October 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 September 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 periods ended September 30, 1998 and 1997, total revenues
increased 11.5% from $500,523 to $557,846 and total expenses increased 11.1%
from $349,716 to $388,467.  As a result, net income increased 12.3% from
$150,807 for the three-month period ended September 30, 1997, to $169,379 for
the same period in 1998.  Rental revenue increased as a result of higher
occupancy and unit rental rates.  Operating expenses increased approximately
$38,000 (12.2%) as a result of increases in yellow pages advertising costs,
maintenance and repair, real estate tax and salaries and wage expenses.
General and administrative expenses remained constant.  Occupancy levels for
the Partnership's six mini-storage facilities averaged 89.2% for the three-
month period ended September 30, 1998, and 87.6% 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 nine month periods ended September 30, 1998, and 1997 total revenues 
increased 10.6% from $1,462,813 to $1,617,793 and total expenses increased
3.1% from $1,109,904 to $1,144,235.  As a result, net income increased 34.2%
from $352,909 for the nine months ended September 30, 1997, to $473,558 for
the same period in 1998.  Rental revenue increased primarily as a result of
higher unit rental rates during the nine months of the period.  Operating
expenses increased approximately $20,900 (2.2%) primarily due to increases in
yellow pages advertising costs, property management fees, real estate tax
and salaries and wage expenses, partially offset by a decrease in maintenance
and repair expenses.  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 $13,400 (9.5%) 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.

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.

The Year 2000 issue refers to the inability of certain computer systems to
recognize a date using "00" as the Year 2000.  The Partnership has implemented
a Year 2000 program, which has three phases:  (1) identification;
(2) remediation; and (3) testing and verification.  The Partnership, as well
as the property management company and the Partnership's warehouse facilities
have completed those phases.  Computer programs have been upgraded and tested
to function properly with respect to the dates in the Year 2000 and thereafter.
Year 2000 compliance costs are nominal and have been expensed in the regular
course of business.  The Partnership provides no assurance that third-party
suppliers and customers will be compliant.  Nevertheless, the Partnership does
not believe that the Year 2000 issue will have a material adverse effect on
its financial condition or results of operations.

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