July 31, 1998

                   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  June  30,  1998.  The  following  is  Management's 
discussion  and  analysis  of  the  Partnership's  financial  condition  and 
results  of  its  operations.

For the three month  period  ended  June 30, 1998, and  1997, total  revenues
increased 9.1% from $490,974 to $535,517 and total expenses decreased 5.5% from
$398,393 to $376,519.  As a result, net income increased 71.7% from $92,581
for the three month period ended June 30, 1997, to $158,998 for the same period
in 1998.  Rental revenue increased as a result of higher unit rental rates as
occupancy levels remained relatively constant.  Operating expenses decreased
approximately $27,700 (7.8%) as a result of decreases in maintenance and repair
and salaries and wage expenses, partially offset by increases real estate tax
expenses and property management fees.  Property management fees, which are
based on rental income, increased as a result of the increase in rental
revenue.  General and administrative expenses increased approximately $5,800
(13.8%) primarily as a result of an increase in incentive management fees.
Incentive management fees, which are based on cash available for distribution,
increased as a result of the increase in net income.  Occupancy levels for the
Partnership's six mini-storage facilities averaged 89.2% for the three month
period ended June 30, 1998, and 89.4% for the same period in 1997.  The
Partnership is continuing its marketing efforts to attract and keep new tenants
in its various mini-storage facilities.

For the six month  periods  ended  June  30, 1998, and 1997,  total  revenues
increased 10.2% from $962,290 to $1,059,947 and total expenses decreased 0.6%
from $760,188 to $755,768.  As a result, net income increased 50.5% from
$202,102 for the six months ended June 30, 1997, to $304,179 for the same
period in 1998.  Rental revenue increased primarily as a result of higher unit
rental rates during the six months of the period.  Operating expenses decreased
approximately $17,100 (2.6%) primarily due to the same reasons as discussed
above.  General and administrative expenses increased approximately $12,700
(12.2%) primarily as a result of an increase in incentive management fees, as
discussed above.

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