SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549
                                
                           FORM 10-KSB
                                
             Annual Report Under Section 13 or 15(d)
             Of The Securities Exchange Act Of 1934
                                
          For the Fiscal Year Ended:  December 31, 1998
                                
                Commission file number:  0-16555
                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
         (Name of Small Business Issuer in its Charter)

        State of Minnesota                41-1571166
(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)

Securities registered pursuant to Section 12(b) of the Act:
                                 Name of each exchange on
     Title of each class             which registered
             None                          None

Securities registered pursuant to Section 12(g) of the Act:

                      Limited Partnership Units
                        (Title of class)
                                
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 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

Check if disclosure of delinquent filers in response to Rule  405
of  Regulation  S-B  is  not  contained  in  this  Form,  and  no
disclosure  will  be contained, to the best of  the  registrant's
knowledge,   in   definitive  proxy  or  information   statements
incorporated by reference in Part III of this Form 10-KSB or  any
amendment to this Form 10-KSB.  [X]

The  Issuer's  revenues  for year ended December  31,  1998  were
$1,057,876.

As  of  February 28, 1999, there were 13,606.15 Units of  limited
partnership interest in the registrant outstanding and  owned  by
nonaffiliates  of  the registrant, which Units had  an  aggregate
market  value (based solely on the price at which they were  sold
since there is no ready market for such Units) of $13,606,150.

               DOCUMENTS INCORPORATED BY REFERENCE

 The registrant has not incorporated any documents by reference
                        into this report.
                                
         Transitional Small Business Disclosure Format:
                                
                     Yes            No   [X]

                             PART I

ITEM 1.   DESCRIPTION OF BUSINESS.

         AEI  Real  Estate  Fund  XVI  Limited  Partnership  (the
"Partnership" or the "Registrant") is a limited partnership which
was  organized pursuant to the laws of the State of Minnesota  on
February  6,  1987.   The  registrant is comprised  of  AEI  Fund
Management XVI, Inc. (AFM) as Managing General Partner, Robert P.
Johnson  as  the  Individual General Partner, and  purchasers  of
partnership  units as Limited Partners.  The Partnership  offered
for  sale up to $15,000,000 of limited partnership interests (the
"Units")  (15,000  Units  at  $1,000  per  Unit)  pursuant  to  a
registration   statement  effective  December  15,   1986.    The
Partnership commenced operations on February 6, 1987 when minimum
subscriptions  of  2,000 Limited Partnership  Units  ($2,000,000)
were accepted.  The Partnership's offering terminated November 6,
1987  when  the  maximum  subscription limit  of  15,000  Limited
Partnership Units ($15,000,000) was reached.

        The Partnership was organized to acquire, initially on  a
debt-free   basis,  existing  and  newly  constructed  commercial
properties located in the United States, to lease such properties
to  tenants under triple net leases, to hold such properties  and
to  eventually sell such properties.  From subscription proceeds,
the  Partnership  purchased twenty properties, including  partial
interests  in  eleven  properties,  totaling  $12,910,857.    The
balance  of the subscription proceeds was applied to organization
and    syndication   costs,   working   capital   reserves    and
distributions,  which  represented  a  return  of  capital.   The
properties  are  all commercial, single tenant  buildings  leased
under triple net leases.

       The Partnership will hold its properties until the General
Partners  determine  that the sale or other  disposition  of  the
properties   is   advantageous  in  view  of  the   Partnership's
investment  objectives.  In deciding whether to sell  properties,
the  General  Partners will consider factors  such  as  potential
appreciation,  net  cash flow and income tax considerations.   In
addition,  certain lessees have been granted options to  purchase
properties  after  a  specified portion of  the  lease  term  has
elapsed.   It is anticipated that the Partnership will  sell  its
properties  within twelve years after acquisition.  At  any  time
prior to selling the properties, the Partnership may mortgage one
or  more of its properties in amounts not exceeding 50% of the of
the fair market value of the property.

Leases

       Although there are variations in the specific terms of the
leases,  the following is a summary of the general terms  of  the
Partnership's  leases.   The properties  are  leased  to  various
tenants  under  triple  net  leases,  which  are  classified   as
operating  leases.   Under  a triple net  lease,  the  lessee  is
responsible  for  all real estate taxes, insurance,  maintenance,
repairs  and  operating expenses for the property.   The  initial
lease terms are for 10 to 20 years.  The leases provide for  base
annual  rental  payments,  payable in monthly  installments,  and
contain  rent  clauses which entitle the Partnership  to  receive
additional rent in future years based on stated rent increases or
if  gross  receipts  for  the property exceed  certain  specified
amounts, among other conditions.

        Most  of the leases provide the lessee with two to  three
five-year   renewal  options  subject  to  the  same  terms   and
conditions  as  the  initial lease.  Certain  lessees  have  been
granted  options  to  purchase the property.   Depending  on  the
lease,  the purchase price is either determined by a formula,  or
is  the  greater of the fair market value of the property or  the
amount determined by a formula.  In all cases, if the option were
to  be  exercised  by  the lessee, the purchase  price  would  be
greater than the original cost of the property.

ITEM 1.   DESCRIPTION OF BUSINESS. (Continued)

        The  Partnership owns a 35% interest in a  J.T.  McCord's
restaurant  in  Mesquite, Texas and a 100%  interest  in  a  J.T.
McCord's  restaurant  in Irving, Texas.  In December,  1995,  the
Partnership  took possession of the properties after  the  lessee
was  unable to perform under the terms of the Lease.   In  March,
1997,  the  restaurant in Mesquite was re-leased to Texas  Sports
City Cafe, Ltd. under a triple net lease agreement with a primary
term  of  12 years which may be renewed for up to two consecutive
five-year  periods.  The Partnership's share of the  annual  base
rent  is  $17,500  for the first lease year and $31,500  for  the
second  lease year, with rent increases in each subsequent  lease
year  of  either three percent of the prior year's rent or  three
percent  of gross receipts in years two and three and six percent
of  gross receipts thereafter, to the extent they exceed the base
rent.

        On  December  22,  1997, the Partnership  sold  the  J.T.
McCord's restaurant in Irving, Texas to an unrelated third party.
The  Partnership  received net sales proceeds of  $741,635  which
resulted  in  a net loss of $109,144.  At the time of  sale,  the
cost  and  related accumulated depreciation of the  property  was
$1,147,333 and $296,554, respectively.  While the properties were
being re-leased or sold, the Partnership was responsible for  the
real  estate  taxes  and  other costs required  to  maintain  the
properties.

        The  Partnership owns a 55.0958% interest in a restaurant
in  Waco, Texas, which was previously closed.  In June 1995,  the
Partnership re-leased the restaurant to Tex-Mex Cocina  of  Waco,
L.C.   The Lease Agreement had a primary term of eighteen  months
with an annual rental payment of $29,752.  In December, 1997, the
lessee  elected not to exercise the renewal option in the  lease.
The restaurant was closed and is listed for sale or lease.  While
the  property is vacant, the Partnership is responsible  for  the
real  estate  taxes  and  other costs required  to  maintain  the
property.

        As  of  December 31, 1997, based on an analysis of market
conditions in the area, it was determined the fair value  of  the
Partnership's  interest  in the Waco property  was  approximately
$385,600.   In the fourth quarter of 1997, a charge to operations
for  real estate impairment of $100,000 was recognized, which  is
the  difference between the book value at December  31,  1997  of
$485,600  and the estimated fair value of $385,600.   The  charge
was  recorded  against  the cost of the land  and  building.   In
December, 1998, the Partnership re-analyzed the market conditions
in  the  area  and determined the fair value of the Partnership's
interest  declined  to  approximately $154,300.   In  the  fourth
quarter  of  1998,  a  charge  to  operations  for  real   estate
impairment  of  $221,000 was recognized, which is the  difference
between  book  value  at December 31, 1998 of  $375,300  and  the
estimated  fair  value  of  $154,300.  The  charge  was  recorded
against the cost of the land and building.

        In  July  1995, the lessee of the Super 8  Motel  in  Hot
Springs, Arkansas, exercised an option in the Lease Agreement  to
purchase  the property.  On March 29, 1996, the sale closed  with
the  Partnership  receiving net sale proceeds of  $663,386  which
resulted  in a net gain of $215,017.  The Partnership  recognized
$18,534  of  this  gain  in  1995 due to  nonrefundable  deposits
received  from the purchaser.  At the time of sale, the cost  and
related accumulated depreciation of the property was $583,653 and
$135,284, respectively.

ITEM 1.   DESCRIPTION OF BUSINESS. (Continued)

         In   January,   1996,   the  Cheddar's   restaurant   in
Indianapolis,  Indiana was destroyed by a fire.  The  Partnership
reached an agreement with the tenant and insurance company  which
called  for termination of the Lease, demolition of the  building
and  payment to the Partnership of $407,282 for the building  and
equipment  and $49,688 for lost rent.  The property will  not  be
rebuilt  and  the  Partnership listed the  land  for  sale.   The
Partnership recognized net disposition proceeds of $406,892 which
resulted  in  a net gain of $88,207.  At the time of disposition,
the  cost  and related accumulated depreciation was $496,967  and
$178,282,  respectively.  As of December 31, 1997,  based  on  an
analysis of market conditions in the area, it was determined  the
fair  value  of  the  Partnership's  interest  in  the  land  was
approximately $200,000.  In the fourth quarter of 1997, a  charge
to   operations  for  real  estate  impairment  of  $54,000   was
recognized,  which is the difference between the  book  value  at
December  31,  1997 of $253,747 and the estimated fair  value  of
$200,000.   In  December, 1998, the Partnership  re-analyzed  the
market  conditions in the area and determined the fair  value  of
the  Partnership's interest in the land declined to approximately
$175,000.   In the fourth quarter of 1998, a charge to operations
for  real  estate impairment of $25,000 was recognized, which  is
the  difference between the book value at December  31,  1998  of
$200,000 and the estimated fair value of $175,000.

        In  November,  1995,  the  Partnership  entered  into  an
Agreement  to  purchase  an Applebee's  restaurant  in  Victoria,
Texas.   The  property  was  acquired  on  March  22,  1996   for
$1,335,555.   The  property is leased to  Renaissant  Development
Corporation  under a Lease Agreement with a primary  term  of  20
years and annual rental payments of approximately $151,000.

