FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
                        Quarterly or Transitional Report



                   U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   Form 10-QSB

(Mark One)
[X]   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934

              For the quarterly period ended September 30, 2001


[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT OF 1934


             For the transition period from _________to _________

                         Commission file number 0-13454


                        NATIONAL PROPERTY INVESTORS 7
      (Exact name of small business issuer as specified in its charter)



         California                                         13-3230613
(State or other jurisdiction of                          (I.R.S. Employer
 incorporation or organization)                         Identification No.)

                     55 Beattie Place, Post Office Box 1089
                       Greenville, South Carolina 29602
                   (Address of principal executive offices)

                                 (864) 239-1000
                           (Issuer's telephone number)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.
Yes X  No___



<PAGE>



                         PART I - FINANCIAL INFORMATION


ITEM 1.     FINANCIAL STATEMENTS

a)

                        NATIONAL PROPERTY INVESTORS 7

                                  BALANCE SHEET
                                   (Unaudited)
                       (in thousands, except unit data)

                               September 30, 2001
<TABLE>
<CAPTION>

Assets
<S>                                                                          <C>
   Cash and cash equivalents                                                 $  501
   Receivables and deposits                                                     573
   Restricted escrows                                                           382
   Other assets                                                                 613
   Investment properties:
       Land                                                  $  3,738
       Buildings and related personal property                 44,948
                                                               48,686
       Less accumulated depreciation                          (31,110)       17,576
                                                                           $ 19,645
Liabilities and Partners' Deficit
Liabilities
   Accounts payable                                                          $ 116
   Tenant security deposit liabilities                                          107
   Accrued property taxes                                                       273
   Other liabilities                                                            300
   Mortgage notes payable                                                    22,871

Partners' Deficit:
   General partner                                            $ (343)
   Limited partners (60,517 units
      issued and outstanding)                                  (3,679)       (4,022)
                                                                           $ 19,645


                See Accompanying Notes to Financial Statements

</TABLE>

<PAGE>
b)
                        NATIONAL PROPERTY INVESTORS 7

                            STATEMENTS OF OPERATIONS
                                   (Unaudited)
                     (in thousands, except per unit data)
<TABLE>
<CAPTION>

                                          Three Months Ended         Nine Months Ended
                                             September 30,             September 30,
                                           2001         2000         2001         2000
Revenues:
<S>                                      <C>          <C>           <C>          <C>
  Rental income                          $ 1,819      $ 1,813       $ 5,469      $ 5,276
  Other income                                76           99           256          284
     Total revenues                        1,895        1,912         5,725        5,560

Expenses:
  Operating                                  792          681         2,243        2,100
  General and administrative                  88          146           343          397
  Depreciation                               505          508         1,536        1,481
  Interest                                   425          411         1,255        1,242
  Property taxes                             116          119           326          330
     Total expenses                        1,926        1,865         5,703        5,550

(Loss) income before extraordinary
  item                                       (31)          47            22           10
Extraordinary loss on early
  extinguishment of debt                     (68)          --           (68)          --

Net (loss) income                         $ (99)        $ 47         $ (46)       $ 10

Net (loss) income allocated to
  general partner (1%)                     $ (1)        $ --         $ --         $ --
Net (loss) income allocated to
  limited partners (99%)                     (98)          47           (46)          10

                                          $ (99)        $ 47         $ (46)       $ 10
Per limited partnership unit:
  (Loss) income before extraordinary
   item                                  $ (0.51)      $ 0.78       $ 0.35       $ 0.17
  Extraordinary loss on early
   extinguishment of debt                  (1.11)          --         (1.11)          --

Net (loss) income                        $ (1.62)      $ 0.78       $ (0.76)     $ 0.17

Distributions per limited
  partnership unit                       $ 26.65       $ 4.33       $ 45.19      $ 47.26

                See Accompanying Notes to Financial Statements

</TABLE>

<PAGE>

c)

                        NATIONAL PROPERTY INVESTORS 7

                  STATEMENT OF CHANGES IN PARTNERS' DEFICIT
                                   (Unaudited)
                       (in thousands, except unit data)
<TABLE>
<CAPTION>

                                     Limited
                                   Partnership    General     Limited
                                      Units       Partner     Partners      Total

<S>                                   <C>           <C>       <C>          <C>
Original capital contributions        60,517        $ 1       $30,259      $30,260

Partners' deficit at
   December 31, 2000                  60,517      $ (315)      $ (898)     $(1,213)

Distributions to partners                 --          (28)     (2,735)      (2,763)

Net loss for the nine months
   ended September 30, 2001               --           --         (46)         (46)

Partners' deficit at
   September 30, 2001                 60,517      $ (343)     $(3,679)     $(4,022)

                See Accompanying Notes to Financial Statements
</TABLE>

<PAGE>

d)

                        NATIONAL PROPERTY INVESTORS 7

                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)
                                (in thousands)
<TABLE>
<CAPTION>

                                                                 Nine Months Ended
                                                                   September 30,
                                                                  2001        2000
Cash flows from operating activities:
<S>                                                              <C>          <C>
  Net (loss) income                                              $ (46)       $ 10
  Adjustments to reconcile net (loss) income to net cash
   provided by operating activities:
     Depreciation                                                 1,536        1,481
     Amortization of loan costs                                      74           70
     Extraordinary loss on early extinguishment of debt              68           --
     Change in accounts:
      Receivables and deposits                                     (376)        (135)
      Other assets                                                  (51)         (30)
      Accounts payable                                              (26)         (75)
      Tenant security deposit liabilities                             7           (3)
      Accrued property taxes                                        221          206
      Other liabilities                                              13          (28)

        Net cash provided by operating activities                 1,420        1,496

Cash flows from investing activities:
  Property improvements and replacements                           (690)        (822)
  Net (deposits to) withdrawals from restricted escrows              (5)         125

