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

                    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, 2002


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



                         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, 2002



                                                                          Page


Part I - FINANCIAL INFORMATION

Item 1.  Financial Statements

           Balance Sheets
              - March 31, 2002 and December 31, 2001....................     1

           Statements of Operations and Accumulated Losses
              - for the three months ended March 31, 2002 and 2001 .....     2

           Statements of Cash Flows
              - for the three months ended March 31, 2002 and 2001......     3

           Notes to  Financial Statements
              - March 31, 2002 and 2001.................................     4

Item 2.    Management's Discussion and Analysis of Financial Condition
              and Results of Operations.................................     8



Part II - OTHER INFORMATION

Item 3.    Defaults Upon Senior Securities..............................    10

Item 5.    Other Information............................................    10

Item 6.    Exhibits and Reports on Form 8-K.............................    11

Signature     ..........................................................    12





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


                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                                 BALANCE SHEETS


                                     ASSETS
<TABLE>
<CAPTION>
                                                                                       March 31,      December 31,
                                                                                          2002           2001
                                                                                      ------------    -----------
                                                                                      (Unaudited)
<S>                                                                                   <C>             <C>
Investments in and advances to partnerships .......................................   $  1,148,444    $  1,136,970
Cash and cash equivalents .........................................................      3,837,139       3,774,659
Acquisition fees, principally paid to related parties,
  net of accumulated amortization of $123,957 and $122,029, respectively ..........        107,398         109,326
Property purchase costs,
  net of accumulated amortization of $113,079 and $111,339 respectively ...........         95,682          97,421
Other assets ......................................................................            413             126
                                                                                      ------------    ------------

      Total assets ................................................................   $  5,189,076    $  5,118,502
                                                                                      ============    ============



                        LIABILITIES AND PARTNERS' CAPITAL


Due on investments in partnerships ................................................   $  1,047,600    $  1,047,600
Accrued interest payable ..........................................................      1,650,674       1,594,216
Accounts payable and accrued expenses .............................................         40,420          45,537
                                                                                      ------------    ------------

      Total liabilities ...........................................................      2,738,694       2,687,353
                                                                                      ------------    ------------

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 ............................................................    (11,274,927)    (11,294,160)
                                                                                      ------------    ------------

      Total partners' capital .....................................................      2,450,382       2,431,149
                                                                                      ------------    ------------

      Total liabilities and partners' capital .....................................   $  5,189,076    $  5,118,502
                                                                                      ============    ============
</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,
                                                                              ----------------------------
                                                                                  2002            2001
                                                                              ------------    ------------
<S>                                                                           <C>             <C>
Share of income from partnerships .........................................   $    138,243    $    130,829
                                                                              ------------    ------------

Other revenue and expenses:

  Revenue:
    Interest ..............................................................         17,631         107,057
                                                                              ------------    ------------


  Expenses:
    Interest ..............................................................         56,458         366,938
    General and administrative ............................................         33,785          36,097
    Management fee ........................................................         24,480          24,480
    Professional fees .....................................................         18,250          17,138
    Amortization of deferred costs ........................................          3,668           3,668
                                                                              ------------    ------------

                                                                                   136,641         448,321
                                                                              ------------    ------------

      Total other revenue and expenses ....................................       (119,010)       (341,264)
                                                                              ------------    ------------

Income (loss) before extraordinary gain from extinguishment of debt .......         19,233        (210,435)

Extraordinary gain from extinguishment of debt ............................           --            46,915
                                                                              ------------    ------------

Net income (loss) .........................................................         19,233        (163,520)

Accumulated losses, beginning of period ...................................    (11,294,160)    (15,934,693)
                                                                              ------------    ------------

Accumulated losses, end of period .........................................   $(11,274,927)   $(16,098,213)
                                                                              ============    ============



Net income (loss) allocated to General Partners (1.51%) ...................   $        290    $     (2,469)
                                                                              ============    ============


