions to Partners                          (150,302)     (579,722)
                                                    -----------   -----------
        Net Cash Used For
        Financing Activities                          (150,265)     (602,771)
                                                    -----------   -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS               52,910         3,000

CASH AND CASH EQUIVALENTS, beginning of period         333,257       299,844
                                                    -----------   -----------
CASH AND CASH EQUIVALENTS, end of period           $   386,167   $   302,844
                                                    ===========   ===========

 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
            STATEMENT OF CHANGES IN PARTNERS' CAPITAL
                                
                  FOR THE PERIODS ENDED JUNE 30
                                
                           (Unaudited)
                                
                                

                                                                      Limited
                                                                   Partnership
                               General      Limited                    Units
                               Partners     Partners     Total     Outstanding


BALANCE, December 31, 1996    $ (33,015)  $ 3,191,171  $ 3,158,156    6,743.96

  Distributions                  (5,798)     (573,924)    (579,722)

  Net Income                      2,452       242,734      245,186
                               ---------   -----------  -----------  ----------
BALANCE, June 30, 1997        $ (36,361)  $ 2,859,981  $ 2,823,620    6,743.96
                               =========   ===========  ===========  ==========


BALANCE, December 31, 1997    $ (36,304)  $ 2,865,559  $ 2,829,255    6,710.96

  Distributions                  (1,503)     (148,799)    (150,302)

  Net Income                      1,402       138,852      140,254
                               ---------   -----------  -----------  ----------
BALANCE, June 30, 1998        $ (36,405)  $ 2,855,612  $ 2,819,207    6,710.96
                               =========   ===========  ===========  ==========



 The accompanying Notes to Financial Statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                          JUNE 30, 1998
                                
                                
                           (Unaudited)
                                

(1)  The  condensed  statements included herein have been  prepared
     by  the Partnership, without audit, pursuant to the rules  and
     regulations  of  the Securities and Exchange  Commission,  and
     reflect   all  adjustments  which  are,  in  the  opinion   of
     management,  necessary to a fair statement of the  results  of
     operations for the interim period, on a basis consistent  with
     the  annual audited statements.  The adjustments made to these
     condensed   statements  consist  only  of   normal   recurring
     adjustments.   Certain information, 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  rules  and  regulations,  although  the  Partnership
     believes  that  the  disclosures  are  adequate  to  make  the
     information  presented not misleading.  It is  suggested  that
     these  condensed financial statements be read  in  conjunction
     with  the  financial statements and the summary of significant
     accounting  policies  and  notes  thereto  included   in   the
     Partnership's latest annual report on Form 10-KSB.
 
(2)  Organization -

     AEI  Real Estate Fund 85-B Limited Partnership (Partnership)
     was  formed  to  acquire and lease commercial properties  to
     operating tenants.  The Partnership's operations are managed
     by  Net  Lease  Management 85-B, Inc.  (NLM),  the  Managing
     General Partner of the Partnership.  Robert P. Johnson,  the
     President  and  sole  shareholder  of  NLM,  serves  as  the
     Individual General Partner of the Partnership.  An affiliate
     of   NLM,   AEI   Fund   Management,  Inc.,   performs   the
     administrative and operating functions for the Partnership.
     
     The   terms   of  the  Partnership  offering  call   for   a
     subscription  price of $1,000 per Limited Partnership  Unit,
     payable   on  acceptance  of  the  offer.   The  Partnership
     commenced  operations  on September 17,  1985  when  minimum
     subscriptions    of   1,300   Limited   Partnership    Units
     ($1,300,000)  were  accepted.   The  Partnership's  offering
     terminated on February 4, 1986 when the maximum subscription
     limit  of  7,500 Limited Partnership Units ($7,500,000)  was
     reached.
     
     Under  the  terms of the Limited Partnership Agreement,  the
     Limited  Partners and General Partners contributed funds  of
     $7,500,000  and $1,000, respectively.  During the  operation
     of the Partnership, any Net Cash Flow, as defined, which the
     General Partners determine to distribute will be distributed
     90% to the Limited Partners and 10% to the General Partners;
     provided,  however, that such distributions to  the  General
     Partners will be subordinated to the Limited Partners  first
     receiving an annual, noncumulative distribution of Net  Cash
     Flow equal to 10% of their Adjusted Capital Contribution, as
     defined,  and, provided further, that in no event  will  the
     General Partners receive less than 1% of such Net Cash  Flow
     per  annum.  Distributions to Limited Partners will be  made
     pro rata by Units.
     
