UNITED STATES
               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, 2002

                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, 2002 and December 31, 2001

         Statements for the Periods ended June 30, 2002 and 2001:

           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, 2002 AND DECEMBER 31, 2001

                           (Unaudited)

                             ASSETS

                                                    2002          2001

CURRENT ASSETS:
  Cash and Cash Equivalents                     $   331,724    $   394,793
  Receivables                                             0             42
                                                 -----------    -----------
      Total Current Assets                          331,724        394,835
                                                 -----------    -----------
INVESTMENTS IN REAL ESTATE:
  Land                                              920,541        920,541
  Buildings and Equipment                         2,207,983      2,207,983
  Accumulated Depreciation                       (1,391,504)    (1,363,339)
                                                 -----------    -----------
                                                  1,737,020      1,765,185
  Real Estate Held for Sale                         575,000        575,000
                                                 -----------    -----------
      Net Investments in Real Estate              2,312,020      2,340,185
                                                 -----------    -----------
          Total Assets                          $ 2,643,744    $ 2,735,020
                                                 ===========    ===========


                       LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
  Payable to AEI Fund Management, Inc.          $    18,843    $    38,629
  Land Remediation Estimate                         211,000        211,000
  Distributions Payable                              69,958         69,804
  Unearned Rent                                       3,333              0
                                                 -----------    -----------
      Total Current Liabilities                     303,134        319,433
                                                 -----------    -----------
PARTNERS' CAPITAL (DEFICIT):
  General Partners                                   (9,193)       (16,444)
  Limited Partners, $1,000 Unit value;
     7,500 Units authorized and issued;
     6,425 Units outstanding                      2,349,803      2,432,031
                                                 -----------    -----------
      Total Partners' Capital                     2,340,610      2,415,587
                                                 -----------    -----------
        Total Liabilities and Partners' Capital $ 2,643,744    $ 2,735,020
                                                 ===========    ===========

 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
                              6/30/02      6/30/01    6/30/02      6/30/01

INCOME:
   Rent                       $ 97,366   $ 109,477    $ 194,732   $ 219,128
   Investment Income             1,154       3,908        2,411       9,075
                               --------   ---------    ---------   ---------
        Total Income            98,520     113,385      197,143     228,203
                               --------   ---------    ---------   ---------

EXPENSES:
   Partnership Administration -
     Affiliates                 21,660      27,027       51,026      51,971
   Partnership Administration
     and Property Management -
     Unrelated Parties          19,154       8,116       42,854      14,596
   Depreciation                 14,083      17,276       28,165      34,552
                               --------   ---------    ---------   ---------
        Total Expenses          54,897      52,419      122,045     101,119
                               --------   ---------    ---------   ---------

NET INCOME                    $ 43,623   $  60,966    $  75,098   $ 127,084
                               ========   =========    =========   =========

NET INCOME ALLOCATED:
   General Partners           $  4,436   $  13,610    $   8,751   $  14,271
   Limited Partners             39,187      47,356       66,347     112,813
                               --------   ---------    ---------   ---------
                              $ 43,623   $  60,966    $  75,098   $ 127,084
                               ========   =========    =========   =========

NET INCOME PER
 LIMITED PARTNERSHIP UNIT
 (6,425 and 6,453 weighted average
 Units outstanding in 2002 and 2001,
 respectively)                $   6.10   $    7.34    $   10.33   $   17.48
                               ========   =========    =========   =========

 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)


                                                       2002          2001

CASH FLOWS FROM OPERATING ACTIVITIES:
   Net  Income                                     $    75,098   $   127,084

   Adjustments to Reconcile Net Income to Net Cash
   Provided by Operating Activities:
     Depreciation                                       28,165        34,552
     Decrease in Receivables                                42           376
     Increase (Decrease) in Payable to
        AEI Fund Management, Inc.                      (19,786)        1,834
     Increase in Unearned Rent                           3,333             0
                                                    -----------   -----------
        Total Adjustments                               11,754        36,762
                                                    -----------   -----------
        Net Cash Provided By
        Operating Activities                            86,852       163,846
                                                    -----------   -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Increase in Distributions Payable                       154           424
   Distributions to Partners                          (150,075)     (165,005)
                                                    -----------   -----------
        Net Cash Used For
        Financing Activities                          (149,921)     (164,581)
                                                    -----------   -----------
NET DECREASE IN CASH
AND CASH EQUIVALENTS                                   (63,069)         (735)