        Net cash used in investing activities                      (695)        (697)

Cash flows from financing activities:
  Payments on mortgage note payable                                 (72)         (60)
  Repayment of mortgage note payable                             (5,000)          --
  Proceeds from mortgage note payable                             7,000           --
  Loan costs paid                                                  (260)         (16)
  Distributions to partners                                      (2,763)      (2,889)

        Net cash used in financing activities                    (1,095)      (2,965)

Net decrease in cash and cash equivalents                          (370)      (2,166)
Cash and cash equivalents at beginning of period                    871        2,793

Cash and cash equivalents at end of period                       $ 501        $ 627

Supplemental disclosure of cash flow information:
  Cash paid for interest                                        $ 1,171      $ 1,145

                See Accompanying Notes to Financial Statements

</TABLE>

<PAGE>

e)

                          NATIONAL PROPERTY INVESTORS 7

                          NOTES TO FINANCIAL STATEMENTS
                                   (Unaudited)


Note A - Basis of Presentation

The accompanying unaudited financial statements of National Property Investors 7
(the  "Partnership"  or  "Registrant")  have been  prepared in  accordance  with
generally accepted accounting  principles for interim financial  information and
with  the  instructions  to Form  10-QSB  and Item  310(b)  of  Regulation  S-B.
Accordingly,  they do not include all of the information and footnotes  required
by generally accepted accounting  principles for complete financial  statements.
In the opinion of NPI Equity Investments, Inc. (the "Managing General Partner"),
all adjustments  (consisting of normal recurring accruals)  considered necessary
for a fair presentation have been included.  Operating results for the three and
nine month periods ended  September 30, 2001 are not  necessarily  indicative of
the results that may be expected  for the fiscal year ending  December 31, 2001.
For further information, refer to the financial statements and footnotes thereto
included in the  Partnership's  Annual  Report on Form 10-KSB for the year ended
December 31, 2000.  The  Managing  General  Partner is an affiliate of Apartment
Investment  and  Management  Company  ("AIMCO"),  a publicly  traded real estate
investment trust.

Segment Reporting: Statement of Financial Accounting Standards ("SFAS") No. 131,
"Disclosure about Segments of an Enterprise and Related Information" established
standards for the way that public business  enterprises report information about
operating  segments  in annual  financial  statements  and  requires  that those
enterprises  report selected  information  about  operating  segments in interim
financial reports.  It also established  standards for related disclosures about
products and services, geographic areas, and major customers. As defined in SFAS
No. 131, the Partnership has only one reportable  segment.  The Managing General
Partner  believes  that  segment-based  disclosures  will not  result  in a more
meaningful presentation than the financial statements as currently presented.

Note B - Transactions with Affiliated Parties

The  Partnership  has no employees  and is  dependent  on the  Managing  General
Partner  and  its  affiliates  for  the  management  and  administration  of all
Partnership  activities.  The  Partnership  Agreement  provides  for payments to
affiliates for services and as  reimbursement  of certain  expenses  incurred by
affiliates on behalf of the Partnership.

The  following  payments  were  made to the  Managing  General  Partner  and its
affiliates during the nine month periods ended September 30, 2001 and 2000:

                                                                  2001      2000
                                                                  (in thousands)

 Property management fees (included in operating expenses)        $282      $272
 Reimbursement for services of affiliates (included in
   investment properties and general and administrative
   expenses)                                                       428       193
 Non-accountable reimbursement (included in general and
   administrative expenses)                                         91        91
 Partnership management fee (included in general and
   administrative expenses)                                         --        40

During the nine months  ended  September  30, 2001 and 2000,  affiliates  of the
Managing  General Partner were entitled to receive 5% of gross receipts from all
of  the  Partnership's   properties  as  compensation  for  providing   property
management  services.  The  Registrant  paid  to such  affiliates  approximately
$282,000 and $272,000  for the nine months  ended  September  30, 2001 and 2000,
respectively.

An  affiliate  of  the  Managing  General  Partner  received   reimbursement  of
accountable  administrative  expenses  amounting to  approximately  $428,000 and
$193,000 for the nine months ended  September  30, 2001 and 2000,  respectively.
Included  in the total is  approximately  $243,000  and  $6,000 in  construction
service  reimbursements  for the nine months ended  September 30, 2001 and 2000,
respectively.

In addition, in connection with the refinancing of the mortgage loan encumbering
Northwoods I and II Apartments, the Partnership paid $70,000 in loan costs to an
affiliate  during the nine months ended  September  30, 2001. No such loan costs
were paid during the nine months ended September 30, 2000. These loan costs were
capitalized,  are included in other assets and are amortized as interest expense
over the term of the loan.

For services relating to the  administration of the Partnership and operation of
Partnership  properties,  the  Managing  General  Partner is entitled to receive
payment for  non-accountable  expenses up to a maximum of $150,000 per year from
distributions from operations,  based upon the number of Partnership units sold,
subject  to  certain   limitations.   The  Managing   General  Partner  received
approximately $91,000 in reimbursements for both of the nine month periods ended
September 30, 2001 and 2000.

For managing the affairs of the Partnership, the Managing General Partner of the
Partnership  is entitled to receive a  partnership  management  fee.  The fee is
equal to 4% of the  Partnership's  adjusted cash from operations,  as defined in
the Partnership  Agreement,  in any year, provided that 50% of the fee shall not
be paid until the Partnership has distributed to the limited  partners  adjusted
cash from operations in such year which is equal to 5% of the limited  partners'
adjusted invested capital, as defined,  on a non-cumulative  basis. In addition,
50% of the fee shall not be paid until the  Partnership  has  distributed to the
limited partners adjusted cash from operations in such year which is equal to 8%
of the limited partners'  adjusted  invested capital on a non-cumulative  basis.
The fee shall be paid when adjusted cash from  operations is  distributed to the
limited partners.  The Managing General Partner was paid  approximately  $40,000
during the nine months  ended  September  30, 2000 for such fees.  The  Managing
General Partner was not entitled to receive a similar fee during the nine months
ended September 30, 2001.