Net income (loss) allocated to Initial and Special Limited Partners (2.49%)   $        479    $     (4,072)
                                                                              ============    ============


Net income (loss) allocated to BAC Holders (96%) ..........................   $     18,464    $   (156,979)
                                                                              ============    ============


Net income (loss) per BAC based on 21,158 BACs outstanding ................   $       0.87    $      (7.42)
                                                                              ============    ============
</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,
                                                                             --------------------------
                                                                                2002            2001
                                                                             -----------    -----------
<S>                                                                          <C>            <C>
Cash flows from operating activities:
  Net income (loss) ......................................................   $    19,233    $  (163,520)

  Adjustments to reconcile net income (loss) to net cash used in operating
    activities:
    Share of income from partnerships ....................................      (138,243)      (130,829)
    Amortization of deferred costs .......................................         3,668          3,668
    Extraordinary gain from extinguishment of debt .......................          --          (46,915)

    Changes in assets and liabilities:
      Increase in accrued interest receivable on advances to partnerships         (5,907)        (5,906)
      (Increase) decrease in other assets ................................          (287)         1,372
      Increase in accrued interest payable ...............................        56,458        366,938
      Decrease in accounts payable and accrued expenses ..................        (5,117)       (32,611)
                                                                             -----------    -----------

        Net cash used in operating activities ............................       (70,195)        (7,803)
                                                                             -----------    -----------


Cash flows from investing activities:
  Receipt of distributions from partnerships .............................       132,675            510
  Additional investment in partnership ...................................          --         (575,000)
                                                                             -----------    -----------

        Net cash provided by (used in) investing activities ..............       132,675       (574,490)
                                                                             -----------    -----------

Net increase (decrease) in cash and cash equivalents .....................        62,480       (582,293)

Cash and cash equivalents, beginning of period ...........................     3,774,659      8,501,288
                                                                             -----------    -----------

Cash and cash equivalents, end of period .................................   $ 3,837,139    $ 7,918,995
                                                                             ===========    ===========
</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, 2002 and 2001

                                   (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, 2002,  and the results of its operations and its cash flows for the
three months ended March 31, 2002 and 2001.  The results of  operations  for the
interim  period  ended March 31, 2002,  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, 2001.


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 purchase money notes having an aggregate principal
balance of $873,000 plus  aggregate  accrued  interest of $1,575,274 as of March
31, 2002,  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 Paradise  Associates,  L.P. (Paradise  Foothills),  in the
principal amount of $230,000, matured on January 30, 1996, but has not been paid
or  extended,  as  discussed  below.  The  purchase  money note  related to Mesa
Partners Limited  Partnership (The Pointe), in the principal amount of $643,000,
matures in 2003.

     The purchase money notes,  which are  nonrecourse to the  Partnership,  are
generally  secured  by  the  Partnership's  interest  in  the  respective  Local
Partnerships.  There is no assurance  that the underlying  properties  will have
sufficient appreciation and equity to enable the Partnership to pay the purchase
money notes'  principal and accrued  interest when due. If a purchase money note
is not paid in accordance with its terms,  the  Partnership  will either have to
renegotiate  the terms of repayment or risk losing its  partnership  interest in
the respective 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 matured or maturing  purchase
money notes not produce sufficient

                                       -4-

<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             March 31, 2002 and 2001

                                   (Unaudited)


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued
     -------------------------------------------

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 matured or 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 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.  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,  2002  and  2001  was  $56,458  and  $366,938,
respectively.  The  accrued  interest  payable on the  purchase  money  notes of
$1,575,274  and  $1,518,816  as  of  March  31,  2002  and  December  31,  2001,
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
Foothills  when the note  matured on January  30,  1996,  and was not paid.  The
default amount included principal and accrued interest of $230,000 and $371,464,
respectively.  As of April 25, 2002,  principal  and accrued  interest  totaling
$230,000 and  $860,141,  respectively,  were due. The Managing  General  Partner
proposed an  extension of the purchase  money note  maturity  date until May 31,
2003,  coterminous  with  the  expiration  of the  related  Local  Partnership's
provisional  workout  agreement  related to its mortgage  loan.  As of April 25,
2002,  the  Managing  General  Partner  continues  to await a response  from the
purchase  money  noteholder.  There is no assurance  that the  Managing  General
Partner will reach an agreement of any kind with the noteholder. The Partnership
did not receive any distributions from Paradise Foothills during the three month
periods ended March 31, 2002 and 2001, nor was there any income or loss from the
Local  Partnership  included  in  share  of  income  from  partnerships  in  the
statements of operations for the periods then ended.