                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                           (Continued)
                                
(2)  Organization - (Continuted)

     Any  Net  Proceeds  of Sale, as defined, from  the  sale  or
     financing of the Partnership's properties which the  General
     Partners determine to distribute will, after provisions  for
     debts  and  reserves, be paid in the following  manner:  (i)
     first,  99%  to the Limited Partners and 1% to  the  General
     Partners until the Limited Partners receive an amount  equal
     to:  (a)  their Adjusted Capital Contribution  plus  (b)  an
     amount  equal  to 6% of their Adjusted Capital  Contribution
     per  annum, cumulative but not compounded, to the extent not
     previously distributed from Net Cash Flow; (ii) next, 99% to
     the  Limited  Partners and 1% to the General Partners  until
     the Limited Partners receive an amount equal to 14% of their
     Adjusted Capital Contribution per annum, cumulative but  not
     compounded, to the extent not previously distributed;  (iii)
     next, to the General Partners until cumulative distributions
     to the General Partners under Items (ii) and (iii) equal 15%
     of cumulative distributions to all Partners under Items (ii)
     and (iii).  Any remaining balance will be distributed 85% to
     the  Limited  Partners  and  15% to  the  General  Partners.
     Distributions to the Limited Partners will be made pro  rata
     by Units.
     
     For  tax  purposes,  profits  from  operations,  other  than
     profits  attributable  to  the  sale,  exchange,  financing,
     refinancing   or  other  disposition  of  the  Partnership's
     property,  will  be  allocated first in the  same  ratio  in
     which,  and  to the extent, Net Cash Flow is distributed  to
     the Partners for such year.  Any additional profits will  be
     allocated 90% to the Limited Partners and 10% to the General
     Partners.   In the event no Net Cash Flow is distributed  to
     the  Limited  Partners,  90% of  each  item  of  Partnership
     income,  gain  or credit for each respective year  shall  be
     allocated to the Limited Partners, and 10% of each such item
     shall be allocated to the General Partners.  Net losses from
     operations will be allocated 98% to the Limited Partners and
     2% to the General Partners.
     
     For  tax purposes, profits arising from the sale, financing,
     or  other disposition of the Partnership's property will  be
     allocated  in  accordance with the Partnership Agreement  as
     follows:  (i) first, to those Partners with deficit balances
     in  their capital accounts in an amount equal to the sum  of
     such  deficit  balances; (ii) second,  99%  to  the  Limited
     Partners  and 1% to the General Partners until the aggregate
     balance in the Limited Partners' capital accounts equals the
     sum  of the Limited Partners' Adjusted Capital Contributions
     plus  an  amount  equal  to 14% of  their  Adjusted  Capital
     Contributions  per annum, cumulative but not compounded,  to
     the  extent  not previously allocated; (iii) third,  to  the
     General Partners until cumulative allocations to the General
     Partners equal 15% of cumulative allocations.  Any remaining
     balance  will  be allocated 85% to the Limited Partners  and
     15%  to the General Partners.  Losses will be allocated  98%
     to the Limited Partners and 2% to the General Partners.
     
     The  General Partners are not required to currently  fund  a
     deficit capital balance. Upon liquidation of the Partnership
     or  withdrawal  by  a General Partner, the General  Partners
     will  contribute to the Partnership an amount equal  to  the
     lesser of the deficit balances in their capital accounts  or
     1%  of total Limited Partners' and General Partners' capital
     contributions.
     
                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                           (Continued)
                                
(3)  Investments in Real Estate -

     The Fair Muffler property, located in Park Forest, Illinois,
     is  a  one-story  brick  building with  approximately  2,450
     square feet on an approximately 19,388 square foot parcel of
     land.   It was acquired in August, 1986 and leased  under  a
     long-term  triple net Lease for twenty years.  In 1989,  the
     lessee  filed  for bankruptcy and the Partnership  re-leased
     the  property  to  a Fair Muffler franchisee  who  had  been
     operating  the  property  as  a sublessee.   The  franchisee
     continued to operate the property until December, 1996.   In
     January, 1997, it was leased on a month-to-month basis to  a
     car care operator for $2,600 per month.
     
     In  1996,  in  anticipation  of selling  the  property,  the
     Partnership  conducted an environmental  soil  contamination
     investigation  of the property.  The investigation  revealed
     contamination  of approximately 2,750 cubic yards  exceeding
     Tier  1  soil migration to Class II groundwater, which  will
     need   to   be  remediated.   The  contamination  has   been
     identified as petroleum constituents and is believed to have
     been  caused by underground storage tanks in place when  the
     property  was operated as a gasoline station, prior  to  the
     Partnership's ownership.
     