CASH AND CASH EQUIVALENTS, beginning of period         394,793       404,981
                                                    -----------   -----------
CASH AND CASH EQUIVALENTS, end of period           $   331,724   $   404,246
                                                    ===========   ===========


 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, 2000    $(37,892)  $ 2,708,399  $ 2,670,507    6,452.66

  Distributions                 (1,650)     (163,355)    (165,005)

  Net Income                    14,271       112,813      127,084
                               --------   -----------  -----------  ----------
BALANCE, June 30, 2001        $(25,271)  $ 2,657,857  $ 2,632,586    6,452.66
                               ========   ===========  ===========  ==========


BALANCE, December 31, 2001    $(16,444)  $ 2,432,031  $ 2,415,587    6,425.16

  Distributions                 (1,500)     (148,575)    (150,075)

  Net Income                     8,751        66,347       75,098
                               --------   -----------  -----------  ----------
BALANCE, June 30, 2002        $ (9,193)  $ 2,349,803  $ 2,340,610    6,425.16
                               ========   ===========  ===========  ==========


 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, 2002

                           (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.  Robert P. Johnson, the President and  sole
     shareholder of NLM, serves as the Individual General Partner
     and  an  affiliate of NLM, AEI Fund Management, Inc.  (AEI),
     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  offering  terminated  on
     February  4,  1986  when the maximum subscription  limit  of
     7,500  Limited  Partnership Units 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 operations, 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

                          JUNE 30, 2002
                           (Continued)

(2)  Organization - (Continued)

     Any  Net  Proceeds  of Sale, as defined, from  the  sale  or
     financing of 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  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 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 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

                          JUNE 30, 2002
                           (Continued)

(3)  Investments in Real Estate -

     In  1996,  in  anticipation of selling a  property  in  Park
     Forest, Illinois, 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 soil removal, tank
     removal,  soil  sampling,  backfilling  and  reporting,   of
     $211,000  was  received  from an  environmental  engineering
     firm.  It has not been determined when the reclamation  work
     will  begin,  how long it will take to complete  or  whether
     there  are any sources available for indemnification of  the
     reclamation  costs.   It  is reasonably  possible  that  the
     actual costs could materially differ from the estimate.

     On  August  5,  1998, the Partnership sold the Fair  Muffler
     property  to  the  current  tenant  for  $5,000.   The  sale
     resulted  in  a  net  gain  of  $704.   The  Partnership  is
     reviewing  its  legal obligation for the site liability  and
     may  have  adjustments to the accrued  liability  in  future
     periods.

     In  May, 2001, Huntington Restaurants Group, Inc. (HRG), the
     lessee  of  the  Denny's Restaurant  in  Fort  Worth,  Texas
     notified  the Partnership that it was experiencing financial
     problems  and would not make the lease payments  while  they
     worked  out  a  plan  which would enable  them  to  continue
     operations   without  seeking  bankruptcy  protection.    On
     December 31, 2001, the Lease expired and was not renewed  by
     the  lessee.  Through this date, HRG owed  $24,500  of  rent
     which, due to the uncertainty of collection, was not accrued
     for  financial reporting purposes.  In December,  2001,  the
     Partnership  received  an offer to buy  the  restaurant  for
     $625,000  from  an  unrelated third party.   In  the  fourth
     quarter  of  2001, a charge to operations  for  real  estate
     impairment  of  $140,337  was  recognized,  which  was   the
     difference  between the book value at December 31,  2001  of
     $715,337  and the estimated net sales proceeds of  $575,000.
     The  charge  was recorded against the cost of the  land  and
     building.  At December 31, 2001, the land and building  were
     classified as Real Estate Held for Sale.  The sale, which is
     subject  to  the  buyer completing their due  diligence,  is
     anticipated to close in August, 2002.