The Managing General Partner has extended to the Partnership a line of credit of
up to $500,000. Loans under the line of credit will have a term of 365 days, are
unsecured  and bear  interest at the rate of 2% per annum in excess of the prime
rate announced from time to time by Chase Manhattan Bank, N.A. The maturity date
of such  borrowing  will be  accelerated in the event of: (i) the removal of the
Managing  General  Partner  (whether  or  not  For  Cause);  (ii)  the  sale  or
refinancing of a property by the  Partnership;  or (iii) the  liquidation of the
Partnership. At the present time, the Partnership has no outstanding amounts due
under this line of credit.

In addition to its  indirect  ownership of the general  partner  interest in the
Partnership,   AIMCO  and  its  affiliates   currently  own  40,235.67   limited
partnership  units in the  Partnership  representing  66.49% of the  outstanding
units at September 30, 2001. A number of these units were  acquired  pursuant to
tender offers made by affiliates of the Managing General Partner,  AIMCO, or its
affiliates.  It is possible that AIMCO or its  affiliates  will make one or more
additional offers to acquire  additional  limited  partnership  interests in the
Partnership  for cash or in exchange for units in the operating  partnership  of
AIMCO. Under the Partnership  Agreement,  unitholders  holding a majority of the
Units are  entitled to take action  with  respect to a variety of matters  which
would  include  voting on certain  amendments to the  Partnership  Agreement and
voting to remove the Managing General  Partner.  As a result of its ownership of
66.49% of the  outstanding  units,  AIMCO is in a position to influence all such
voting decisions with respect to the Registrant.  When voting on matters,  AIMCO
would in all likelihood vote the units it acquired in a manner  favorable to the
interest of the Managing  General Partner  because of its  affiliation  with the
Managing General Partner.  However,  DeForest Ventures II L.P., from whom AIMCO,
through its merger with Insignia,  acquired  25,399 Units (41.97% of the units),
had agreed for the benefit of non-tendering unit holders, that it would vote its
Units: (i) against any increase in compensation  payable to the Managing General
Partner or to affiliates;  and (ii) on all other matters  submitted by it or its
affiliates,  in proportion  to the votes cast by all other unit holders.  Except
for  the  foregoing,  no  other  limitations  are  imposed  on  AIMCO's  or  its
affiliates' right to vote each unit acquired.

Note C - Distributions

During the nine months ended  September 30, 2001, the  Partnership  declared and
paid distributions of approximately $2,763,000  (approximately $2,735,000 to the
limited partners or $45.19 per limited  partnership  unit) to its partners.  The
distributions consisted of approximately $1,133,000 (approximately $1,122,000 to
the  limited  partners  or $18.54  per  limited  partnership  unit) of cash from
operations and approximately $1,630,000 (approximately $1,613,000 to the limited
partners or $26.65 per limited  partnership  unit) of cash from the  refinancing
proceeds of  Northwoods  I and II  Apartments  in August  2001.  During the nine
months ended September 30, 2000, the Partnership declared and paid distributions
of approximately $2,889,000 (approximately $2,860,000 to the limited partners or
$47.26 per limited  partnership  unit)  consisting of  approximately  $2,004,000
(approximately  $1,984,000  to  the  limited  partners  or  $32.78  per  limited
partnership   unit)  of  cash  from   operations  and   approximately   $885,000
(approximately   $876,000  to  the  limited   partners  or  $14.48  per  limited
partnership unit) of cash from the refinancing  proceeds of The Pines Apartments
and from refinancing proceeds in prior years.

Note D - Refinancing of Mortgage Notes Payable

On December 13, 1999, the  Partnership  refinanced the mortgage  encumbering The
Pines  Apartments.   The  refinancing  replaced  indebtedness  of  approximately
$3,406,000 with a new mortgage in the amount of $4,225,000. The interest rate on
the new  mortgage is 7.97% as compared to 8.56% on the  previous  debt.  The new
loan which  matures on January 1, 2020 requires  monthly  principal and interest
payments and is scheduled to be fully amortized at maturity.  Total  capitalized
loan costs were  approximately  $88,000 during the year ended December 31, 1999.
Additional  loan costs of  approximately  $16,000  and $7,000  were  capitalized
during the nine months ended September 30, 2000 and 2001, respectively.

On  August  31,  2001,  the  Partnership  refinanced  the  mortgage  encumbering
Northwoods  I and  II  Apartments.  The  refinancing  replaced  indebtedness  of
$5,000,000 with a new mortgage in the amount of $7,000,000. The interest rate on
the new  mortgage is 7.06% as compared to 7.33% on the  previous  debt.  The new
loan which matures on September 1, 2021 requires monthly  principal and interest
payments and is scheduled to be fully amortized at maturity.  Total  capitalized
loan costs were  approximately  $253,000 at September 30, 2001. The  Partnership
recognized  an  extraordinary  loss  on the  early  extinguishment  of  debt  of
approximately $68,000 due to the write off of unamortized loan costs.