     An  estimate  for  site  remediation  work,  which  includes
     contaminated  soil  removal, tank  removal,  soil  sampling,
     backfilling and reporting, of $211,000 was received from  an
     environmental engineering firm.  The Partnership has engaged
     legal  counsel  to  investigate what sources,  if  any,  are
     available  for  indemnification of these reclamation  costs.
     In  the  third  quarter of 1996, the Partnership  accrued  a
     current liability of $211,000 to remediate the site.  It has
     not been determined when the reclamation work will begin  or
     how  long  it  will  take  to complete.   It  is  reasonably
     possible that the actual costs could materially differ  from
     the estimate.
     
     The  Partnership  obtained an independent appraisal  of  the
     property  which showed a value of $125,000.  In  the  fourth
     quarter  of  1995, a charge to operations  for  real  estate
     impairment  of  $116,252  was  recognized,  which   is   the
     difference  between  book  value at  December  31,  1995  of
     $241,252  and  the appraised market value of $125,000.   The
     charge was recorded against the carrying amount of the land.
     
     Since  1995, the Partnership has not paid real estate  taxes
     on  the  Park  Forest  property while it was  unsuccessfully
     appealing  the  real estate tax valuation of  the  property.
     During  this period of time the Partnership accrued $128,958
     of  real  estate taxes, of which $86,399 was accrued  as  of
     December  31, 1996.  In 1997, the taxing authority sold  the
     property  for  unpaid  taxes to an  unrelated  third  party.
     Since  the tax liability exceeded the appraised market value
     of  the  property, the Partnership did not  redeem  the  tax
     sale.   Consequently,  the  Partnership  reversed  the   tax
     accrual  resulting  in a $86,399 credit  to  1997  expenses.
     Since  the Partnership intends to allow the tax sale  to  be
     completed,  a  charge to operations for an  additional  real
     estate  impairment of $117,823 was recognized in  the  third
     quarter  of  1997, to write down the carrying value  of  the
     property to zero.  The third party who purchased the  unpaid
     taxes has not filed a petition for issuance of the tax  deed
     and the Partnership remains as the owner of record.
     
                                
          AEI REAL ESTATE FUND 85-B LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                           (Continued)
                                
(3)  Investments in Real Estate - (Continued)

     On  February  17, 1997, the Partnership sold  the  Auto  Max
     property  to  an  unrelated third  party.   The  Partnership
     received net sale proceeds of $411,993, which resulted in  a
     net  gain  of $109,147.  At the time of sale, the  cost  and
     related   accumulated  depreciation  of  the  property   was
     $388,800  and  $85,954, respectively.  In April,  1997,  the
     Partnership distributed $404,040 of the net sale proceeds to
     the Limited and General Partners, which represented a return
     of capital of $59.31 per Limited Partnership Unit.
     
     On  January 21, 1998, the Cheddar's restaurant was destroyed
     by  fire.   The  lessee is in the process of rebuilding  the
     restaurant  and is planning on reopening in November,  1998.
     The lessee had adequate insurance coverage to cover the cost
     of rebuilding and the rental payments in the interim.
     
(4)  Payable to AEI Fund Management -

     AEI  Fund  Management, Inc. performs the administrative  and
     operating functions for the Partnership.  The payable to AEI
     Fund   Management  represents  the  balance  due  for  those
     services.    This  balance  is  non-interest   bearing   and
     unsecured  and  is  to  be  paid in  the  normal  course  of
     business.
     
     
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS

Results of Operations

        For  the  six  months ended June 30, 1998 and  1997,  the
Partnership  recognized rental income of $234,640  and  $257,642,
respectively.   During the same periods, the  Partnership  earned
investment income of $9,573 and $11,282, respectively.  In  1997,
rental  income decreased mainly as a result of the  sale  of  the
Auto Max property discussed below.