        The  Partnership owned a 30.8078% interest in  a  Sizzler
restaurant at the King's Island Theme Park near Cincinnati, Ohio.
In  January,  1994,  the Partnership closed  the  restaurant  and
listed  it  for  sale  or  lease.   On  January  23,  1997,   the
Partnership  sold its interest in the property  to  an  unrelated
third  party.   The  Partnership received net sales  proceeds  of
$149,201,  which  resulted in a net loss of $216,300,  which  was
recognized  as a real estate impairment in the fourth quarter  of
1996.  Prior to the sale, the Partnership was responsible for the
real  estate  taxes  and  other costs required  to  maintain  the
property.

       In August, 1996, the Partnership entered into an agreement
to  purchase  a  Caribou Coffee store in Atlanta,  Georgia.   The
property  was  acquired on August 15, 1997 for  $1,247,571.   The
property is leased to Caribou Coffee Company, Inc. under a  Lease
Agreement  with  a  primary term of 18 years  and  annual  rental
payments of $142,025.

        Pursuant  to  the Partnership Agreement, as amended,  net
sale proceeds may be reinvested in additional properties until  a
date  ten  years after the date on which the offer  and  sale  of
Units  is  terminated.  This period expired on November 6,  1997.
In  February,  1998,  the Managing General  Partner  proposed  an
Amendment  to the Limited Partnership Agreement that would  allow
the  Partnership  to reinvest the majority of the  sale  proceeds
from the J.T. McCord's restaurant in Irving, Texas and subsequent
property  sales in additional properties.  The proposed Amendment
did not receive a majority vote for adoption.

ITEM 1.   DESCRIPTION OF BUSINESS. (Continued)

Major Tenants

        During  1998,  five  of  the Partnership's  lessees  each
contributed  more  than  ten percent of the  Partnership's  total
rental  revenue.  The major tenants in aggregate contributed  74%
of  the  Partnership's  total rental  revenue  in  1998.   It  is
anticipated  that, based on the minimum rental payments  required
under  the  leases, each major tenant will continue to contribute
more  than ten percent of the Partnership's total rental  revenue
in  1999 and future years.  Any failure of these major tenants or
business  concepts could materially affect the Partnership's  net
income and cash distributions.

Competition

        The  Partnership is a minor factor in the commercial real
estate  business.   There are numerous entities  engaged  in  the
commercial  real  estate  business which have  greater  financial
resources  than  the  Partnership.  At the time  the  Partnership
elects to dispose of its properties, the Partnership will  be  in
competition  with other persons and entities to find  buyers  for
its properties.

Employees

        The  Partnership  has  no direct  employees.   Management
services   are  performed  for  the  Partnership  by   AEI   Fund
Management, Inc., an affiliate of AFM.

Year 2000 Compliance

       The Year 2000 issue is the result of computer systems that
use  two  digits rather than four to define the applicable  year,
which  may prevent such systems from accurately processing  dates
ending  in  the  Year  2000 and beyond.   This  could  result  in
computer  system failures or disruption of operations, including,
but not limited to, an inability to process transactions, to send
or  receive  electronic data, or to engage  in  routine  business
activities.

        AEI  Fund  Management, Inc. (AEI) performs all management
services  for  the  Partnership.   In  1998,  AEI  completed   an
assessment of its computer hardware and software systems and  has
replaced or upgraded certain computer hardware and software using
the  assistance  of  outside vendors.  AEI has  received  written
assurance  from  the equipment and software manufacturers  as  to
Year  2000  compliance.   The  costs associated  with  Year  2000
compliance have not been, and are not expected to be, material.

        The  Partnership intends to monitor and communicate  with
tenants regarding Year 2000 compliance, although there can be  no
assurance  that the systems of the various tenants will  be  Year
2000 compliant.

ITEM 2.   DESCRIPTION OF PROPERTIES.

Investment Objectives

        The  Partnership's investment objectives are  to  acquire
existing or newly-developed commercial properties throughout  the
United  States that offer the potential for (i) preservation  and
protection  of  the  Partnership's capital; (ii)  partially  tax-
deferred  cash distributions from operations which  may  increase
through  rent  participation clauses or mandated rent  increases;
and  (iii) long-term capital gains through appreciation in  value
of   the  Partnership's  properties  realized  upon  sale.    The
Partnership  does not have a policy, and there is no  limitation,
as  to the amount or percentage of assets that may be invested in
any  one  property.  However, to the extent possible, the General
Partners  attempt  to  diversify the type  and  location  of  the
Partnership's properties.
ITEM 2.   DESCRIPTION OF PROPERTIES. (Continued)

Description of Properties

        The  Partnership's properties are all commercial,  single
tenant  buildings.  All the properties were acquired on  a  debt-
free  basis  and are leased to various tenants under  triple  net
leases,   which   are  classified  as  operating   leases.    The
Partnership  holds  an  undivided  fee  simple  interest  in  the
properties.   At  any time prior to selling the  properties,  the
Partnership may mortgage one or more of its properties in amounts
not exceeding 50% of the fair market value of the property.

        The  Partnership's properties are subject to the  general
competitive conditions incident to the ownership of single tenant
investment  real estate.  Since each property is leased  under  a
long-term   lease,   there  is  little  competition   until   the
Partnership  decides to sell the property.   At  this  time,  the
Partnership will be competing with other real estate  owners,  on
both a national and local level, in attempting to find buyers for
the   properties.   In  the  event  of  a  tenant  default,   the
Partnership would be competing with other real estate owners, who
have  property vacancies, to attract a new tenant  to  lease  the
property.   The Partnership's tenants operate in industries  that
are  very  competitive and can be affected  by  factors  such  as
changes  in regional or local economies, seasonality and  changes
in consumer preference.

        The  following table is a summary of the properties  that
the Partnership acquired and owned as of December 31, 1998.

<TABLE>
<CAPTION>
                                Total Property
                       Purchase  Acquisition                 Annual Lease   Annual Rent
Property                 Date      Costs         Lessee          Payment    Per Sq. Ft.
<S>                   <C>      <C>         <C>                <C>          <C>        

Creative Years Early                          Creative Years
Learning Center                               Early Learning
 Houston, TX            4/8/87   $  483,128    Centers, Inc.     $   42,180   $  6.13

Grand Rapids Teachers                          Grand Rapids
Credit Union                                     Teachers
 Wyoming, MI            5/1/87   $  626,239    Credit Union      $   32,370   $  9.37

Arby's Restaurant                                 RTM Mid-
 Grand Rapids, MI       5/1/87   $  652,880     America, Inc.    $   24,000   $  6.89

Fuddruckers Restaurant
 Omaha, NE            11/16/87   $1,151,543   Fuddruckers, Inc.  $  145,081   $ 20.94

Children's World
Daycare Center                                    ARAMARK
 Sterling Heights, MI                           Educational
 (83.6514%)           11/25/87   $  729,486   Resources, Inc.    $  108,696   $ 21.04

Jiffy Lube Auto Care Center
 Dallas, TX                                      Lone Star
 (25%)                12/10/87   $  154,891   Lubrication, Inc.  $   21,822   $ 32.70

JEMCARE
 Arkansas Lane
 Arlington, TX        12/10/87   $  450,475     JEMCARE, Inc.    $   40,649   $  8.07
 </TABLE>

ITEM 2.   PROPERTIES. (Continued)

<TABLE>
<CAPTION>
                                Total Property
                       Purchase  Acquisition                 Annual Lease   Annual Rent
Property                 Date      Costs         Lessee          Payment    Per Sq. Ft.
<S>                   <C>      <C>         <C>                <C>          <C>        

Zapata's Cantina & Cafe
 Waco, TX
 (55.0958%)           12/16/87   $  674,285        (1)

Sports City Cafe                                  Texas
 Mesquite, TX                                  Sports City
 (35%)                12/16/87   $  520,109     Cafe, Ltd.       $   31,500    $ 12.73

JEMCARE
 Matlock Avenue
 Arlington, TX        12/16/87   $  603,641    JEMCARE, Inc.     $   47,285    $  8.04

Cheddar's Restaurant
 Indianapolis, IN
 (50%)                 2/16/88   $  253,747        (2)

Fuddruckers Restaurant
 St. Louis, MO
 (40%)                 3/25/88   $  761,053   Fuddruckers, Inc.  $   92,164    $ 26.40

Applebee's Restaurant
 Slidell, LA                                     Gulf Coast
 (73%)                  5/5/93   $  746,465   Restaurants, Inc.  $  115,183    $ 34.44

                                                Renaissant
Applebee's Restaurant                           Development
 Victoria, TX          3/22/96   $1,335,555        Corp.         $  151,110    $ 27.57

Caribou Coffee Store                           Caribou Coffee
 Atlanta, GA           8/15/97   $1,247,571     Company, Inc.    $  142,025    $ 33.39

</TABLE>

(1) The property is vacant and listed for sale or lease.
(2) The  property was destroyed by fire and the land is listed for
    sale.

        The  properties  listed above with  a  partial  ownership
percentage  are  owned with affiliates of the  Partnership.   AEI
Real  Estate  Fund  85-B Limited Partnership owns  the  remaining
interest in the Children's World Daycare Center.  AEI Real Estate
Fund  XV Limited Partnership owns the remaining interest  in  the
Zapata's Cantina & Cafe and the Fuddruckers restaurant.  AEI Real
Estate Fund XVII Limited Partnership owns the remaining interests
in  the  Jiffy  Lube,  the  Sports City Cafe  and  the  Cheddar's
restaurant.  AEI Real Estate Fund XVIII Limited Partnership  owns
the  remaining interest in the Applebee's restaurant in  Slidell,
Louisiana.

        Each  Partnership owns a separate, undivided interest  in
the  properties.   No  specific agreement  or  commitment  exists
between the Partnerships as to the management of their respective
interests in the properties, and the Partnership that holds  more
than  a  50% interest does not control decisions over  the  other
Partnership's interest.

ITEM 2.   PROPERTIES. (Continued)

        The  initial  Lease  terms are 20 years  except  for  the
JEMCARE  properties (10 years), the Credit Union (11 years),  the
Sports  City  Cafe (12 years), the Creative Years daycare  center
(13  years),  the Arby's (15 years) and the Caribou Coffee  store
(18  years).  Most of the Leases have renewal options  which  may
extend the Lease term an additional 9 to 15 years.