Note E - Legal Proceedings

In March 1998, several putative unit holders of limited partnership units of the
Partnership  commenced an action  entitled  Rosalie  Nuanes,  et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of  California  for the  County  of San  Mateo.  The  plaintiffs  named as
defendants,  among others,  the  Partnership,  its Managing  General Partner and
several of their  affiliated  partnerships  and corporate  entities.  The action
purports  to  assert  claims  on  behalf  of a class  of  limited  partners  and
derivatively  on behalf  of a number  of  limited  partnerships  (including  the
Partnership)  which are named as nominal  defendants,  challenging,  among other
things,  the  acquisition of interests in certain  general  partner  entities by
Insignia  Financial  Group,  Inc.  ("Insignia")  and entities which were, at one
time,  affiliates of Insignia;  past tender offers by the Insignia affiliates to
acquire  limited  partnership  units;  management  of  the  partnerships  by the
Insignia  affiliates;  and the series of transactions which closed on October 1,
1998 and  February 26, 1999 whereby  Insignia  and  Insignia  Properties  Trust,
respectively,  were merged into AIMCO.  The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998,  the Managing  General  Partner  filed a motion  seeking  dismissal of the
action.  In lieu of responding to the motion,  the  plaintiffs  filed an amended
complaint. The Managing General Partner filed demurrers to the amended complaint
which were heard February 1999.

Pending the ruling on such  demurrers,  settlement  negotiations  commenced.  On
November 2, 1999,  the parties  executed and filed a Stipulation  of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the  settlement  was obtained on November 3, 1999 from the Court,  at which time
the Court set a final  approval  hearing for  December  10,  1999.  Prior to the
December  10,  1999  hearing,  the  Court  received  various  objections  to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement.  On
December 14, 1999, the Managing  General  Partner and its affiliates  terminated
the  proposed  settlement.  In  February  2000,  counsel  for some of the  named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated  the  settlement.  On June  27,  2000,  the  Court  entered  an order
disqualifying  them  from the case and an  appeal  was  taken  from the order on
October 5, 2000. On December 4, 2000, the Court  appointed the law firm of Lieff
Cabraser  Heimann & Bernstein  LLP as new lead  counsel for  plaintiffs  and the
putative class.  Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001,  the  Managing  General  Partner  and its  affiliates  filed a
demurrer to the third amended  complaint.  On May 14, 2001,  the Court heard the
demurrer to the third amended  complaint.  On July 10, 2001, the Court issued an
order  sustaining  defendants'  demurrer on certain  grounds.  On July 20, 2001,
plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order
granting in part and denying in part defendants' demurrer. On September 7, 2001,
plaintiffs  filed a fourth amended class and  derivative  action  complaint.  On
September 12, 2001, the Court denied plaintiffs' motion for reconsideration.  On
October 5, 2001, the Managing General Partner and affiliated  defendants filed a
demurrer to the fourth amended complaint,  which, together with a demurrer filed
by other  defendants,  is currently  scheduled to be heard on November 15, 2001.
The Court has set the matter for trial in January 2003.

During the third  quarter of 2001, a complaint  (the "Heller  action") was filed
against  the same  defendants  that are named in the  Nuanes  action,  captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended  complaint.  The first amended complaint in the Heller action is
brought as a purported  derivative  action,  and asserts  claims for among other
things  breach  of  fiduciary  duty;  unfair  competition;   conversion,  unjust
enrichment;  and judicial  dissolution.  Plaintiffs in the Nuanes action filed a
motion to  consolidate  the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed  without  leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the Managing  General  Partner and affiliated
defendants  moved to strike the first  amended  complaint  in its  entirety  for
violating  the Court's July 10, 2001 order  granting in part and denying in part
defendants'  demurrer in the Nuanes action, or alternatively,  to strike certain
portions of the complaint based on the statute of limitations.  Other defendants
in the action  demurred to the fourth  amended  complaint,  and,  alternatively,
moved to strike the complaint.  The matters are currently  scheduled to be heard
on November 15, 2001.

The Managing  General Partner does not anticipate that any costs,  whether legal
or  settlement  costs,  associated  with  these  cases will be  material  to the
Partnership's overall operations.

The  Partnership is unaware of any other pending or outstanding  litigation that
is not of a routine nature arising in the ordinary course of business.


ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The  matters  discussed  in this Form  10-QSB  contain  certain  forward-looking
statements  and  involve  risks and  uncertainties  (including  changing  market
conditions,   competitive  and  regulatory   matters,   etc.)  detailed  in  the
disclosures  contained  in this  Form  10-QSB  and the  other  filings  with the
Securities and Exchange Commission made by the Registrant from time to time. The
discussion of the  Registrant's  business and results of  operations,  including
forward-looking  statements  pertaining  to such  matters,  does not  take  into
account the effects of any changes to the  Registrant's  business and results of
operation.  Accordingly,  actual  results  could  differ  materially  from those
projected in the forward-looking  statements as a result of a number of factors,
including those identified herein.

The Partnership's investment properties consist of five apartment complexes. The
following  table sets forth the average  occupancy of the properties for each of
the nine month periods ended September 30, 2001 and 2000:

                                                   Average Occupancy
                                                    2001       2000

      Fairway View II Apartments                    92%        93%
         Baton Rouge, Louisiana
      The Pines Apartments                          95%        97%
         Roanoke, Virginia
      Patchen Place Apartments                      88%        92%
         Lexington, Kentucky
      Northwoods I and II Apartments                94%        92%
         Pensacola, Florida
      South Point Apartments                        94%        91%
         Durham, North Carolina

The Managing  General  Partner  attributes  the decrease in occupancy at Patchen
Place  Apartments  to increased  competition  in the area of the  property.  The
Managing  General  Partner  attributes  the increase in occupancy at South Point
Apartments to increased marketing efforts and decreased home purchases.

Results of Operations

The  Registrant's  net loss for the nine  months  ended  September  30, 2001 was
approximately  $46,000 compared to net income of  approximately  $10,000 for the
nine months ended  September 30, 2000. The  Registrant's  net loss for the three
months ended  September  30, 2001 was  approximately  $99,000 as compared to net
income of  approximately  $47,000 for the three months ended September 30, 2000.
The decrease in net income for the nine months ended  September 30, 2001 was due
to the  extraordinary  loss on the early  extinguishment of the debt encumbering
Northwoods  I and II  Apartments  and an  increase in total  expenses  partially
offset by an  increase  in total  revenues.  The  decrease in net income for the
three months ended September 30, 2001 was due to the  extraordinary  loss on the
early extinguishment of the debt encumbering Northwoods I and II Apartments,  an
increase in total expenses, and a decrease in total revenues.