        During  the six months ended June 30, 1998 and 1997,  the
Partnership   paid   Partnership   administration   expenses   to
affiliated  parties of $52,979 and $48,142, respectively.   These
administration  expenses  include  costs  associated   with   the
management of the properties, processing distributions, reporting
requirements  and correspondence to the Limited Partners.  During
the   same   periods,   the  Partnership   incurred   Partnership
administration  and property management expenses  from  unrelated
parties  of  $15,004 and $44,579, respectively.   These  expenses
represent  direct payments to third parties for legal and  filing
fees,  direct administrative costs, outside audit and  accounting
costs,  taxes, insurance and other property costs.  The  decrease
in  these expenses in 1998, when compared to 1997, is the  result
of expenses incurred in 1997 related to the Park Forest property.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.  (Continued)

        The  Fair  Muffler  property,  located  in  Park  Forest,
Illinois, is a one-story brick building with approximately  2,450
square  feet  on  an approximately 19,388 square foot  parcel  of
land.   It was acquired in August, 1986 and leased under a  long-
term  triple  net Lease for 20 years.  In 1989, the lessee  filed
for  bankruptcy and the Partnership re-leased the property  to  a
Fair Muffler franchisee who had been operating the property as  a
sublessee.   The  franchisee continued to  operate  the  property
until December, 1996.  In January, 1997, it was leased on a month-
to-month basis to a car care operator for $2,600 per month.

        In  1996,  in  anticipation of selling the property,  the
Partnership   conducted  an  environmental   soil   contamination
investigation  of  the  property.   The  investigation   revealed
contamination of approximately 2,750 cubic yards exceeding Tier 1
soil  migration to Class II groundwater, which will  need  to  be
remediated.   The contamination has been identified as  petroleum
constituents  and is believed to have been caused by  underground
storage  tanks  in  place when the property  was  operated  as  a
gasoline station, prior to the Partnership's ownership.

        An  estimate  for site remediation work,  which  includes
contaminated   soil   removal,  tank  removal,   soil   sampling,
backfilling  and  reporting, of $211,000  was  received  from  an
environmental  engineering  firm.  The  Partnership  has  engaged
legal  counsel to investigate what sources, if any, are available
for  indemnification of these reclamation costs.   In  the  third
quarter  of 1996, the Partnership accrued a current liability  of
$211,000 to remediate the site.  It has not been determined  when
the  reclamation  work will begin or how long  it  will  take  to
complete.  It is reasonably possible that the actual costs  could
materially differ from the estimate.

        The Partnership obtained an independent appraisal of  the
property which showed a value of $125,000.  In the fourth quarter
of  1995,  a  charge to operations for real estate impairment  of
$116,252  was  recognized, which is the difference  between  book
value  at December 31, 1995 of $241,252 and the appraised  market
value  of $125,000.  The charge was recorded against the carrying
amount of the land.

       Since 1995, the Partnership has not paid real estate taxes
on the Park Forest property while it was unsuccessfully appealing
the  real  estate  tax  valuation of the property.   During  this
period  of  time the Partnership accrued $128,958 of real  estate
taxes, of which $86,399 was accrued as of December 31, 1996.   In
1997, the taxing authority sold the property for unpaid taxes  to
an  unrelated third party.  Since the tax liability exceeded  the
appraised market value of the property, the Partnership  did  not
redeem the tax sale.  Consequently, the Partnership reversed  the
tax  accrual  resulting  in a $86,399 credit  to  1997  expenses.
Since  the  Partnership  intends to allow  the  tax  sale  to  be
completed,  a charge to operations for an additional real  estate
impairment  of  $117,823 was recognized in the third  quarter  of
1997,  to write down the carrying value of the property to  zero.
The  third party who purchased the unpaid taxes has not  filed  a
petition for issuance of the tax deed and the Partnership remains
as the owner of record.

         On  January  21,  1998,  the  Cheddar's  restaurant  was
destroyed  by  fire.  The lessee is in the process of  rebuilding
the  restaurant  and is planning on reopening in November,  1998.
The  lessee had adequate insurance coverage to cover the cost  of
rebuilding and the rental payments in the interim.

        As  of  June 30, 1998, the Partnership's annualized  cash
distribution  rate  was  5.0%,  based  on  the  Adjusted  Capital
Contribution.   Distributions of Net Cash  Flow  to  the  General
Partners were subordinated to the Limited Partners as required in
the Partnership Agreement.  As a result, 99% of distributions and
income  were allocated to Limited Partners and 1% to the  General
Partners.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.  (Continued)

        Inflation  has  had  a  minimal  effect  on  income  from
operations.   It is expected that increases in sales  volumes  of
the  tenants, due to inflation and real sales growth, will result
in  an  increase  in rental income over the term of  the  leases.
Inflation  also  may  cause  the  Partnership's  real  estate  to
appreciate in value.  However, inflation and changing prices  may
also  have  an  adverse impact on the operating  margins  of  the
properties' tenants which could impair their ability to pay  rent
and subsequently reduce the Partnership's Net Cash Flow available
for distributions.