(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

        The Management's Discussion and Analysis contains various
"forward  looking  statements"  within  the  meaning  of  federal
securities  laws  which  represent management's  expectations  or
beliefs  concerning future events, including statements regarding
anticipated  application of cash, expected  returns  from  rental
income,  growth  in revenue, taxation levels, the sufficiency  of
cash to meet operating expenses, rates of distribution, and other
matters.  These, and other forward looking statements made by the
Partnership,  must be evaluated in the context  of  a  number  of
factors that may affect the Partnership's financial condition and
results of operations, including the following:

    Market  and  economic conditions which affect the  value
    of  the  properties the Partnership owns and  the  cash
    from rental income such properties generate;

    the  federal  income tax consequences of rental  income,
    deductions,  gain  on  sales and other  items  and  the
    affects of these consequences for the Partners;

    resolution  by  the General Partners of  conflicts  with
    which they may be confronted;

    the   success  of  the  General  Partners  of   locating
    properties with favorable risk return characteristics;

    the effect of tenant defaults; and

    the  condition of the industries in which the tenants of
    properties owned by the Partnership operate.


Critical Accounting Policies


        The preparation of the Partnership's financial statements
requires  management to make estimates and assumptions  that  may
affect the reported amounts of assets, liabilities, revenues  and
expenses,  and  related  disclosure  of  contingent  assets   and
liabilities. Management evaluates these estimates on  an  ongoing
basis,  including  those related to the carrying  value  of  real
estate  and  the  allocation  by AEI  Fund  Management,  Inc.  of
expenses  to  the  Partnership as opposed  to  other  funds  they
manage.

        The Partnership purchases properties and records them  in
the  financial  statements  at the lower  of  cost  or  estimated
realizable   value.   The  Partnership  initially   records   the
properties  at cost (including capitalized acquisition expenses).
The Partnership is required to periodically evaluate the carrying
value  of properties to determine whether their realizable  value
has  declined.   For  properties the Partnership  will  hold  and
operate, management determines whether impairment has occurred by
comparing the property's probability-weighted cash flows  to  its
current carrying value.  For properties held for sale, management
determines  whether  impairment has  occurred  by  comparing  the
property's estimated fair value less cost to sell to its  current
carrying  value.   If  the carrying value  is  greater  than  the
realizable  value, an impairment loss is recorded to  reduce  the
carrying value of the property to its realizable value.  A change
in  these assumptions or analysis could cause material changes in
the carrying value of the properties.

       AEI Fund Management Inc. allocates expenses to each of the
funds  they manage primarily on the basis of the number of  hours
devoted  by  their employees to each fund's affairs.   They  also
allocate  some  expenses at the end of each month  that  are  not
directly related to a fund's operations based upon the number  of
investors  in the fund and the fund's capitalization relative  to
other  funds  they  manage.   The  Partnership  reimburses  these
expenses  subject  to  detailed  limitations  contained  in   the
Partnership Agreement.


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

Results of Operations

        For  the  six  months ended June 30, 2002 and  2001,  the
Partnership  recognized rental income of $194,732  and  $219,128,
respectively.   During the same periods, the  Partnership  earned
investment income of $2,411 and $9,075, respectively.   In  2002,
rental income decreased as a result of the loss of rent from  the
Denny's restaurant.

        In  May, 2001, Huntington Restaurants Group, Inc.  (HRG),
the  lessee  of  the  Denny's Restaurant  in  Fort  Worth,  Texas
notified  the  Partnership  that it  was  experiencing  financial
problems and would not make the lease payments while they  worked
out a plan which would enable them to continue operations without
seeking  bankruptcy protection.  On December 31, 2001, the  Lease
expired and was not renewed by the lessee. Through this date, HRG
owed $24,500 of rent which, due to the uncertainty of collection,
was  not  accrued for financial reporting purposes.  In December,
2001, the Partnership received an offer to buy the restaurant for
$625,000 from an unrelated third party.  In the fourth quarter of
2001,  a  charge  to  operations for real  estate  impairment  of
$140,337  was  recognized, which was the difference  between  the
book value at December 31, 2001 of $715,337 and the estimated net
sales proceeds of $575,000.  The charge was recorded against  the
cost  of  the land and building.  At December 31, 2001, the  land
and  building were classified as Real Estate Held for Sale.   The
sale,  which  is  subject  to  the  buyer  completing  their  due
diligence, is anticipated to close in August, 2002.