     The local managing  general  partner is exploring  options to refinance the
mortgage loan. As of April 25, 2002, the local managing  general partner has not
received a commitment for a refinancing.

     The  amount  due to a  local  general  partner  of  Paradise  Foothills  of
$174,600,  plus accrued interest of $75,400 at March 31, 2002, will be paid upon
the  occurrence  of  specified  events,  as outlined in the Local  Partnership's
partnership agreement.

                                       -5-

<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             March 31, 2002 and 2001

                                   (Unaudited)


2.   INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued
     -------------------------------------------

                                 Willow Creek II
                                 ---------------

     The Partnership defaulted on its two purchase money notes related to Willow
Creek II on  January  14,  2001 when the notes  matured  and were not paid.  The
default amount included  aggregate  principal and accrued interest of $1,475,000
and $7,583,743,  respectively.  In September 2001, the Partnership  paid off the
notes at a discount.  The discounted payoff resulted in extraordinary  gain from
extinguishment  of debt of $5,190,030  for financial  statement  purposes and in
cancellation  of  indebtedness  income of $5,190,030 for federal tax purposes in
2001.

b.   Additional investment in Local Partnership
     ------------------------------------------

     The Partnership has an investment in Sheridan West L.P. (Semper), the Local
Partnership which owns Semper Village Apartments in Westminster,  Colorado.  The
Local Partnership, in turn, was the maker of two purchase money notes related to
the acquisition of the property. The security for these two purchase money notes
included the  Partnership's  limited partner interest in Semper.  In conjunction
with the discounted  payoff of these two purchase money notes, in December 2000,
the Partnership agreed to make an additional  investment in Semper in the amount
of $574,000,  which amount was disbursed to Semper in January 2001.  Semper,  in
turn,  paid off the two purchase  money notes at a discount in January 2001. The
discounted  payoff of the purchase  money notes resulted in  extraordinary  gain
from extinguishment of debt of $46,915 for financial statement purposes in 2001.

     The  Partnership  also  agreed to  purchase  for $1,000  the 0.01%  general
partner  interest in Semper held by the  developer  and original  local  general
partner of Semper.  This agreement was made in December 2000, and the funds were
disbursed in January 2001. The Local Partnership has converted the 0.01% general
partner interest to a limited partner  interest,  so the Partnership now holds a
99.00% limited partner interest in Semper.

c.   Advance to Local Partnership
     ----------------------------

     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,  2002 and  December  31,  2001,  accrued  interest  was  $346,220  and
$340,313, respectively.

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

     Combined  statements of operations for the four Local Partnerships in which
the Partnership was invested as of March 31, 2002 and 2001, follow. The combined
statements have been compiled from information supplied by the management agents
of the projects and are unaudited.

                                       -6-

<PAGE>
                 CAPITAL REALTY INVESTORS-85 LIMITED PARTNERSHIP

                          NOTES TO FINANCIAL STATEMENTS

                             March 31, 2002 and 2001

                                   (Unaudited)



                        COMBINED STATEMENTS OF OPERATIONS
                                   (Unaudited)

                                                   For the three months ended
                                                            March 31,
                                                  ---------------------------
                                                     2002             2001
                                                  -----------      -----------

          Revenue:
            Rental                                $ 1,572,227      $ 1,540,595
            Other                                     107,553           95,661
                                                  -----------      -----------

              Total revenue                         1,679,780        1,636,256
                                                  -----------      -----------

          Expenses:
            Operating                                 818,606          774,869
            Interest                                  496,491          507,926
            Depreciation and amortization             283,954          277,163
                                                  -----------      -----------

              Total expenses                        1,599,051        1,559,958
                                                  -----------      -----------

          Net income                              $    80,729      $    76,298
                                                  ===========      ===========


     As of March 31, 2002 and 2001, 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
$6,840,328  and  $6,603,533,  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.