        The  Partnership acquired lease guarantee insurance  from
United  Guaranty  Commercial Insurance Company of  Iowa  for  the
Houston,  Texas  daycare center, and one of the Arlington,  Texas
daycare centers.  The policies insured approximately 80%  of  the
annual  payments for a period of ten years.  The  rent  guarantee
began thirty days after the occurrence of all the following:  (1)
the lessee was at least thirty days in default in the payment  of
rent;  (2)  the  lessee was removed from the  property;  (3)  the
property  was listed for rent with a real estate broker and  "For
Rent"  signs  were posted on the property; and (4) certain  other
minor  conditions.   Once these conditions  were  satisfied,  the
Partnership  received lease insurance payments until  either  the
property  was  re-leased  or the policy  expired.   The  policies
expired on April 7, 1997 and February 28, 1997, respectively.

       Pursuant to the Lease Agreements, the tenants are required
to provide proof of adequate insurance coverage on the properties
they  occupy.   The General Partners believe the  properties  are
adequately covered by insurance and consider the properties to be
well-maintained and sufficient for the Partnership's operations.

         For  tax  purposes,  the  Partnership's  properties  are
depreciated  under the Modified Accelerated Cost Recovery  System
(MACRS).  The largest depreciable component of a property is  the
building  which  is depreciated, using the straight-line  method,
over 31.5 or 40 years depending on the date when it was placed in
service.  The remaining depreciable components of a property  are
personal  property and land improvements which  are  depreciated,
using  an  accelerated method, over 5 and 15 years, respectively.
Since the Partnership has tax-exempt Partners, the Partnership is
subject to the rules of Section 168(h)(6) of the Internal Revenue
Code  which  requires a percentage of the properties' depreciable
components to be depreciated over longer lives using the straight-
line  method.  In general the federal tax basis of the properties
for  tax depreciation purposes is the same as the basis for  book
depreciation purposes except for properties whose book value  was
reduced  by  a real estate impairment loss pursuant to  Financial
Accounting Standards Board Statement No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets  to  be
Disposed  of."   The  real  estate  impairment  loss,  which  was
recorded  against  the  book cost of  the  land  and  depreciable
property, was not recognized for tax purposes.

        During the last five years or since the date of purchase,
if  purchased  after December 31, 1993, all properties  were  100
percent  occupied by the lessees noted except for the  properties
discussed  below.  The ZapataOs Cantina & Cafe  was  100  percent
vacant from January, 1993 to June, 1995 when it was re-leased  to
a  lessee who occupied the property until December 31, 1997.  The
Sports City Cafe was 100 percent occupied by a prior lessee until
December, 1995.  The property was re-leased to the current lessee
on  March  15,  1997.   The CheddarOs property  was  100  percent
occupied until January, 1996.

ITEM 3. LEGAL PROCEEDINGS.

       None.

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

       None.


                             PART II

ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND
        RELATED SECURITY HOLDER MATTERS.

        As  of  December  31, 1998, there were 1,473  holders  of
record  of the registrant's Limited Partnership Units.  There  is
no  other  class  of  security outstanding  or  authorized.   The
registrant's  Units  are  not a traded security  in  any  market.
However, the Partnership may purchase 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 total number  of  Units
outstanding at the beginning of the year.  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  1998,  twenty-seven Limited Partners  redeemed  a
total of 313.25 Partnership Units for $161,072 in accordance with
the  Partnership  Agreement.  In prior  years,  a  total  of  101
Limited Partners redeemed 1,080.6 Partnership Units for $829,400.
The   redemptions   increase  the  remaining  Limited   Partners'
ownership interest in the Partnership.

        Cash distributions of $15,258 and $7,978 were made to the
General  Partners and $1,349,386 and $745,729 were  made  to  the
Limited   Partners   in   1998  and  1997,   respectively.    The
distributions  were made on a quarterly basis and  represent  Net
Cash   Flow,  as  defined,  except  as  discussed  below.   These
distributions  should  not be compared  with  dividends  paid  on
capital stock by corporations.

        As  part  of the Limited Partner distributions  discussed
above,  the  Partnership  distributed  $734,218  and  $70,915  of
proceeds from property sales in 1998 and 1997, respectively.  The
distributions  reduced  the  Limited Partners'  Adjusted  Capital
Contributions.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS.

Results of Operations

        For  the  years  ended December 31, 1998  and  1997,  the
Partnership recognized rental income of $1,040,302 and  $975,472,
respectively.   During the same periods, the  Partnership  earned
investment income of $17,574 and $60,983, respectively.  In 1998,
rental  income increased as the result of rental income  received
from  the  Caribou  Coffee  in Atlanta,  Georgia,  rental  income
received  from re-leasing the restaurant in Mesquite,  Texas  and
rent increases on five properties.  This increase was offset by a
reduction  in rental income due to the vacancy of the  restaurant
in  Waco,  Texas,  the  expiration of lease  guarantee  insurance
policies  on  two  properties  in  1997,  and  the  reduction  of
percentage rent on one property in 1998.  The increase in  rental
income  was offset by a decrease in investment income  earned  on
net  sale  proceeds  prior  to  the purchase  of  the  additional
properties.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

        The  Partnership owns a 35% interest in a  J.T.  McCord's
restaurant  in  Mesquite, Texas and a 100%  interest  in  a  J.T.
McCord's  restaurant  in Irving, Texas.  In December,  1995,  the
Partnership  took possession of the properties after  the  lessee
was  unable  to perform under the terms of the Lease.   In  July,
1996, the Partnership entered into an agreement to sell the  J.T.
McCord's  in  Mesquite, Texas to an unrelated  third  party.   In
September,  1996, the Agreement was terminated by the  purchaser.
The  property was listed for sale or lease until March, 1997 when
it  was  re-leased to Texas Sports City Cafe, Ltd. under a triple
net lease agreement with a primary term of 12 years which may  be
renewed  for  up  to  two  consecutive  five-year  periods.   The
Partnership's  share of the annual base rent is $17,500  for  the
first lease year and $31,500 for the second lease year, with rent
increases  in each subsequent lease year of either three  percent
of  the  prior year's rent or three percent of gross receipts  in
years two and three and six percent of gross receipts thereafter,
to  the extent they exceed the base rent.  In December, 1997, the
Irving   property  was  sold  as  discussed  below.   While   the
properties  were  being re-leased or sold,  the  Partnership  was
responsible for the real estate taxes and other costs required to
maintain the properties.

        The  Partnership owns a 55.0958% interest in a restaurant
in  Waco, Texas, which was previously closed.  In June 1995,  the
Partnership re-leased the restaurant to Tex-Mex Cocina  of  Waco,
L.C.   The Lease Agreement had a primary term of eighteen  months
with an annual rental payment of $29,752.  In December, 1997, the
lessee  elected not to exercise the renewal option in the  lease.
The restaurant was closed and is listed for sale or lease.  While
the  property is vacant, the Partnership is responsible  for  the
real  estate  taxes  and  other costs required  to  maintain  the
property.

        As  of  December 31, 1997, based on an analysis of market
conditions in the area, it was determined the fair value  of  the
Partnership's  interest  in the Waco property  was  approximately
$385,600.   In the fourth quarter of 1997, a charge to operations
for  real estate impairment of $100,000 was recognized, which  is
the  difference between the book value at December  31,  1997  of
$485,600  and the estimated fair value of $385,600.   The  charge
was  recorded  against  the cost of the land  and  building.   In
December, 1998, the Partnership re-analyzed the market conditions
in  the  area  and determined the fair value of the Partnership's
interest  declined  to  approximately $154,300.   In  the  fourth
quarter  of  1998,  a  charge  to  operations  for  real   estate
impairment  of  $221,000 was recognized, which is the  difference
between  book  value  at December 31, 1998 of  $375,300  and  the
estimated  fair  value  of  $154,300.  The  charge  was  recorded
against the cost of the land and building.

        The  Partnership owned a 30.8078% interest in  a  Sizzler
restaurant at the King's Island Theme Park near Cincinnati, Ohio.
In  January,  1994,  the Partnership closed  the  restaurant  and
listed  it  for  sale  or  lease.   On  January  23,  1997,   the
Partnership  sold its interest in the property  to  an  unrelated
third  party.   The  Partnership received net sales  proceeds  of
$149,201,  which  resulted in a net loss of $216,300,  which  was
recognized  as a real estate impairment in the fourth quarter  of
1996.  Prior to the sale, the Partnership was responsible for the
real  estate  taxes  and  other costs required  to  maintain  the
property.

        During  the years ended December 31, 1998 and  1997,  the
Partnership   paid   Partnership   administration   expenses   to
affiliated parties of $210,718 and $207,550, 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  $49,925 and $83,197, 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 mainly  due
to  expenses  incurred  in  1997 related  to  the  J.T.  McCord's
restaurant in Irving, Texas.
ITEM 6.   MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

       As of December 31, 1998, the Partnership's annualized cash
distribution   rate  was  5%,  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.

        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.

       The Year 2000 issue is the result of computer systems that
use  two  digits rather than four to define the applicable  year,
which  may prevent such systems from accurately processing  dates
ending  in  the  Year  2000 and beyond.   This  could  result  in
computer  system failures or disruption of operations, including,
but not limited to, an inability to process transactions, to send
or  receive  electronic data, or to engage  in  routine  business
activities.

        AEI  Fund  Management, Inc. (AEI) performs all management
services  for  the  Partnership.   In  1998,  AEI  completed   an
assessment of its computer hardware and software systems and  has
replaced or upgraded certain computer hardware and software using
the  assistance  of  outside vendors.  AEI has  received  written
assurance  from  the equipment and software manufacturers  as  to
Year  2000  compliance.   The  costs associated  with  Year  2000
compliance have not been, and are not expected to be, material.

        The  Partnership intends to monitor and communicate  with
tenants regarding Year 2000 compliance, although there can be  no
assurance  that the systems of the various tenants will  be  Year
2000 compliant.

Liquidity and Capital Resources

        During  1998,  the Partnership's cash balances  decreased
$757,689  mainly due to the distribution of $707,071 of net  sale
proceeds  to  the  Partners as a special distribution  in  April,
1998.   Net Cash provided by operating activities increased  from
$675,703  in 1997 to $766,940 in 1998 as a result of an  increase
in  income  and  a decrease in expenses in 1998  and  net  timing
differences  in the collection of payments from the  lessees  and
the payment of expenses.