Total revenues  increased for the nine months ended September 30, 2001 due to an
increase  in rental  income  which was  partially  offset by a decrease in other
income.  Total revenues  decreased for the three months ended September 30, 2001
due to a  decrease  in other  income  which  was  partially  offset  by a slight
increase in rental income. Rental income increased for the three and nine months
ended September 30, 2001 primarily due to increased  average rental rates at all
of the Partnership's investment properties and increased occupancy at Northwoods
I and II and South Point Apartments,  which more than offset decreased occupancy
at Fairway  View II, The Pines,  and  Patchen  Place  Apartments  and  increased
military discounts at South Point Apartments. In addition, concessions decreased
at South  Point,  Fairway  View  II,  Patchen  Place,  and  Northwoods  I and II
Apartments.  The  decrease in other  income was  primarily  due to a decrease in
interest  income as a result of lower average cash balances in interest  bearing
accounts held by the Partnership during 2001.

Total  expenses  increased  for the nine months ended  September 30, 2001 due to
increases in depreciation, interest, and operating expenses which were partially
offset by a decrease  in general and  administrative  expenses.  Total  expenses
increased  for the three  months  ended  September  30, 2001 due to increases in
interest and operating  expenses  which were  partially  offset by a decrease in
general and administrative expenses. Depreciation expense increased for the nine
months ended September 30, 2001 due to property  improvements  and  replacements
completed  during the last twelve  months.  Interest  expense  increased for the
three  and nine  months  ended  September  30,  2001 due to the  refinancing  of
Northwoods I and II Apartments  in August 2001 which  replaced the existing debt
with a loan having a larger principal amount.  Operating  expenses increased for
the three and nine months ended  September  30, 2001  primarily due to increased
natural  gas  bills at  Patchen  Place and The Pines  Apartments  and  increased
insurance  expense  at  all  of  the  Partnership's   properties.   General  and
administrative  expenses decreased for the three and nine months ended September
30, 2001 primarily due to decreased fees paid to the Managing General Partner in
connection  with the  distributions  from operations made during the nine months
ended  September  30, 2001,  reduced  legal fees,  and a decrease in the cost of
services  included in the  management  reimbursements  to the  Managing  General
Partner as allowed under the Partnership Agreement. The decreases were partially
offset by increased  professional fees required to manage the Partnership.  Also
included in general and  administrative  expenses at both September 30, 2001 and
2000 are costs  associated  with the  quarterly and annual  communications  with
investors  and  regulatory  agencies  and  the  annual  audit  required  by  the
Partnership Agreement.

As part of the ongoing  business plan of the  Partnership,  the Managing General
Partner  monitors  the  rental  market  environment  of each  of its  investment
properties  to assess  the  feasibility  of  increasing  rents,  maintaining  or
increasing  occupancy  levels and protecting the  Partnership  from increases in
expense.  As part of this plan, the Managing General Partner attempts to protect
the  Registrant  from the burden of  inflation-related  increases in expenses by
increasing rents and maintaining a high overall occupancy level. However, due to
changing market  conditions,  which can result in the use of rental  concessions
and  rental  reductions  to  offset  softening  market  conditions,  there is no
guarantee that the Managing General Partner will be able to sustain such a plan.

Liquidity and Capital Resources

At  September  30,  2001,  the  Partnership  had cash and  cash  equivalents  of
approximately  $501,000 as compared to  approximately  $627,000 at September 30,
2000. Cash and cash  equivalents  decreased by  approximately  $370,000 from the
Partnership's  year ended December 31, 2000 due to  approximately  $1,095,000 of
cash used in financing  activities  and  approximately  $695,000 of cash used in
investing  activities,  which more than offset approximately  $1,420,000 of cash
provided by operating activities. Cash used in financing activities consisted of
payments of principal made on the mortgage encumbering The Pines Apartments, the
repayment  of the  mortgage  encumbering  Northwoods  I and II  Apartments,  the
payment of loan costs, and  distributions to partners which was partially offset
by the proceeds received from the refinancing of Northwoods I and II Apartments.
Cash  used in  investing  activities  consisted  of  property  improvements  and
replacements and deposits to escrow accounts  maintained by the mortgage lender.
The  Partnership  invests its  working  capital  reserves  in  interest  bearing
accounts.

The Managing  General Partner has extended to the Partnership a $500,000 line of
credit.  The  Partnership  has no  outstanding  amounts  due under  this line of
credit. Based on present plans, the Managing General Partner does not anticipate
the need to borrow  against  the line of credit in the near  future.  Other than
cash and cash equivalents,  the line of credit is the Partnership's  only unused
source of liquidity.

The sufficiency of existing  liquid assets to meet future  liquidity and capital
expenditure   requirements   is  directly   related  to  the  level  of  capital
expenditures  required at the various  properties  to  adequately  maintain  the
physical  assets and other  operating needs of the Registrant and to comply with
Federal, state and local legal and regulatory requirements. Capital improvements
for each of the Registrant's properties are detailed below.

Fairway View II

During the nine months ended  September  30,  2001,  the  Partnership  completed
approximately  $148,000 of budgeted and  non-budgeted  capital  improvements  at
Fairway View II, consisting primarily of carpet and vinyl replacements, plumbing
fixtures, air conditioning unit replacement,  major landscaping,  and structural
improvements.  These  improvements  were funded from  Partnership  reserves  and
operating cash flow. The Partnership has evaluated the capital improvement needs
of the  property for the current  year and, as a result  budgeted  approximately
$90,000 for capital improvements,  consisting primarily of air conditioning unit
replacement,  appliances,  carpet  replacements,  and  swimming  pool  upgrades.
Additional  improvements  may be  considered  and will  depend  on the  physical
condition of the property as well as replacement  reserves and anticipated  cash
flow generated by the property.

