July 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  June  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  period  ended  June 30, 1997, and  1996, total  revenues 
increased 3.2% from $475,815  to $490,974 and  total expenses increased 13.5%
from $351,030 to $398,393.  As a  result, net  income  decreased 25.8%  from
$124,785 for the three month period ended June 30, 1996, to $92,581 for the
same period in 1997.  Occupancy levels for the Partnership's six mini-storage
facilities averaged 89.4% for the three month period ended June 30, 1997,
and 87.6% for the same period in 1996.  Rental revenue increased as a result
of higher occupancy and unit rental rates.  The Partnership is continuing its
marketing effort to attract and keep new tenants in its various mini-storage
facilities.  Operating expenses increased approximately $42,300 (13.5%) as a
result of increases in yellow pages advertising costs, maintenance and repair,
office and salaries and wage expenses.  General and  administrative  expenses
increased approximately $5,100 (13.9%) primarily as a result of Colorado State
Taxes, which were levied for the first time, partially offset by a decrease in
incentive management fees.  Incentive management fees which are based on cash
available for distribution, decreased as a result of the decrease in net
income.

For the six month  periods  ended  June  30, 1997, and 1996,  total  revenues
increased  2.2%  from $941,171 to $962,290  and total expenses increased 6.7%
from $712,589 to $760,188.  As a result, net  income  decreased  11.6% from
$228,582 for the six months ended September 30, 1996, to $202,102 for the
same period in 1997.  Rental revenue increased as a result of higher occupancy
and  unit  rental rates  during the   first  six  months  of  the  period.
Operating expenses increased approximately $42,800 (7%) primarily due to the
same  reasons as  discussed above.  General  and  administrative  expenses
increased approximately $4,800 (4.9%) primarily due to the same reasons 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