        The  major components of the Partnership's cash flow from
investing activities are investments in real estate and  proceeds
from the sale of real estate.  In 1997, the Partnership generated
cash  flow from the sale of real estate of $890,836.  During  the
same  period, the Partnership expended $524,976 to invest in real
properties (inclusive of acquisition expenses) as the Partnership
reinvested the cash generated from the property sales.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

         In   January,   1996,   the  Cheddar's   restaurant   in
Indianapolis,  Indiana was destroyed by a fire.  The  Partnership
reached an agreement with the tenant and insurance company  which
called  for termination of the Lease, demolition of the  building
and  payment to the Partnership of $407,282 for the building  and
equipment  and $49,688 for lost rent.  The property will  not  be
rebuilt  and  the Partnership listed the land for  sale.   As  of
December  31, 1997, based on an analysis of market conditions  in
the  area,  it was determined the fair value of the Partnership's
interest  in the land was approximately $200,000.  In the  fourth
quarter  of  1997,  a  charge  to  operations  for  real   estate
impairment  of  $54,000 was recognized, which is  the  difference
between  the book value at December 31, 1997 of $253,747 and  the
estimated  fair  value  of  $200,000.   In  December,  1998,  the
Partnership  re-analyzed the market conditions in  the  area  and
determined  the fair value of the Partnership's interest  in  the
land  declined to approximately $175,000.  In the fourth  quarter
of  1998,  a  charge to operations for real estate impairment  of
$25,000 was recognized, which is the difference between the  book
value  at  December 31, 1998 of $200,000 and the  estimated  fair
value of $175,000.

        On  December  22,  1997, the Partnership  sold  the  J.T.
McCord's restaurant in Irving, Texas to an unrelated third party.
The  Partnership  received net sales proceeds of  $741,635  which
resulted  in  a net loss of $109,144.  At the time of  sale,  the
cost  and  related accumulated depreciation of the  property  was
$1,147,333 and $296,554, respectively.

       In August, 1996, the Partnership entered into an agreement
to  purchase  a  Caribou Coffee store in Atlanta,  Georgia.   The
property  was  acquired on August 15, 1997 for  $1,247,571.   The
property is leased to Caribou Coffee Company, Inc. under a  Lease
Agreement  with  a  primary term of 18 years  and  annual  rental
payments of $142,025.

        Pursuant  to  the Partnership Agreement, as amended,  net
sale proceeds may be reinvested in additional properties until  a
date  ten  years after the date on which the offer  and  sale  of
Units  is  terminated.  This period expired on November 6,  1997.
In  February,  1998,  the Managing General  Partner  proposed  an
Amendment  to the Limited Partnership Agreement that would  allow
the  Partnership  to reinvest the majority of the  sale  proceeds
from the J.T. McCord's restaurant in Irving, Texas and subsequent
property  sales in additional properties.  The proposed Amendment
did not receive a majority vote for adoption.

       During 1998 and 1997, the Partnership distributed $741,635
and  $71,631 of the net sale proceeds to the Limited and  General
Partners as part of their regular quarterly distributions,  which
represented  a return of capital of $52.78 and $5.07 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.   The  redemption payments generally are funded  with  cash
that  would  normally  be paid as part of the  regular  quarterly
distributions.    As   a   result,   total   distributions    and
distributions payable have fluctuated from year to  year  due  to
cash  used to fund redemption payments.  Effective April 1, 1997,
the Partnership's distribution rate was reduced from 6.5% to 6.0%
which  resulted  in  regular distributions  to  the  Partners  of
$753,262  in  1997.  In April, 1998, the Partnership  distributed
net  sale  proceeds  of  $707,071 to the Partners  as  a  special
distribution,  which  reduced  the  Limited  Partners'   Adjusted
Capital  Contribution.  Effective April 1, 1998, the  Partnership
made distributions at a 5.0% rate on the reduced capital balance,
which  resulted  in  regular distributions  to  the  Partners  of
$655,945 for 1998.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS. (Continued)

        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
outstanding at the beginning of the year.  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  1998,  twenty-seven Limited Partners  redeemed  a
total of 313.25 Partnership Units for $161,072 in accordance with
the  Partnership Agreement.  The Partnership acquired these Units
using Net Cash Flow from operations.  In prior years, a total  of
101  Limited  Partners  redeemed 1,080.6  Partnership  Units  for
$829,400.    The  redemptions  increase  the  remaining   Limited
Partners' ownership interest in the Partnership.

       The continuing rent payments from the properties should be
adequate   to  fund  continuing  distributions  and  meet   other
Partnership obligations on both a short-term and long-term basis.

Cautionary Statement for Purposes of the "Safe Harbor" Provisions
of the Private Securities Litigation Reform Act of 1995

         The   foregoing  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:

    <BULLET>  Market  and economic conditions which  affect
              the  value of the properties the Partnership  owns  and
              the cash from rental income such properties generate;
       
    <BULLET>  the federal income tax consequences of rental
              income,  deductions, gain on sales and other items  and
              the affects of these consequences for investors;
       
    <BULLET>  resolution  by  the  General   Partners   of
              conflicts with which they may be confronted;
       
    <BULLET>  the  success  of  the  General  Partners   of
              locating   properties   with  favorable   risk   return
              characteristics;
       
    <BULLET>  the effect of tenant defaults; and
       
    <BULLET>  the condition of the industries in which  the
              tenants of properties owned by the Partnership operate.

ITEM 7. FINANCIAL STATEMENTS.

       See accompanying Index to Financial Statements.
                                
                                
                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  INDEX TO FINANCIAL STATEMENTS




                                                       

Report of Independent Auditors                         

Balance Sheet as of December 31, 1998 and 1997         

Statements for the Years Ended December 31, 1998 and 1997:

     Income                                             

     Cash Flows                                         

     Changes in Partners' Capital                       

Notes to Financial Statements                     

                                
                                
                                
                 REPORT OF INDEPENDENT AUDITORS


To the Partners:
AEI Real Estate Fund XVI Limited Partnership
St. Paul, Minnesota



      We  have audited the accompanying balance sheet of AEI REAL
ESTATE   FUND  XVI  LIMITED  PARTNERSHIP  (a  Minnesota   limited
partnership)  as  of December 31, 1998 and 1997 and  the  related
statements of income, cash flows and changes in partners' capital
for  the  years then ended.  These financial statements  are  the
responsibility    of   the   Partnership's    management.     Our
responsibility  is  to  express an  opinion  on  these  financial
statements based on our audits.

      We  conducted  our  audits  in  accordance  with  generally
accepted  auditing standards.  Those standards  require  that  we
plan  and perform the audit to obtain reasonable assurance  about
whether   the   financial  statements  are   free   of   material
misstatement.   An  audit includes examining, on  a  test  basis,
evidence  supporting the amounts and disclosures in the financial
statements.   An  audit  also includes assessing  the  accounting
principles used and significant estimates made by management,  as
well  as evaluating the overall financial statement presentation.
We  believe  that our audits provide a reasonable basis  for  our
opinion.

      In  our opinion, the financial statements referred to above
present  fairly, in all material respects, the financial position
of  AEI  Real Estate Fund XVI Limited Partnership as of  December
31, 1998 and 1997, and the results of its operations and its cash
flows  for  the  years then ended, in conformity  with  generally
accepted accounting principles.


                            /s/ Boulay, Heutmaker, Zibell & Co. P.L.L.P.
Minneapolis, Minnesota          Boulay, Heutmaker, Zibell & Co. P.L.L.P.
January 27, 1999                Certified Public Accountants

<PAGE>
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                          BALANCE SHEET
                                
                           DECEMBER 31
                                
                             ASSETS
                                
                                                       1998           1997
CURRENT ASSETS:
  Cash and Cash Equivalents                       $    78,013    $   835,702
  Receivables                                          35,703         23,306
                                                   -----------    -----------
      Total Current Assets                            113,716        859,008
                                                   -----------    -----------
INVESTMENTS IN REAL ESTATE:
  Land                                              3,474,363      3,580,192
  Buildings and Equipment                           6,341,958      6,457,129
  Accumulated Depreciation                         (2,320,311)    (2,120,686)
                                                   -----------    -----------
                                                    7,496,010      7,916,635
  Real Estate Held for Sale                           174,747        199,747
                                                   -----------    -----------
      Net Investments in Real Estate                7,670,757      8,116,382
                                                   -----------    -----------
          Total Assets                            $ 7,784,473    $ 8,975,390
                                                   ===========    ===========

                         LIABILITIES AND PARTNERS' CAPITAL

CURRENT LIABILITIES:
  Payable to AEI Fund Management, Inc.            $    64,626    $    60,310
  Distributions Payable                               138,384        137,297
  Deferred Income                                      22,212         22,212
                                                   -----------    -----------
      Total Current Liabilities                       225,222        219,819
                                                   -----------    -----------

DEFERRED INCOME - Net of Current Portion              177,557        199,769

PARTNERS' CAPITAL (DEFICIT):
  General Partners                                    (55,381)       (43,639)
  Limited Partners, $1,000 Unit value;
   15,000 Units authorized and issued;
   13,606 and 13,919 outstanding in 1998
   and 1997, respectively                           7,437,075      8,599,441
                                                   -----------    -----------
      Total Partners' Capital                       7,381,694      8,555,802
                                                   -----------    -----------
        Total Liabilities and Partners' Capital   $ 7,784,473    $ 8,975,390
                                                   ===========    ===========
                                
The accompanying notes to financial statements are an integral
                     part of this statement.
</PAGE>
<PAGE>

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                       STATEMENT OF INCOME
                                
                 FOR THE YEARS ENDED DECEMBER 3l


                                                     1998            1997

INCOME:
  Rent                                           $ 1,040,302     $   975,472
  Investment Income                                   17,574          60,983
                                                  -----------     -----------
      Total Income                                 1,057,876       1,036,455
                                                  -----------     -----------

EXPENSES:
  Partnership Administration - Affiliates            210,718         207,550
  Partnership Administration and Property
     Management - Unrelated Parties                   49,925          83,197
  Depreciation                                       199,625         269,297
  Real Estate Impairment                             246,000         154,000
                                                  -----------     -----------
      Total Expenses                                 706,268         714,044
                                                  -----------     -----------