        AEI  Fund  Management, Inc. (AEI) performs all management
services  for  the Partnership.  AEI is currently  analyzing  its
computer hardware and software systems to determine what, if any,
resources  need to be dedicated regarding Year 2000 issues.   The
Partnership  does  not  anticipate  any  significant  operational
impact  or  incurring material costs as a result of AEI  becoming
Year 2000 compliant.

Liquidity and Capital Resources

         During   the  six  months  ended  June  30,  1998,   the
Partnership's cash balances increased $52,910 as the  Partnership
distributed  less  cash to the Partners than  it  generated  from
operating  activities.  Net cash provided by operating activities
increased from $193,778 in 1997 to $203,175 in 1998 as  a  result
of  a reduction in expenses in 1998 and net timing differences in
the  collection of payments from the lessees and the  payment  of
expenses  which were partially offset by a decrease in income  in
1998.

        On  February 17, 1997, the Partnership sold the Auto  Max
property  to an unrelated third party.  The Partnership  received
net  sale proceeds of $411,993, which resulted in a net  gain  of
$109,147.   At the time of sale, the cost and related accumulated
depreciation   of   the  property  was  $388,800   and   $85,954,
respectively.   In  April,  1997,  the  Partnership   distributed
$404,040  of  the  net sale proceeds to the Limited  and  General
Partners  which  represented a return of capital  of  $59.31  per
Limited Partnership Unit, respectively.

       The Partnership's primary use of cash flow is distribution
and  redemption  payments to Partners.  The Partnership  declares
its  regular  quarterly  distributions before  the  end  of  each
quarter and pays the distribution in the first week after the end
of  each quarter.  The Partnership attempts to maintain a  stable
distribution  rate from quarter to quarter.  Redemption  payments
are  paid  to  redeeming Partners in the fourth quarter  of  each
year.   In  the first three months of 1997, the Partnership  made
distributions  at a 6.27% rate.  In April, 1997, the  Partnership
distributed  net sale proceeds of $404,040 to the Partners  as  a
special   distribution,  which  reduced  the  Limited   Partners'
Adjusted  Capital  Contribution.  Effective April  1,  1997,  the
Partnership  made  distributions at a 5.0% rate  on  the  reduced
capital  balance.   As a result, distributions during  1997  were
higher when compared to the same period in 1998.

        The  Partnership may acquire Units from Limited  Partners
who  have tendered their Units to the Partnership. Such Units may
be  acquired at a discount.  The Partnership is not obligated  to
purchase  in  any  year  more than 5%  of  the  number  of  Units
originally sold.  In no event shall the Partnership be  obligated
to  purchase  Units if, in the sole discretion  of  the  Managing
General  Partner,  such  purchase would  impair  the  capital  or
operation of the Partnership.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.  (Continued)

        During 1997, five Limited Partners redeemed a total of 33
Partnership  Units for $15,895 in accordance with the Partnership
Agreement.  The Partnership acquired these Units using  Net  Cash
Flow  from  operations.  In prior years, a total  of  seventy-two
Limited  Partners redeemed 755.84 Partnership Units for $590,626.
The   redemptions   increase  the  remaining  Limited   Partners'
ownership interest in the Partnership.

       The continuing rent payments from the properties, together
with  the Partnership's cash reserve, should be adequate to  fund
continuing  distributions and meet other Partnership obligations,
including  those  obligations  associated  with  remediation   of
contaminated  soil at the Fair Muffler property located  in  Park
Forest, Illinois, on both a short-term and long-term basis.

                                
                   PART II - OTHER INFORMATION
                                
ITEM 1.LEGAL PROCEEDINGS

       There  are no material pending legal proceedings to  which
  the  Partnership  is  a  party or of  which  the  Partnership's
  property is subject.

ITEM 2.CHANGES IN SECURITIES

      None.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

      None.

ITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      None.

ITEM 5.OTHER INFORMATION

      None.

ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K

      a. Exhibits -
                        Description

         27  Financial Data Schedule  for  period
             ended June 30, 1998.

      b.   Reports filed on Form 8-K - None.

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


Dated:  August 3, 1998        AEI Real Estate Fund 85-B
                              Limited Partnership
                              By: Net Lease Management 85-B, Inc.
                              Its: Managing General Partner



                              By:  /s/ Robert P Johnson
                                       Robert P. Johnson
                                       President
                                       (Principal Executive Officer)


                              By: /s/  Mark E Larson
                                       Mark E. Larson
                                       Chief Financial Officer
                                       (Principal Accounting Officer)