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 $25,736 and
$30,590 for the three month periods ended March 31, 2002 and 2001, 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, 2002 and 2001.




                                      # # #

                                       -7-

<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 $3,837,139
as of March 31, 2002,  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 25, 2002,  there were no material
commitments for capital expenditures.

     The  Partnership's  obligations  with respect to its  investments  in Local
Partnerships,  in the form of purchase money notes having an aggregate principal
balance of $873,000 plus  aggregate  accrued  interest of $1,575,274 as of March
31, 2002,  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 Paradise  Associates,  L.P. (Paradise  Foothills),  in the
principal amount of $230,000, matured on January 30, 1996, but has not been paid
or  extended.   The  purchase  money  note  related  to  Mesa  Partners  Limited
Partnership (The Pointe), in the principal amount of $643,000,  matures in 2003.
See Note 2.a. of the notes to financial  statements contained in Part I, Item 1,
hereof, for additional information concerning 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.

     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 matured or 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 matured or 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  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.  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.

                                       -8-

<PAGE>
Part I. FINANCIAL INFORMATION
        ---------------------

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


     The  Managing  General  Partner  is  continuing  to  investigate   possible
alternatives to reduce the Partnership's  debt obligations.  These  alternatives
include, among others, retaining the cash available for distribution to meet the
purchase money note  requirements,  paying off certain purchase money notes at a
discounted  price,  extending the due dates of certain  purchase money notes, or
refinancing   the  respective   properties'   underlying   debt  and  using  the
Partnership's  share of the  proceeds  to pay off or pay down  certain  purchase
money note obligations.

     Included in due on investments in  partnerships  is $174,600 due to a local
general partner  related to Paradise  Foothills at both March 31, 2002 and 2001;
accrued  interest  payable  thereon was $75,400 at both March 31, 2002 and 2001.
These amounts will be paid upon the occurrence of certain  specified  events, as
outlined in the respective Local Partnership's partnership agreement.

     The Partnership closely monitors its cash flow and liquidity position in an
effort to ensure that sufficient  cash is available for operating  requirements.
For the three month period ended March 31,  2002,  the receipt of  distributions
from Local Partnerships was adequate to support operating cash requirements; for
the three month  period  ended March 31,  2001,  existing  cash  resources  were
adequate  to support  operating  cash  requirements.  Cash and cash  equivalents
increased  during the three month period ended March 31, 2002, as the receipt of
distributions  from  Local  Partnerships  exceeded  net cash  used in  operating
activities.

     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  for  operating  cash  reserves.  No
distributions  were declared or paid by the  Partnership  during the three month
period ended March 31, 2002.

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

     The  Partnership  recognized  net income for the three month  period  ended
March 31,  2002,  as compared to net loss for the  corresponding  period in 2001
primarily  due to a  decrease  in  interest  expense  related to the payoff of a
purchase  money note in 2001.  Contributing  to net income  were an  increase in
share of income from  partnerships due to higher income at one property,  and to
lower general and administrative expenses.  Partially offsetting the increase in
the  Partnership's  net income were a decrease in interest  revenue due to lower
cash and cash  equivalent  balances  and  lower  interest  rates in 2002,  and a
decrease in extraordinary gain from extinguishment of debt.

     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,  2002 and 2001 did not  include  losses of $64,224 and
$60,697, respectively.

     No other  significant  changes in the  Partnership's  operations have taken
place during this period.

                                       -9-

<PAGE>
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 certain
purchase money notes.