OPERATING INCOME                                     351,608         322,411

LOSS ON SALE OF REAL ESTATE                                0        (109,144)
                                                  -----------     -----------
NET INCOME                                       $   351,608     $   213,267
                                                  ===========     ===========

NET INCOME ALLOCATED:
  General Partners                               $     3,516     $     2,133
  Limited Partners                                   348,092         211,134
                                                  -----------     -----------
                                                 $   351,608     $   213,267
                                                  ===========     ===========

NET INCOME PER LIMITED PARTNERSHIP UNIT
(13,840 and 13,976 weighted average Units outstanding
in 1998 and 1997, respectively)                  $     25.15     $     15.11
                                                  ===========     ===========


 The accompanying notes to financial statements are an integral
                     part of this statement.
</PAGE>
<PAGE>
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                     STATEMENT OF CASH FLOWS
                                
                 FOR THE YEARS ENDED DECEMBER 31


                                                    1998            1997

CASH FLOWS FROM OPERATING ACTIVITIES:
 Net Income                                     $   351,608    $   213,267

 Adjustments To Reconcile Net Income
 To Net Cash Provided By Operating Activities:
     Depreciation                                   199,625        269,297
     Real Estate Impairment                         246,000        154,000
     Loss on Sale of Real Estate                          0        109,144
     Increase in Receivables                        (12,397)        (6,022)
     Increase (Decrease) in Payable to
        AEI Fund Management, Inc.                     4,316        (41,772)
     Decrease in Deferred Income                    (22,212)       (22,212)
                                                 -----------    -----------
       Total Adjustments                            415,332        462,435
                                                 -----------    -----------
       Net Cash Provided By
          Operating Activities                      766,940        675,702
                                                 -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Investments in Real Estate                              0       (524,976)
  Proceeds from Sale of Real Estate                       0        890,836
                                                 -----------    -----------
       Net Cash Provided By
           Investing Activities                           0        365,860
                                                 -----------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase (Decrease) in Distributions Payable        1,087        (53,350)
  Distributions to Partners                      (1,363,016)      (753,262)
  Redemption Payments                              (162,700)       (44,550)
                                                 -----------    -----------
       Net Cash Used For
          Financing Activities                   (1,524,629)      (851,162)
                                                 -----------    -----------
NET INCREASE (DECREASE) IN CASH
   AND CASH EQUIVALENTS                            (757,689)       190,400

CASH AND CASH EQUIVALENTS, beginning of period      835,702        645,302
                                                 -----------    -----------
CASH AND CASH EQUIVALENTS, end of period        $    78,013    $   835,702
                                                 ===========    ===========
                                
                              
 The accompanying notes to financial statements are an integral
                     part of this statement.
</PAGE>
<PAGE>

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
            STATEMENT OF CHANGES IN PARTNERS' CAPITAL
                                
                 FOR THE YEARS ENDED DECEMBER 31


                                                                    Limited
                                                                  Partnership
                              General      Limited                   Units
                              Partners     Partners     Total     Outstanding


BALANCE, December 31, 1996  $  (37,794)  $ 9,178,141  $ 9,140,347    13,994.70

  Distributions                 (7,533)     (745,729)    (753,262)

  Redemption Payments             (445)      (44,105)     (44,550)      (75.30)

  Net Income                     2,133       211,134      213,267
                             ----------   -----------  -----------  -----------
BALANCE, December 31, 1997     (43,639)    8,599,441    8,555,802    13,919.40

  Distributions                (13,630)   (1,349,386)  (1,363,016)

  Redemption Payments           (1,628)     (161,072)    (162,700)     (313.25)

  Net Income                     3,516       348,092      351,608
                             ----------   -----------  -----------  -----------
BALANCE, December 31, 1998  $  (55,381)  $ 7,437,075  $ 7,381,694    13,606.15
                             ==========   ===========  ===========  ===========

 The accompanying notes to financial statements are an integral
                     part of this statement.
</PAGE>
<PAGE>

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 1998 AND 1997
                                
(1)  Organization -

     AEI  Real  Estate Fund XVI Limited Partnership (Partnership)
     was  formed  to  acquire and lease commercial properties  to
     operating tenants.  The Partnership's operations are managed
     by AEI Fund Management XVI, Inc. (AFM), the Managing General
     Partner   of  the  Partnership.   Robert  P.  Johnson,   the
     President  and  sole  shareholder  of  AFM,  serves  as  the
     Individual General Partner of the Partnership.  An affiliate
     of  AFM,  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  February  6,  1987  when  minimum
     subscriptions    of   2,000   Limited   Partnership    Units
     ($2,000,000)  were  accepted.   The  Partnership's  offering
     terminated on November 6, 1987 when the maximum subscription
     limit of 15,000 Limited Partnership Units ($15,000,000)  was
     reached.
     
     Under  the  terms of the Limited Partnership Agreement,  the
     Limited  Partners and General Partners contributed funds  of
     $15,000,000 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.
     
     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.

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 1998 AND 1997
                                
(1)  Organization - (Continued)

     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.
         
(2)  Summary of Significant Accounting Policies -

     Financial Statement Presentation
       
       The  accounts  of  the Partnership are maintained  on  the
       accrual  basis of accounting for both federal  income  tax
       purposes and financial reporting purposes.

     Accounting Estimates
     
       Management  uses  estimates and assumptions  in  preparing
       these  financial statements in accordance  with  generally
       accepted  accounting  principles.   Those  estimates   and
       assumptions may affect the reported amounts of assets  and
       liabilities,  the  disclosure  of  contingent  assets  and
       liabilities,  and  the  reported  revenues  and  expenses.
       Actual results could differ from those estimates.
       

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 1998 AND 1997
                                
(2)  Summary of Significant Accounting Policies - (Continued)

       The  Partnership regularly assesses whether market  events
       and conditions indicate that it is reasonably possible  to
       recover  the carrying amounts of its investments  in  real
       estate  from  future operations and sales.   A  change  in
       those  market events and conditions could have a  material
       effect on the carrying amount of its real estate
       
     Cash Concentrations of Credit Risk

       At  times  throughout  the year,  the  Partnership's  cash
       deposited  in  financial  institutions  may  exceed   FDIC
       insurance limits.
     
     Statement of Cash Flows
     
       For  purposes  of  reporting cash  flows,  cash  and  cash
       equivalents  may include cash in checking,  cash  invested
       in   money   market  accounts,  certificates  of  deposit,
       federal  agency notes and commercial paper with a term  of
       three months or less.
     
     Income Taxes

       The  income or loss of the Partnership for federal  income
       tax  reporting  purposes is includable in the  income  tax
       returns of the partners.  Accordingly, no recognition  has
       been  given to income taxes in the accompanying  financial
       statements.
       
       The  tax  return, the qualification of the Partnership  as
       such  for  tax  purposes, and the amount of  distributable
       Partnership  income or loss are subject to examination  by
       federal   and  state  taxing  authorities.   If  such   an
       examination  results  in  changes  with  respect  to   the
       Partnership  qualification or in changes to  distributable
       Partnership  income  or loss, the taxable  income  of  the
       partners would be adjusted accordingly.
              
     Real Estate

       The  Partnership's real estate is leased under triple  net
       leases  classified as operating leases.   The  Partnership
       recognizes  rental revenue on the accrual basis  according
       to  the terms of the individual leases.  For leases  which
       contain  cost  of  living  increases,  the  increases  are
       recognized in the year in which they are effective.
       
       Real  estate is recorded at the lower of cost or estimated
       net   realizable  value.   The  Partnership  compares  the
       carrying amount of its properties to the estimated  future
       cash  flows expected to result from the property  and  its
       eventual  disposition.  If the sum of the expected  future
       cash  flows  is  less  than the  carrying  amount  of  the
       property,  the  Partnership recognizes an impairment  loss
       by  the  amount  by  which  the  carrying  amount  of  the
       property exceeds the fair value of the property.
       
                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 1998 AND 1997

(2)  Summary of Significant Accounting Policies - (Continued)

       The  Partnership  has capitalized as Investments  in  Real
       Estate   certain   costs  incurred  in  the   review   and
       acquisition  of the properties.  The costs were  allocated
       to the land, buildings and equipment.
       
       The   buildings  and  equipment  of  the  Partnership  are
       depreciated  using the straight-line method for  financial
       reporting purposes based on estimated useful lives  of  30
       years and 10 years, respectively.

(3)  Related Party Transactions -

     The  Partnership owns an 83.6514% interest in the Children's
     World  Daycare Center.  The remaining interest is  owned  by
     AEI  Real Estate Fund 85-B Limited Partnership, an affiliate
     of   the  Partnership.   The  Partnership  owns  a  55.0958%
     interest in the restaurant in Waco, Texas and a 40% interest
     in  the  St.  Louis Fuddruckers restaurant.   The  remaining
     interests  in these properties are owned by AEI Real  Estate
     Fund   XV   Limited   Partnership,  an  affiliate   of   the
     Partnership.   The  Partnership owns a  35%  interest  in  a
     Sports City Cafe, a 25% interest in a Jiffy Lube and  a  50%
     interest in a parcel of land in Indianapolis, Indiana.   The
     remaining  interests in these properties are  owned  by  AEI
     Real  Estate Fund XVII Limited Partnership, an affiliate  of
     the Partnership.  The Partnership owns a 73% interest in  an
     Applebee's restaurant in Slidell, Louisiana.  The  remaining
     interest  in this property is owned by AEI Real Estate  Fund
     XVIII Limited Partnership.  The Partnership owned a 30.8078%
     interest  in a Sizzler restaurant.  The remaining  interests
     in  this  property were owned by AEI Real Estate  Fund  XVII
     Limited  Partnership and AEI Real Estate Fund XVIII  Limited
     Partnership.
     
     Each  Partnership owns a separate undivided interest in  the
     properties.   No  specific agreement  or  commitment  exists
     between  the  Partnerships as to  the  management  of  their
     respective  interests in the properties, and the Partnership
     that  holds  more  than  a  50% interest  does  not  control
     decisions  over  the  other  Partnership's  interest.    The
     financial   statements  reflect  only   this   Partnership's
     percentage  share  of  the properties'  land,  building  and
     equipment, liabilities, revenues and expenses.
     