The Pines

During the nine months ended  September  30,  2001,  the  Partnership  completed
approximately  $191,000  of  capital  improvements  at  The  Pines,   consisting
primarily  of carpet  and vinyl  replacements,  plumbing  upgrades,  appliances,
swimming pool upgrades and cabinet upgrades. These improvements were funded from
Partnership  reserves and operating cash flow. The Partnership has evaluated the
capital  improvement needs of the property for the current year and, as a result
budgeted approximately  $263,000 for capital improvements,  consisting primarily
of cabinet upgrades,  air conditioning unit  replacement,  interior  decoration,
appliances,  and carpet and vinyl  replacement.  Additional  improvements may be
considered and will depend on the physical  condition of the property as well as
replacement reserves and anticipated cash flow generated by the property.

Patchen Place

During the nine months ended  September  30,  2001,  the  Partnership  completed
approximately  $108,000 of capital  improvements  at Patchen  Place,  consisting
primarily  of carpet  replacements,  office  computers,  air  conditioning  unit
replacement,  plumbing  upgrades,  structural  improvements,  and  water  heater
replacements.  These  improvements  were funded from  Partnership  reserves  and
operating cash flow. The Partnership has evaluated the capital improvement needs
of the  property for the current  year and, as a result  budgeted  approximately
$211,000  for capital  improvements,  consisting  primarily  of carpet and vinyl
replacements,   appliances,  and  water  conservation  improvements.  Additional
improvements may be considered and will depend on the physical  condition of the
property as well as replacement  reserves and anticipated cash flow generated by
the property.

Northwoods I and II

During the nine months ended  September  30,  2001,  the  Partnership  completed
approximately  $179,000 of capital improvements at Northwoods I & II, consisting
primarily of carpet and vinyl  replacements,  air conditioning unit replacement,
plumbing fixtures,  appliances and structural  improvements.  These improvements
were funded from  Partnership  reserves and operating cash flow. The Partnership
has evaluated the capital improvement needs of the property for the current year
and, as a result  budgeted  approximately  $275,000  for  capital  improvements,
consisting   primarily  of  air  conditioning   unit   replacement,   countertop
replacements,   carpet,   vinyl,  and  tile  replacements,   exterior  painting,
appliances,  lighting  improvements,  wall  coverings,  and  water  submetering.
Additional  improvements  may be  considered  and will  depend  on the  physical
condition of the property as well as replacement  reserves and anticipated  cash
flow generated by the property.

South Point

During the nine months ended  September  30,  2001,  the  Partnership  completed
approximately  $64,000  of  capital  improvements  at  South  Point,  consisting
primarily  of  carpet   replacements,   appliances  and  air  conditioning  unit
replacements.  These  improvements  were funded from  Partnership  reserves  and
operating cash flow. The Partnership has evaluated the capital improvement needs
of the  property for the current  year and, as a result  budgeted  approximately
$79,000  consisting  primarily  of cabinet  upgrades  and  carpet  replacements.
Additional  improvements  may be  considered  and will  depend  on the  physical
condition of the property as well as replacement  reserves and anticipated  cash
flow generated by the property.

The additional  capital  improvements will be incurred only if cash is available
from operations or from Partnership  reserves.  To the extent that such budgeted
capital improvements are completed,  the Partnership's  distributable cash flow,
if any, may be adversely affected at least in the short term.

On  August  31,  2001,  the  Partnership  refinanced  the  mortgage  encumbering
Northwoods  I and  II  Apartments.  The  refinancing  replaced  indebtedness  of
$5,000,000 with a new mortgage in the amount of $7,000,000. The interest rate on
the new  mortgage is 7.06% as compared to 7.33% on the  previous  debt.  The new
loan which matures on September 1, 2021 requires monthly  principal and interest
payments and is scheduled to be fully amortized at maturity.  Total  capitalized
loan costs were  approximately  $253,000 at September 30, 2001. The  Partnership
recognized  an  extraordinary  loss  on the  early  extinguishment  of  debt  of
approximately $68,000 due to the write-off of unamortized loan costs.

The  Registrant's  current assets are thought to be sufficient for any near-term
needs  (exclusive  of capital  improvements)  of the  Registrant.  The  mortgage
indebtedness of  approximately  $4,071,000  encumbering The Pines and $7,000,000
encumbering  Northwoods  I and II are  scheduled to be fully  amortized  over 20
years.  The mortgage  indebtedness  of  $11,800,000  encumbering  the  remaining
properties requires interest only payments with balloon payments due November 1,
2003. The Managing  General Partner will attempt to refinance such  indebtedness
and/or sell the  properties  prior to such  maturity  dates.  If the  properties
cannot be refinanced or sold for a sufficient  amount,  the  Registrant may risk
losing such properties through foreclosure.