        During  the six months ended June 30, 2002 and 2001,  the
Partnership   paid   Partnership   administration   expenses   to
affiliated  parties of $51,026 and $51,971, 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  $42,854 and $14,596, 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  increase
in  these expenses in 2002, when compared to 2001, is mainly  the
result  of  expenses  incurred in 2002  related  to  the  Denny's
restaurant.

        In  1996, in anticipation of selling a property  in  Park
Forest, Illinois, 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
soil  removal,  tank  removal,  soil  sampling,  backfilling  and
reporting,   of  $211,000  was  received  from  an  environmental
engineering   firm.   It  has  not  been  determined   when   the
reclamation work will begin, how long it will take to complete or
whether  there  are any sources available for indemnification  of
the reclamation costs.  It is reasonably possible that the actual
costs could materially differ from the estimate.

        On  August 5, 1998, the Partnership sold the Fair Muffler
property to the current tenant for $5,000.  The sale resulted  in
a  net  gain  of  $704.  The Partnership is reviewing  its  legal
obligation for the site liability and may have adjustments to the
accrued liability in future periods.

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

        As  of  June 30, 2002, 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
were  allocated  to  Limited  Partners  and  1%  to  the  General
Partners.

        Inflation  has  had  a  minimal  effect  on  income  from
operations.   Leases  may contain rent increases,  based  on  the
increase  in  the  Consumer Price Index over a specified  period,
which  will result in an increase in rental income over the  term
of  the  leases.   In addition, leases may contain  rent  clauses
which  entitle  the  Partnership to receive  additional  rent  in
future  years  if gross receipts for the property exceed  certain
specified  amounts.  Increases in sales volumes of  the  tenants,
due to inflation and real sales growth, may result in an increase
in rental income over the term of the leases.  Inflation also may
cause the real estate to appreciate in value.  However, inflation
and  changing prices may have an adverse impact on the  operating
margins  of  the  properties' tenants, which could  impair  their
ability  to  pay rent and subsequently reduce the Net  Cash  Flow
available for distributions.


Liquidity and Capital Resources


         During   the  six  months  ended  June  30,  2002,   the
Partnership's cash balances decreased $63,069 as the  Partnership
distributed  more  cash to the Partners than  it  generated  from
operating  activities.  Net cash provided by operating activities
decreased from $163,846 in 2001 to $86,852 in 2002 as a result of
a   decrease   in   income   and  an  increase   in   Partnership
administration expenses in 2002 and net timing differences in the
collection  of  payments  from the lessees  and  the  payment  of
expenses.

       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.  However,  in  certain
quarters,   the   Partnership   will   increase   the   quarterly
distribution to pay out contingent rent received as a  result  of
an  increase  in  sales at a property.  The distribution  of  the
contingent  rent  can  cause  the  total  distributions  and  the
distribution payable to fluctuate from year to year.   Redemption
payments are paid to redeeming Partners in the fourth quarter  of
each year.

        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.

        During  2001, three Limited Partners redeemed a total  of
27.5   Partnership   Units  for  $10,917  accordance   with   the
Partnership  Agreement.   The Partnership  acquired  these  Units
using Net Cash Flow from operations.  In prior years, a total  of
100  Limited  Partners  redeemed 1,047.34 Partnership  Units  for
$716,978.    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

        99.1  Certification  of Chief Executive  Officer  of  General
              Partner  pursuant  to Section 906 of the Sarbanes-Oxley
              Act of 2002.

        99.2  Certification  of Chief Financial  Officer  of  General
              Partner  pursuant  to Section 906 of the Sarbanes-Oxley
              Act of 2002.

       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 6, 2002        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)