     AEI   and  AFM  received  the  following  compensation   and
     reimbursements for costs and expenses from the Partnership:


                                    Total Incurred by the Partnership
                                     for the Years Ended December 3l

                                                     1998         1997
a.AEI and AFM are reimbursed for all costs
  incurred in connection with managing the
  Partnership's operations, maintaining the
  Partnership's books and communicating
  the results of operations to the Limited
  Partners.                                       $ 210,718     $ 207,550
                                                   ========      ========

                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP

                  NOTES TO FINANCIAL STATEMENTS

                   DECEMBER 31, 1998 AND 1997
                                
(3)  Related Party Transactions - (Continued)

                                    Total Incurred by the Partnership
                                     for the Years Ended December 3l

                                                      1998           1997
b.AEI and AFM are reimbursed for all direct
  expenses they have paid on the Partnership's
  behalf to third parties.  These expenses
  included printing costs, legal and filing fees,
  direct administrative costs, outside audit and
  accounting costs, taxes, insurance and
  other property costs.                             $  49,925     $  83,197
                                                     ========      ========

c.AEI is reimbursed for all property acquisition
  costs incurred by it in acquiring properties on
  behalf of the Partnership.  The amount is net
  of financing and commitment fees and expense
  reimbursements received by the Partnership from
  the lessees in the amount of $22,178 for 1997.    $       0     $  (8,362)
                                                     ========      ========
     
     The  payable  to  AEI Fund Management, Inc.  represents  the
     balance due for the services described in 3a, b and c.  This
     balance is non-interest bearing and unsecured and is  to  be
     paid in the normal course of business.
     
(4)  Investments in Real Estate -
     
     The  Partnership  leases its properties to  various  tenants
     through triple net leases, which are classified as operating
     leases.  Under a triple net lease, the lessee is responsible
     for  all  real estate taxes, insurance, maintenance, repairs
     and  operating expenses of the property.  The initial  Lease
     terms  are  20  years except for the JEMCARE properties  (10
     years),  the Credit Union (11 years), the Sports  City  Cafe
     (12  years),  the Creative Years daycare center (13  years),
     the  Arby's  (15  years) and the Caribou  Coffee  store  (18
     years).   Most of the Leases have renewal options which  may
     extend  the  Lease term an additional 9 to  15  years.   The
     Leases contain rent clauses which entitle the Partnership to
     receive additional rent in future years based on stated rent
     increases  or  if  gross receipts for  the  property  exceed
     certain  specified amounts, among other conditions.  Certain
     lessees  have been granted options to purchase the property.
     Depending  on  the  lease,  the  purchase  price  is  either
     determined  by  a  formula, or is the greater  of  the  fair
     market value of the property or the amount determined  by  a
     formula.   In all cases, if the option were to be  exercised
     by  the lessee, the purchase price would be greater than the
     original cost of the property.
     
                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                   DECEMBER 31, 1998 AND 1997
                                
(4)  Investments in Real Estate - (Continued)
     
     The  Partnership's  properties are all  commercial,  single-
     tenant  buildings.   The  restaurant  in  Waco,  Texas   was
     constructed  in  1980 and enlarged in 1982  and  1983.   The
     Sports City Cafe and the Creative Years daycare center  were
     constructed  in 1984.  The Omaha Fuddruckers restaurant  was
     constructed  in 1985 and remodeled in 1987.  The  Applebee's
     restaurant in Slidell, Louisiana, was constructed  in  1991.
     The Applebee's restaurant in Victoria, Texas was constructed
     in  1996.  The Caribou Coffee store was constructed in 1997.
     All other properties were constructed in 1986, 1987 or 1988.
     All properties were acquired in 1987 or 1988, except for the
     Slidell  Applebee's restaurant which was acquired  in  1993,
     the  Victoria Applebee's restaurant in 1996, and the Caribou
     Coffee  store in 1997.  There have been no costs capitalized
     as improvements subsequent to the acquisitions.

     The cost of the properties not held for sale and the related
     accumulated  depreciation  at  December  31,  1998  are   as
     follows:
                                         Buildings and            Accumulated
Property                         Land      Equipment      Total   Depreciation

Creative Years,
 Houston, TX                $   147,753  $   335,375  $   483,128  $   155,534
Credit Union, Wyoming, MI       166,434      459,805      626,239      215,342
Arby's, Grand Rapids, MI        195,229      457,651      652,880      214,333
Fuddruckers, Omaha, NE          307,913      843,630    1,151,543      476,950
Children's World,
 Sterling Heights, MI           138,133      591,353      729,486      241,073
Jiffy Lube, Dallas, TX           65,918       88,973      154,891       40,198
JEMCARE, Arlington, TX          148,214      302,261      450,475      131,878
Zapata's, Waco, TX               73,880      279,405      353,285      199,005
Sports City Cafe, Mesquite, TX  230,337      289,772      520,109      130,452
JEMCARE, Arlington, TX          323,671      279,970      603,641      120,190
Fuddruckers, St. Louis, MO      396,943      364,110      761,053      171,172
Applebee's, Slidell, LA         278,879      467,586      746,465       88,322
Applebee's, Victoria, TX        379,644      955,911    1,335,555      106,322
Caribou Coffee, Atlanta, GA     621,415      626,156    1,247,571       29,540
                             -----------  -----------  -----------  -----------
                            $ 3,474,363  $ 6,341,958  $ 9,816,321  $ 2,320,311
                             ===========  ===========  ===========  ===========
     
                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                   DECEMBER 31, 1998 AND 1997
                                
(4)  Investments in Real Estate - (Continued)
     
     The  Partnership  owns a 35% interest  in  a  J.T.  McCord's
     restaurant in Mesquite, Texas and a 100% interest in a  J.T.
     McCord's  restaurant in Irving, Texas.  In  December,  1995,
     the  Partnership took possession of the properties after the
     lessee  was unable to perform under the terms of the  Lease.
     In  July, 1996, the Partnership entered into an agreement to
     sell  the  J.T. McCord's in Mesquite, Texas to an  unrelated
     third   party.   In  September,  1996,  the  Agreement   was
     terminated  by the purchaser.  The property was  listed  for
     sale  or  lease until March, 1997 when it was  re-leased  to
     Texas  Sports  City  Cafe, Ltd. under  a  triple  net  lease
     agreement  with  a  primary term of 12 years  which  may  be
     renewed  for  up to two consecutive five-year periods.   The
     Partnership's share of the annual base rent is  $17,500  for
     the  first lease year and $31,500 for the second lease year,
     with  rent increases in each subsequent lease year of either
     three  percent of the prior year's rent or three percent  of
     gross  receipts  in years two and three and six  percent  of
     gross  receipts  thereafter, to the extent they  exceed  the
     base rent.
     
     On December 22, 1997, the Partnership sold the J.T. McCord's
     restaurant  in  Irving, Texas to an unrelated  third  party.
     The  Partnership  received net sales  proceeds  of  $741,635
     which  resulted in a net loss of $109,144.  At the  time  of
     sale,  the cost and related accumulated depreciation of  the
     property  was $1,147,333 and $296,554, respectively.   While
     the properties were being re-leased or sold, the Partnership
     was  responsible for the real estate taxes and  other  costs
     required to maintain the properties.
     
     The Partnership owns a 55.0958% interest in a restaurant  in
     Waco, Texas, which was previously closed.  In June 1995, the
     Partnership  re-leased the restaurant to Tex-Mex  Cocina  of
     Waco,  L.C.   The  Lease Agreement had  a  primary  term  of
     eighteen  months with an annual rental payment  of  $29,752.
     In  December,  1997, the lessee elected not to exercise  the
     renewal option in the lease.  The restaurant was closed  and
     is  listed for sale or lease.  While the property is vacant,
     the Partnership is responsible for the real estate taxes and
     other costs required to maintain the property.
     
     As  of  December  31, 1997, based on an analysis  of  market
     conditions in the area, it was determined the fair value  of
     the   Partnership's  interest  in  the  Waco  property   was
     approximately $385,600.  In the fourth quarter  of  1997,  a
     charge  to operations for real estate impairment of $100,000
     was  recognized,  which is the difference between  the  book
     value  at  December 31, 1997 of $485,600 and  the  estimated
     fair value of $385,600.  The charge was recorded against the
     cost  of  the  land  and building.  In December,  1998,  the
     Partnership  re-analyzed the market conditions in  the  area
     and  determined the fair value of the Partnership's interest
     declined  to approximately $154,300.  In the fourth  quarter
     of  1998,  a charge to operations for real estate impairment
     of  $221,000 was recognized, which is the difference between
     book  value  at  December  31,  1998  of  $375,300  and  the
     estimated  fair value of $154,300.  The charge was  recorded
     against the cost of the land and building.
     
                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                   DECEMBER 31, 1998 AND 1997
                                
(4)  Investments in Real Estate - (Continued)
     
     In  January, 1996, the Cheddar's restaurant in Indianapolis,
     Indiana was destroyed by a fire.  The Partnership reached an
     agreement with the tenant and insurance company which called
     for termination of the Lease, demolition of the building and
     payment to the Partnership of $407,282 for the building  and
     equipment and $49,688 for lost rent.  The property will  not
     be rebuilt and the Partnership listed the land for sale.  As
     of  December  31,  1997,  based on  an  analysis  of  market
     conditions in the area, it was determined the fair value  of
     the  Partnership's  interest in the land  was  approximately
     $200,000.   In  the  fourth quarter of  1997,  a  charge  to
     operations  for  real  estate  impairment  of  $54,000   was
     recognized, which is the difference between the  book  value
     at  December  31,  1997 of $253,747 and the  estimated  fair
     value  of $200,000.  In December, 1998, the Partnership  re-
     analyzed  the  market conditions in the area and  determined
     the  fair  value of the Partnership's interest in  the  land
     declined  to approximately $175,000.  In the fourth  quarter
     of  1998,  a charge to operations for real estate impairment
     of  $25,000 was recognized, which is the difference  between
     the  book  value  at December 31, 1998 of $200,000  and  the
     estimated fair value of $175,000.
     