During the nine months ended  September 30, 2001, the  Partnership  declared and
paid distributions of approximately $2,763,000  (approximately $2,735,000 to the
limited partners or $45.19 per limited  partnership  unit) to its partners.  The
distributions consisted of approximately $1,133,000 (approximately $1,122,000 to
the  limited  partners  or $18.54  per  limited  partnership  unit) of cash from
operations and approximately $1,630,000 (approximately $1,613,000 to the limited
partners or $26.65 per limited  partnership  unit) of cash from the  refinancing
proceeds of  Northwoods  I and II  Apartments  in August  2001.  During the nine
months ended September 30, 2000, the Partnership declared and paid distributions
of approximately $2,889,000 (approximately $2,860,000 to the limited partners or
$47.26 per limited  partnership  unit)  consisting of  approximately  $2,004,000
(approximately  $1,984,000  to  the  limited  partners  or  $32.78  per  limited
partnership   unit)  of  cash  from   operations  and   approximately   $885,000
(approximately   $876,000  to  the  limited   partners  or  $14.48  per  limited
partnership unit) of cash from the refinancing  proceeds of The Pines Apartments
and from refinancing  proceeds in prior years.  Future cash  distributions  will
depend on the levels of net cash generated from operations,  the availability of
cash reserves and the timing of debt  maturities,  refinancings  and/or property
sales.  The  Partnership's  distribution  policy is reviewed on a monthly basis.
There  can  be  no  assurance,  however,  that  the  Partnership  will  generate
sufficient funds from operations after required capital expenditures,  to permit
any  additional  distributions  to its partners  during the remainder of 2001 or
subsequent periods.

In addition to its  indirect  ownership of the general  partner  interest in the
Partnership,   AIMCO  and  its  affiliates   currently  own  40,235.67   limited
partnership  units in the  Partnership  representing  66.49% of the  outstanding
units at September 30, 2001. A number of these units were  acquired  pursuant to
tender offers made by affiliates of the Managing General Partner,  AIMCO, or its
affiliates.  It is possible that AIMCO or its  affiliates  will make one or more
additional offers to acquire  additional  limited  partnership  interests in the
Partnership  for cash or in exchange for units in the operating  partnership  of
AIMCO. Under the Partnership  Agreement,  unitholders  holding a majority of the
units are  entitled to take action  with  respect to a variety of matters  which
would  include  voting on certain  amendments to the  Partnership  Agreement and
voting to remove the Managing General  Partner.  As a result of its ownership of
66.49% of the  outstanding  units,  AIMCO is in a position to influence all such
voting decisions with respect to the Registrant.  When voting on matters,  AIMCO
would in all likelihood vote the units it acquired in a manner  favorable to the
interest of the Managing  General Partner  because of its  affiliation  with the
Managing General Partner.  However,  DeForest Ventures II L.P., from whom AIMCO,
through its merger with Insignia,  acquired  25,399 Units (41.97% of the units),
had agreed for the benefit of non-tendering unit holders, that it would vote its
Units: (i) against any increase in compensation  payable to the Managing General
Partner or to affiliates;  and (ii) on all other matters  submitted by it or its
affiliates,  in proportion  to the votes cast by all other unit holders.  Except
for the foregoing, no other limitations are imposed on AIMCO's or its affiliates
right to vote each unit acquired.


<PAGE>

                           PART II - OTHER INFORMATION



ITEM 1.     LEGAL PROCEEDINGS

In March 1998, several putative unit holders of limited partnership units of the
Partnership  commenced an action  entitled  Rosalie  Nuanes,  et al. v. Insignia
Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the
State of  California  for the  County  of San  Mateo.  The  plaintiffs  named as
defendants,  among others,  the  Partnership,  its Managing  General Partner and
several of their  affiliated  partnerships  and corporate  entities.  The action
purports  to  assert  claims  on  behalf  of a class  of  limited  partners  and
derivatively  on behalf  of a number  of  limited  partnerships  (including  the
Partnership)  which are named as nominal  defendants,  challenging,  among other
things,  the  acquisition of interests in certain  general  partner  entities by
Insignia  Financial  Group,  Inc.  ("Insignia")  and entities which were, at one
time,  affiliates of Insignia;  past tender offers by the Insignia affiliates to
acquire  limited  partnership  units;  management  of  the  partnerships  by the
Insignia  affiliates;  and the series of transactions which closed on October 1,
1998 and  February 26, 1999 whereby  Insignia  and  Insignia  Properties  Trust,
respectively,  were merged into AIMCO.  The plaintiffs seek monetary damages and
equitable relief, including judicial dissolution of the Partnership. On June 25,
1998,  the Managing  General  Partner  filed a motion  seeking  dismissal of the
action.  In lieu of responding to the motion,  the  plaintiffs  filed an amended
complaint. The Managing General Partner filed demurrers to the amended complaint
which were heard February 1999.

Pending the ruling on such  demurrers,  settlement  negotiations  commenced.  On
November 2, 1999,  the parties  executed and filed a Stipulation  of Settlement,
settling claims, subject to court approval, on behalf of the Partnership and all
limited partners who owned units as of November 3, 1999. Preliminary approval of
the  settlement  was obtained on November 3, 1999 from the Court,  at which time
the Court set a final  approval  hearing for  December  10,  1999.  Prior to the
December  10,  1999  hearing,  the  Court  received  various  objections  to the
settlement, including a challenge to the Court's preliminary approval based upon
the alleged lack of authority of prior lead counsel to enter the settlement.  On
December 14, 1999, the Managing  General  Partner and its affiliates  terminated
the  proposed  settlement.  In  February  2000,  counsel  for some of the  named
plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who
negotiated  the  settlement.  On June  27,  2000,  the  Court  entered  an order
disqualifying  them  from the case and an  appeal  was  taken  from the order on
October 5, 2000. On December 4, 2000, the Court  appointed the law firm of Lieff
Cabraser  Heimann & Bernstein  LLP as new lead  counsel for  plaintiffs  and the
putative class.  Plaintiffs filed a third amended complaint on January 19, 2001.
On March 2, 2001,  the  Managing  General  Partner  and its  affiliates  filed a
demurrer to the third amended  complaint.  On May 14, 2001,  the Court heard the
demurrer to the third amended  complaint.  On July 10, 2001, the Court issued an
order  sustaining  defendants'  demurrer on certain  grounds.  On July 20, 2001,
plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order
granting in part and denying in part defendants' demurrer. On September 7, 2001,
plaintiffs  filed a fourth amended class and  derivative  action  complaint.  On
September 12, 2001, the Court denied plaintiffs' motion for reconsideration.  On
October 5, 2001, the Managing General Partner and affiliated  defendants filed a
demurrer to the fourth amended complaint,  which, together with a demurrer filed
by other  defendants,  is currently  scheduled to be heard on November 15, 2001.
The Court has set the matter for trial in January 2003.

