October 31, 1997

		QUARTERLY REPORT TO THE LIMITED PARTNERS
			OF DSI REALTY INCOME FUND VII


DEAR LIMITED PARTNERS:

We are pleased to enclose the  Partnership's  unaudited financial statements 
for  the period ended September 30,  1997.  The  following  is  Management's 
discussion  and  analysis  of  the  Partnership's  financial  condition  and 
results  of  its  operations.

For the three month periods ended September 30, 1997, and 1996, total revenues
increased 6.3% from $470,810 to $500,523 and total expenses increased 3.6% from
$337,511 to $349,716.  As a result, net income increased 13.1% from $133,299
for the three month period ended September 30, 1996, to $150,807 for the same
period in 1997.  Rental revenue increased as a result of higher occupancy and
unit rental rates.  Operating expenses increased approximately $9,000 (3.0%)
as a result of increases in yellow pages advertising costs, maintenance and
repair and property mangagement fees.  Property management fees, which are based
on rental income, increased as a result of the increase in rental revenue.
General and administrative expenses remained relatively constant.  Occupancy
levels for the Partnership's six mini-storage facilities averaged 87.6% for the
same period in 1996.  The Partnership is continuing its marketing efforts to
attract and keep new tenants in its various mini-storage facilities.

For the nine month periods ended September 30, 1997, and 1996, total revenues
increased 3.6% from $1,411,981 to $1,462,813 and total expenses increased 5.7%
from $1,050,100 to $1,109,904.  As a result, net income decreased 2.5% from
$361,881 for the nine months ended September 30, 1996, to $352,909 for the same
period in 1997.  Rental revenue increased as a result of higher occupancy and
unit rental rates during the nine months of the period.  Operating expenses
increased approximately $51,800 (5.6%) primarily due to the same reasons as
discussed above.  General and administrative expenses increased approximately
$8,000 (6.0%) primarily as a result of Colorado State Taxes, which were levied
for the first time.

The General Partners will continue their  policy of  funding improvements and  
maintenance of  Partnership  properties with cash generated from operations.  
The Partnership's financial resources appear to be adequate to meet its needs.
The  General  Partners  anticipate  distributions to the Limited Partners 
to remain at the current level for the foreseeable future.

We are not enclosing a copy of the Partnership Form 10-Q as filed with the 
Securities  and  Exchange  Commission  since all the information set forth 
therein is contained  either in this  letter or in the  attached  financial 
statements.  However, if you wish to  receive a copy of said report, please 
send a  written  request to  DSI  Realty  Income  Fund  VII,  P.O.  Box 357, 
Long  Beach,  California  90801. 

                              Very truly yours,
 
                              DSI REALTY INCOME FUND VII
                              By: DSI Properties, Inc., as
                              General Partner



                              By  /s/ Robert J. Conway
                                  ____________________________
                                  ROBERT J. CONWAY, President