     The  Partnership  owned  a 30.8078% interest  in  a  Sizzler
     restaurant  at the King's Island Theme Park near Cincinnati,
     Ohio.    In  January,  1994,  the  Partnership  closed   the
     restaurant and listed it for sale or lease.  On January  23,
     1997,  the Partnership sold its interest in the property  to
     an  unrelated  third  party.  The Partnership  received  net
     sales proceeds of $149,201, which resulted in a net loss  of
     $216,300,  which was recognized as a real estate  impairment
     in  the  fourth  quarter of 1996.  Prior to  the  sale,  the
     Partnership  was responsible for the real estate  taxes  and
     other costs required to maintain the property.
     
     In November, 1997, the Partnership entered into an agreement
     to sell the Fuddruckers restaurant in St. Louis, Missouri to
     an unrelated third party.  In March, 1998, the agreement was
     terminated by the purchaser.
     
     In  August, 1996, the Partnership entered into an  agreement
     to purchase a Caribou Coffee store in Atlanta, Georgia.  The
     property  was  acquired on August 15, 1997  for  $1,247,571.
     The property is leased to Caribou Coffee Company, Inc. under
     a Lease Agreement with a primary term of 18 years and annual
     rental payments of $142,025.

     Pursuant to the Partnership Agreement, as amended, net  sale
     proceeds may be reinvested in additional properties until  a
     date ten years after the date on which the offer and sale of
     Units  is  terminated.  This period expired on  November  6,
     1997.   In  February,  1998,  the Managing  General  Partner
     proposed  an Amendment to the Limited Partnership  Agreement
     that would allow the Partnership to reinvest the majority of
     the  sale  proceeds  from  the J.T. McCord's  restaurant  in
     Irving,  Texas  and subsequent property sales in  additional
     properties.   The  proposed  Amendment  did  not  receive  a
     majority vote for adoption.
     
     During  1998 and 1997, the Partnership distributed  $741,635
     and  $71,631  of  the net sale proceeds to the  Limited  and
     General   Partners  as  part  of  their  regular   quarterly
     distributions,  which  represented a return  of  capital  of
     $52.78 and $5.07 per Limited Partnership Unit, respectively.
     
                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                   DECEMBER 31, 1998 AND 1997

(4)  Investments in Real Estate - (Continued)

     The   minimum  future  rentals  on  the  Leases  for   years
     subsequent to December 31, 1998 are as follows:
     
                       1999          $ 1,032,134
                       2000            1,043,824
                       2001              956,669
                       2002              974,428
                       2003              953,492
                       Thereafter      7,552,573
                                      -----------
                                     $12,513,120
                                      ===========

     In  1998  and  1997,  the Partnership recognized  contingent
     rents of $16,340 and $24,974, respectively.

(5)  Deferred Income -

     In  June,  1994, Fuddruckers, Inc., the restaurant concept's
     franchisor,  acquired  the  operations  of  the  Fuddruckers
     restaurants in St. Louis, Missouri and Omaha, Nebraska,  and
     assumed the lease obligations from the original lessee.   As
     part of the agreement, the Partnership amended the Leases to
     reduce  the  base  rent  from the  current  annual  rent  of
     $109,033  to $92,164 for the St. Louis property and $167,699
     to  $145,081 for the Omaha property.  The Partnership  could
     receive  additional  rent in the  future  if  10%  of  gross
     receipts  from  the  properties exceed the  base  rent.   In
     consideration  for the lease assumption and  amendment,  the
     Partnership  received a lump sum payment from  the  original
     lessee of $299,723.  The lump sum payment will be recognized
     as income over the remainder of the Lease terms which expire
     January  31, 2008 and November 30, 2007, using the  straight
     line  method.   As  of  December  31,  1998  and  1997,  the
     Partnership    has   recognized   $99,954    and    $77,742,
     respectively, of this payment as income.

                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                   DECEMBER 31, 1998 AND 1997
                                
(6)  Major Tenants -

     The following schedule presents rent revenue from individual
     tenants,   or  affiliated  groups  of  tenants,   who   each
     contributed more than ten percent of the Partnership's total
     rent revenue for the years ended December 31:
     
                                                      1998          1997
      Tenants                         Industry
                              
     Fuddruckers, Inc.               Restaurant    $  259,457    $  259,457
     Renaissant Development Corp.    Restaurant       151,110       151,110
     Caribou Coffee Company, Inc.    Restaurant       142,025           N/A
     Gulf Coast Restaurants, Inc.    Restaurant       113,560       109,720
     ARAMARK Educational
       Resources, Inc.               Child Care       107,205       105,309
     JEMCARE, Inc.                   Child Care           N/A        98,869
                                                    ----------    ----------

     Aggregate rent revenue of major tenants       $  773,357    $  724,465
                                                    ==========    ==========

     Aggregate rent revenue of major tenants as
     a percentage of total rent revenue                    74%           74%
                                                    ==========    ==========

(7) Partners' Capital -

     Cash  distributions of $15,258 and $7,978 were made  to  the
     General  Partners and $1,349,386 and $745,729 were  made  to
     the  Limited Partners for the years ended December 31,  1998
     and 1997, respectively.  The Limited Partners' distributions
     represent  $97.50  and $53.36 per Limited  Partnership  Unit
     outstanding  using 13,840 and 13,976 weighted average  Units
     in 1998 and 1997, respectively.  The distributions represent
     $13.31  and  $11.94 per Unit of Net Income  and  $84.19  and
     $41.42 per Unit of return of contributed capital in 1998 and
     1997, respectively.
     
     As  part  of  the  Limited  Partner distributions  discussed
     above,  the Partnership distributed $734,218 and $70,915  of
     proceeds from property sales in 1998 and 1997, respectively.
     The  distributions  reduced the Limited  Partners'  Adjusted
     Capital Contributions.

     Distributions  of  Net  Cash Flow to  the  General  Partners
     during  1998  and  1997  were subordinated  to  the  Limited
     Partners  as  required in the Partnership Agreement.   As  a
     result,  99%  of distributions and income were allocated  to
     the Limited Partners and 1% to the General Partners.
     
                                
          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                   DECEMBER 31, 1998 AND 1997
                                
(7) Partners' Capital - (Continued)

     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
     outstanding at the beginning of the year.  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 1998, twenty-seven Limited Partners redeemed a  total
     of  313.25 Partnership Units for $161,072 in accordance with
     the  Partnership Agreement.  The Partnership acquired  these
     Units  using Net Cash Flow from operations.  In 1997, eleven
     Limited Partners redeemed a total of 75.3 Partnership  Units
     for $44,105.  The redemptions increase the remaining Limited
     Partners' ownership interest in the Partnership.
     
     After  the  effect of redemptions and the return of  capital
     from   the   sale   of   property,  the   Adjusted   Capital
     Contribution,  as defined in the Partnership  Agreement,  is
     $892.63 per original $1,000 invested.

          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                   DECEMBER 31, 1998 AND 1997

(8)  Income Taxes -

     The   following  is  a  reconciliation  of  net  income  for
     financial reporting purposes to income reported for  federal
     income tax purposes for the years ended December 31:
     
                                                    1998            1997
     Net Income for Financial
      Reporting Purposes                        $  351,608       $  213,267
     
     Depreciation for Tax Purposes
      Under Depreciation for Financial
      Reporting Purposes                             2,082           47,395
     
     Income Accrued for Tax Purposes
      Under Income for Financial
      Reporting Purposes                           (27,512)         (24,813)
     
     Property Expenses for Tax Purposes
      Under Expenses for Financial
      Reporting Purposes                             1,995            6,639
     
     Real Estate Impairment Loss
      Not Recognized for Tax Purposes              246,000          154,000
     
     Gain on Sale of Real Estate for Tax
      Purposes Under Gain for Financial
      Reporting Purposes                                 0         (398,704)
                                                 ----------       ----------
           Taxable Income (Loss) to Partners    $  574,173       $   (2,216)
                                                 ==========       ==========


          AEI REAL ESTATE FUND XVI LIMITED PARTNERSHIP
                                
                  NOTES TO FINANCIAL STATEMENTS
                                
                   DECEMBER 31, 1998 AND 1997

(8)  Income Taxes - (Continued)

     The following is a reconciliation of Partners' capital for
     financial reporting purposes to Partners' capital reported
     for federal income tax purposes for the years ended December
     31:
     
                                                      1998           1997
      
     Partners' Capital for
      Financial Reporting Purposes                $ 7,381,694    $ 8,555,802
     
     Adjusted Tax Basis of Investments
      in Real Estate Over Net Investments
      in Real Estate for Financial
      Reporting Purposes                              787,467        539,385
     
     Income Accrued for Tax Purposes Over
      Income for Financial
      Reporting Purposes                              266,729        294,241
     
     Property Expenses for Tax Purposes
      Under Expenses for Financial
      Reporting Purposes                                8,634          6,639
     
     Syndication Costs Treated as
      Reduction of Capital for
      Financial Reporting Purposes                  1,981,686      1,981,686
                                                   -----------    -----------
           Partners' Capital for
              Tax Reporting Purposes              $10,426,210    $11,377,753
                                                   ===========    ===========
(9)  Fair Value of Financial Instruments -

     The estimated fair values of the financial instruments, none
     of which are held for trading purposes, are as follows at
     December 31:
     
                                       1998                    1997
                              Carrying       Fair      Carrying      Fair
                               Amount        Value      Amount       Value
     
     Cash                    $     348    $     348   $     336   $     366
     Money Market Funds         77,665       77,665     835,366     835,366
                              ---------    ---------   ---------   ---------
       Total Cash and
         Cash Equivalents    $  78,013    $  78,013   $ 835,702   $ 835,702
                              =========    =========   =========   =========
     
ITEM 8.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
       ACCOUNTING AND FINANCIAL DISCLOSURE.

        None.


                            PART III

ITEM 9.DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
       PERSONS;  COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
       ACT.