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 26, 2001,  Equity Resources  Lexington Fund Limited  Partnership
(Lexington)  initiated an unregistered tender offer to purchase up to 994 of the
outstanding  BAC units at a price of $125 per unit;  the offer expired  February
26, 2001. On April 23, 2001, Lexington initiated an unregistered tender offer to
purchase up to 589 of the outstanding BAC units at a price of $150 per unit; the
offer  expired  May  22,  2001.  On  June  22,  2001,   Lexington  initiated  an
unregistered  tender offer to purchase up to 330 of the outstanding BAC units at
a price of $225  per  unit;  the  offer  expired  July 22,  2001.  Lexington  is
unaffiliated  with the Partnership or the Managing General  Partner.  The prices
offered  were  determined  solely  at the  discretion  of  Lexington  and do not
necessarily represent the fair market value of each BAC.

     On May 14, 2001,  Bond Purchase,  L.L.C.  (Bond)  initiated an unregistered
tender offer to purchase up to 1,000 of the  outstanding BAC units at a price of
$156 per unit;  the offer  expired  June 30,  2001.  On October  4,  2001,  Bond
initiated an unregistered  tender offer to purchase up to 930 of the outstanding
BAC units at a price of $247 per unit; the offer expired November 15, 2001. Bond
is unaffiliated with the Partnership or the Managing General Partner. The prices
offered were determined  solely at the discretion of Bond and do not necessarily
represent the fair market value of each BAC.

     Although  previously  the Managing  General  Partner had not  expressed any
opinion toward any offer for the purchase of BACs such as those described above,
on May 25, 2001, and July 9, 2001, the Managing  General Partner sent letters to
all BAC holders  recommending  that the May 14 tender offer by Bond and the June
22 tender offer by Lexington be rejected as inadequate in price.

     On June 8, 2001, Peachtree Partners  (Peachtree)  initiated an unregistered
tender  offer to  purchase a limited  number of the  outstanding  BAC units at a
price  of  $200  per  unit;  the  offer  expired  July  6,  2001.  Peachtree  in
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.

     During 2001, a number of investors sold their BAC units in the  Partnership
to other investors, as a result of unregistered tender offers. If more than five
percent of the total  outstanding  BAC units in the  Partnership are transferred
due to sale in any one calendar year (not counting  certain  exempt  transfers),
the  Partnership  could  be  taxed  as a  "publicly  traded  partnership,"  with
potentially  severe tax  implications  for the  Partnership  and its  investors.
Specifically,  the Partnership  could be taxed as a corporation  and, if so, the
income and losses from the  Partnership  would no longer be considered a passive
activity.  From January 1, 2001, through June 27, 2001, the Partnership received
sale transfer  requests for  approximately  4.6% of the  outstanding  BAC units.
Accordingly,  to remain within the five percent safe harbor,  effective June 27,
2001,  the Managing  General  Partner  halted  recognition of any transfers that
would exceed the safe harbor  limit  through  December  31,  2001.  As a result,
transfers of BAC units due to sales  transactions  were not being  recognized by
the Partnership between June 28, 2001 and December 31, 2001. The halt was lifted
effective January 1, 2002. For the calendar

                                      -10-

<PAGE>
Part II. OTHER INFORMATION
         -----------------
Item 5. Other Information - Continued
        -----------------


year 2002 to April 25, 2002, BAC units transferred have not exceeded 4.9% of the
total outstanding BACs, therefore, the Partnership has not halted recognition of
transfers.


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

     a.   None

     b.   No reports of on Form 8-K were  filed with the  Commission  during the
          quarter ended March 31, 2002.

     All other items are not applicable.

                                      -11-

<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 25, 2002                 by:  /s/ Michael J. Tuszka
------------------                  --------------------------------------------
DATE                                Michael J. Tuszka
                                      Vice President
                                      and Chief Accounting Officer
                                      (Principal Financial Officer
                                      and Principal Accounting Officer)

                                      -12-