July 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  June  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  June 30, 1996 and 1995, total revenues 
decreased slightly from $476,446 to $475,815 and  total expenses  decreased 
3.4% from $363,285 to $351,030.  As a result, net income increased 10.3% from
$113,161  for  the  three  month  period  ended  June 30, 1995, to  $124,785 
for the same period in 1996.  Occupancy  levels for the  Partnership's  six
mini-storage facilities averaged 87.6%  for the  three  month  periods ended
June 30, 1996, and 86.6% for the same period in 1995.  Rental  revenue  
remained constant.  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  (3.9%) as a result
of decreases in yellow pages advertising, office and salaries and wages 
expenses partially  offset by an increase in maintenance and repair expenses. 
General  and  administrative expenses remained constant. 

For the six month periods ended June 30, 1996, and 1995 total revenues 
increased 2.9% from $914,841 to $941,171 and total expenses decreased 0.1% from
$713,514 to $712,589.  As a result, net income increased 13.5% from $201,327
for the six months ended June 30, 1995, to $228,582 for the same period in 
1996.  Rental revenue increased as a result of higher occupancy and unit
rental rates.  Operating expenses decreased approximately $7,400 (1.2%) 
primarily as a result of decreases in yellow page advertising costs, office
expenses and salaries and wages partially offset by increases in real estate 
tax and maintenance and repair expenses.  General and administrative expenses
increased approximately $6,500 (7%) 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 the  continuing
improvement 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