October 31, 1996

		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,  1996.  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, 1996 and 1995, total revenues 
decreased  1.4%  from  $477,305  to  $470,810 and  total expenses  decreased 
3.5% from $349,577 to $337,511.  As a result, net income increased 4.4% from
$127,728 for the three  month period  ended September 30, 1995, to  $133,299 
for the same period in 1996.  Occupancy  levels for the  Partnership's  six
mini-storage facilities averaged 86.7%  for the  three  month  period ended
September 30, 1996, and 85.4% for the same period in 1995.  Rental  revenue  
decreased slightly as unit rental rates were lowered in the current period in 
order to remain competitive.  The  Partnership is  continuing its  marketing 
effort to attract  and  keep  new  tenants  in  its  various  mini-storage 
facilities.  Operating  expenses  decreased  approximately  $12,700  (3.7%) 
as a result of decreases in yellow pages advertising and maintenance and 
repair expenses.  General  and  administrative expenses remained constant. 

For the nine month periods ended September 30, 1996, and 1995 total revenues 
increased 1.4% from $1,392,146 to $1,411,981 and total expenses decreased 
1.2% from $1,063,091 to $1,050,100.  As a result, net income increased 10% 
from $329,055 for the nine months ended September 30, 1995, to $361,881 for 
the same period in 1996.  Rental revenue increased as a result of higher unit
rental rates during the first six months of the period.  Operating expenses 
decreased approximately $10,200 (2.1%) primarily as a result of decreases 
in yellow page advertising costs and  office expenses partially offset by 
increases in real estate expense.  General  and  administrative  expenses
increased  approximately  $6,200  (4.9%)  primarily  as  a result of higher 
management incentive fees, which are based on cash available for distribution.

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