        The  registrant  is  a  limited partnership  and  has  no
officers,  directors, or direct employees.  The General  Partners
of  the  registrant are Robert P. Johnson and AFM.   The  General
Partners  manage and control the Partnership's affairs  and  have
general  responsibility and the ultimate authority in all matters
affecting the Partnership's business.  The director and  officers
of AFM are as follows:

        Robert  P.  Johnson, age 54, is Chief Executive  Officer,
President  and  Director and has held these positions  since  the
formation  of  AFM in September, 1986, and has  been  elected  to
continue in these positions until December, 1999.  From  1970  to
the  present, he has been employed exclusively in the  investment
industry,  specializing  in  tax-advantaged  limited  partnership
investments.   In  that  capacity, he has been  involved  in  the
development,  analysis, marketing and management  of  public  and
private investment programs investing in net lease properties  as
well  as  public  and  private investment programs  investing  in
energy  development.   Since  1971,  Mr.  Johnson  has  been  the
president,  a  director  and  a  registered  principal   of   AEI
Securities, Inc. (formerly AEI Incorporated), which is registered
with  the  Securities  and Exchange Commission  as  a  securities
broker-dealer,  is  a  member  of  the  National  Association  of
Securities  Dealers, Inc. (NASD) and is a member of the  Security
Investors  Protection Corporation (SIPC).  Mr. Johnson  has  been
president, a director and the principal shareholder of  AEI  Fund
Management,  Inc.,  a real estate management company  founded  by
him,  since 1978.  Mr. Johnson is currently a general partner  or
principal  of  the  general partner in  seventeen  other  limited
partnerships.

        Mark  E.  Larson,  age 46, is Executive  Vice  President,
Treasurer  and  Chief Financial Officer and has been  elected  to
continue in these positions until December, 1999.  Mr. Larson has
been  Treasurer and Executive Vice President since December, 1987
and  Chief  Financial Officer since January, 1990.   In  January,
1993,  Mr.  Larson was elected to serve as Secretary of  AFM  and
will continue to serve until December, 1999.  Mr. Larson has been
employed  by  AEI  Fund Management, Inc. and affiliated  entities
since  1985.   From  1979  to 1985, Mr. Larson  was  with  Apache
Corporation as manager of Program Accounting responsible for  the
accounting  and reports for approximately 45 public partnerships.
Mr.   Larson   is  responsible  for  supervising  the  accounting
functions of AFM and the registrant.

ITEM 10. EXECUTIVE COMPENSATION.

        The General Partner and affiliates are reimbursed at cost
for  all  services performed on behalf of the registrant and  for
all  third party expenses paid on behalf of the registrant.   The
cost for services performed on behalf of the registrant is actual
time  spent  performing such services plus  an  overhead  burden.
These  services include organizing the registrant  and  arranging
for  the  offer  and  sale  of Units,  reviewing  properties  for
acquisition and rendering administrative and management services.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT.

        The following table sets forth information pertaining  to
the   ownership  of  the  Units  by  each  person  known  by  the
Partnership to beneficially own 5% or more of the Units, by  each
General  Partner, and by each officer or director of the Managing
General Partner as of February 28, 1999:

     Name and Address                        Number of         Percent
   of Beneficial Owner                       Units Held        of Class

   AEI Fund Management XVI, Inc.                   0               0%
   1300 Minnesota World Trade Center
   30 East 7th Street, St. Paul, Minnesota 55101

   Robert P. Johnson                               0               0%
   1300 Minnesota World Trade Center
   30 East 7th Street, St. Paul, Minnesota 55101

   Mark E. Larson                                  0               0%
   1300 Minnesota World Trade Center
   30 East 7th Street, St. Paul, Minnesota 55101

   * Less than 1%
   
The  persons  set forth in the preceding table hold  sole  voting
power  and power of disposition with respect to all of the  Units
set forth opposite their names.  The General Partners know of  no
holders of more than 5% of the outstanding Units.

ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

        The  registrant,  AFM  and  its  affiliates  have  common
management and utilize the same facilities.  As a result, certain
administrative  expenses  are  allocated  among   these   related
entities.   All  of  such activities and any  other  transactions
involving the affiliates of the General Partner of the registrant
are  governed  by,  and  are conducted in  conformity  with,  the
limitations set forth in the Limited Partnership Agreement of the
registrant.

        The following table sets forth the forms of compensation,
distributions  and cost reimbursements paid by the registrant  to
the  General Partners or their Affiliates in connection with  the
operation  of  the Fund and its properties for  the  period  from
inception through December 31, 1998.

Person or Entity                                      Amount Incurred From
   Receiving                 Form and Method      Inception (February 6, 1987)
 Compensation                of Compensation          To December 31, 1998

AEI Securities, Inc.   Selling Commissions equal to 9%        $1,500,000
                       of proceeds plus a 1% nonaccountable
                       expense allowance, most of which was
                       reallowed to Participating Dealers.

General Partners and   Reimbursement at Cost for other        $  487,080
Affiliates             Organization and Offering Costs.

ITEM 12.      CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS.
       (Continued)

Person or Entity                                      Amount Incurred From
   Receiving                 Form and Method      Inception (February 6, 1987)
 Compensation                of Compensation          To December 31, 1998

General Partners and   Reimbursement at Cost for all          $  215,052
Affiliates             Acquisition Expenses

General Partners       1% of Net Cash Flow in any fiscal      $  104,481
                       year until the Limited Partners have
                       received annual, non- cumulative
                       distributions of Net Cash Flow  equal
                       to 10% of their Adjusted Capital
                       Contributions and 10% of any remaining
                       Net Cash Flow in such fiscal year.

General Partners and   Reimbursement at Cost for all          $2,481,672
Affiliates             Administrative Expenses attributable
                       to the Fund, including all expenses
                       related to management and disposition
                       of the Fund's properties and all other
                       transfer agency, reporting, partner
                       relations   and   other administrative
                       functions.

General Partners       15% of distribution of Net Proceeds    $   28,836
                       of Sale other than distributions
                       necessary to restore Adjusted Capital
                       Contributions and provide a 6% cumulative
                       return to Limited Partners.  The General
                       Partners will receive only 1% of
                       distributions of Net Proceeds of Sale
                       until the Limited Partners have received
                       an amount equal to: (a) their Adjusted
                       Capital Contributions, plus (b) an
                       amount equal to 14% of their Adjusted
                       Capital Contributions per annum, cumulative
                       but not compounded, less (c) all previous
                       cash distributions to the Limited Partners.

        The  limitations  included in the  Partnership  Agreement
require   that  the  cumulative  reimbursements  to  the  General
Partners  and  their affiliates for administrative  expenses  not
allowed under the NASAA Guidelines ("Guidelines") will not exceed
the  sum of (i) the front-end fees allowed by the Guidelines less
the  front-end fees paid, (ii) the cumulative property management
fees  allowed  but  not  paid, (iii) any real  estate  commission
allowed under the Guidelines, and (iv) 10% of Net Cash Flow  less
the  Net Cash Flow actually distributed.  The reimbursements  not
allowed  under  the  Guidelines include  a  controlling  person's
salary  and  fringe  benefits,  rent  and  depreciation.   As  of
December  31, 1998, the cumulative reimbursements to the  General
Partners and their affiliates did not exceed these amounts.


                             PART IV

ITEM 13.    EXHIBITS AND REPORTS ON FORM 8-K AND FORM 8-K/A.

            A.   Exhibits -
                               Description

               10.1  Net  Lease Agreement  dated
                     March 22, 1996, between the Partnership  and
                     Renaissant Development Corporation  relating
                     to  the  property at 6409 N.  Navarro  Road,
                     Victoria,  Texas (incorporated by  reference
                     to  Exhibit 10.3 of Form 8-K filed with  the
                     Commission on April 4, 1996).

               10.2  Net  Lease Agreement  dated
                     March 15, 1997 between the Partnership,  AEI
                     Real  Estate  Fund XVI Limited  Partnership,
                     and  Texas  Sports City Cafe, Ltd.  relating
                     to  the  property  at  3808  Towne  Crossing
                     Boulevard, Mesquite, Texas (incorporated  by
                     reference  to  Exhibit 10.7 of  Form  10-KSB
                     filed  with  the  Commission  on  March  24,
                     1997).

               10.3  Guarantee  of  Lease  dated
                     March 15, 1997 between the Partnership,  AEI
                     Real  Estate  Fund XVI Limited  Partnership,
                     and  Texas  Sports City Cafe, Ltd.  relating
                     to  the  property  at  3808  Towne  Crossing
                     Boulevard, Mesquite, Texas (incorporated  by
                     reference  to  Exhibit 10.8 of  Form  10-KSB
                     filed  with  the  Commission  on  March  24,
                     1997).

               10.4  Net  Lease Agreement  dated
                     August 15, 1997 between the Partnership  and
                     Caribou  Coffee  Company, Inc.  relating  to
                     the  property  at 1275 Johnson  Ferry  Road,
                     Marietta,    Georgia    (incorporated     by
                     reference to Exhibit 10.1 of Form 8-K  filed
                     with the Commission on August 21, 1997).

               10.5  Purchase  Agreement  dated
                     October  24,  1997 between  the  Partnership
                     and   Spaghetti  Warehouse  of  Texas,  L.P.
                     relating to the property at 2849 W.  Airport
                     Freeway,  Irving,  Texas  (incorporated   by
                     reference  to  Exhibit 10.1 of  Form  10-QSB
                     filed  with  the Commission on  November  7,
                     1997).

               10.6  Purchase  Agreement  dated
                     November  20,  1997 between the  Partnership
                     and  Home  Depot USA, Inc. relating  to  the
                     property  at 2175 Barrett Station Road,  St.
                     Louis,  Missouri (incorporated by  reference
                     to  Exhibit  10.9 of Form 10-KSB filed  with
                     the Commission on March 16, 1998).

                27   Financial Data Schedule for
                     year ended December 31, 1998.

             B.   Reports on Form 8-K and Form 8-K/A - None.

                                
                           SIGNATURES

       Pursuant to the requirements of Section 13 or 15(d) of the
Securities  Exchange Act of 1934, the registrant has duly  caused
this  report  to  be  signed on its behalf  by  the  undersigned,
thereunto duly authorized.

                          AEI REAL ESTATE FUND XVI
                          Limited Partnership
                          By: AEI Fund Management XVI, Inc.
                              Its Managing General Partner


March 12, 1999            By: /s/ Robert P. Johnson
                                  Robert  P. Johnson, President
                                  and Director
                                  (Principal Executive Officer)



        Pursuant  to the requirements of the Securities  Exchange
Act  of  1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and  on
the dates indicated.

    Name                            Title                         Date


/s/ Robert P. Johnson  President (Principal  Executive Officer) March 12,1999
    Robert P. Johnson  and Sole Director of Managing General
                       Partner

/s/ Mark E. Larson     Executive Vice President, Treasurer      March 12, 1999
    Mark E. Larson     and Chief Financial Officer
                       (Principal Accounting Officer)