During the third  quarter of 2001, a complaint  (the "Heller  action") was filed
against  the same  defendants  that are named in the  Nuanes  action,  captioned
Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed
a first amended  complaint.  The first amended complaint in the Heller action is
brought as a purported  derivative  action,  and asserts  claims for among other
things  breach  of  fiduciary  duty;  unfair  competition;   conversion,  unjust
enrichment;  and judicial  dissolution.  Plaintiffs in the Nuanes action filed a
motion to  consolidate  the Heller action with the Nuanes action and stated that
the Heller action was filed in order to preserve the derivative claims that were
dismissed  without  leave to amend in the Nuanes action by the Court order dated
July 10, 2001. On October 5, 2001, the Managing  General  Partner and affiliated
defendants  moved to strike the first  amended  complaint  in its  entirety  for
violating  the Court's July 10, 2001 order  granting in part and denying in part
defendants'  demurrer in the Nuanes action, or alternatively,  to strike certain
portions of the complaint based on the statute of limitations.  Other defendants
in the action  demurred to the fourth  amended  complaint,  and,  alternatively,
moved to strike the complaint.  The matters are currently  scheduled to be heard
on November 15, 2001.

The Managing  General Partner does not anticipate that any costs,  whether legal
or  settlement  costs,  associated  with  these  cases will be  material  to the
Partnership's overall operations.

ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

            a)    Exhibits:

                  Exhibit 10.11,  Multifamily Note dated August 31, 2001, by and
                  between National  Property  Investors 7, a California  Limited
                  Partnership,  and  GMAC  Commercial  Mortgage  Corporation,  a
                  California Corporation.

            b)    Reports on Form 8-K filed during the quarter  ended  September
                  30, 2001:

                  None.



<PAGE>



                                   SIGNATURES



In accordance with the  requirements of the Exchange Act, the Registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.



                                    NATIONAL PROPERTY INVESTORS 7


                                    By:   NPI EQUITY INVESTMENTS, INC.
                                          Its Managing General Partner


                                    By:   /s/Patrick J. Foye
                                          Patrick J. Foye
                                          Executive Vice President


                                    By:   /s/Martha L. Long
                                          Martha L. Long
                                          Senior Vice President
                                          and Controller


                                    Date:

<PAGE>
                                    EXHIBIT C

                                                        FHLMC Loan No. 002692805
                                                           Northwoods Apartments

                                MULTIFAMILY NOTE
                     (MULTISTATE - REVISION DATE 11-01-2000)


US $7,000,000.00                                         As of August 30, 2001


      FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally (if
more  than  one)  promises  to pay to the  order  of  GMAC  COMMERCIAL  MORTGAGE
CORPORATION,  a California  corporation,  the principal sum of Seven Million and
00/100 Dollars (US $7,000,000.00), with interest on the unpaid principal balance
at the annual rate of Seven and Sixty Thousandths percent (7.060%).

1. Defined  Terms.  As used in this Note, (i) the term "Lender" means the holder
of this Note, and (ii) the term "Indebtedness"  means the principal of, interest
on,  and any other  amounts  due at any time  under,  this  Note,  the  Security
Instrument  or any other Loan  Document,  including  prepayment  premiums,  late
charges,  default interest, and advances to protect the security of the Security
Instrument under Section 12 of the Security  Instrument.  "Event of Default" and
other  capitalized  terms  used but not  defined  in this  Note  shall  have the
meanings given to such terms in the Security Instrument.

2. Address for Payment. All payments due under this Note shall be payable at 200
Witmer Road, Post Office Box 809, Horsham, Pennsylvania 19044, Attn: Servicing -
Account  Manager,  or such other place as may be designated by written notice to
Borrower from or on behalf of Lender.

3. Payment of Principal  and Interest.  Principal and interest  shall be paid as
follows:

(a) Unless  disbursement of principal is made by Lender to Borrower on the first
day of the month,  interest for the period beginning on the date of disbursement
and ending on and including the last day of the month in which such disbursement
is made  shall be  payable  simultaneously  with  the  execution  of this  Note.
Interest  under  this Note  shall be  computed  on the  basis of a 360-day  year
consisting of twelve 30-day months.

(b)  Consecutive  monthly  installments  of principal and interest,  each in the
amount of Fifty Four Thousand Five Hundred  Twenty Three and 32/100  Dollars (US
$54,523.32),  shall be  payable  on the first  day of each  month  beginning  on
October 1, 2001,  until the entire unpaid  principal  balance  evidenced by this
Note is fully paid.

(c) Any accrued interest remaining past due for 30 days or more may, at Lender's
discretion,  be added to and become  part of the unpaid  principal  balance  and
shall  bear  interest  at the  rate or rates  specified  in this  Note,  and any
reference below to "accrued  interest" shall refer to accrued interest which has
not become part of the unpaid  principal  balance.  Any remaining  principal and
interest shall be due and payable on September 1, 2021 or on any earlier date on
which the unpaid  principal  balance of this Note  becomes due and  payable,  by
acceleration or otherwise (the "Maturity  Date").  The unpaid principal  balance
shall  continue to bear interest after the Maturity Date at the Default Rate set
forth in this Note until and including the date on which it is paid in full.

(d) Any regularly  scheduled monthly  installment of principal and interest that
is  received  by Lender  before  the date it is due shall be deemed to have been
received on the due date solely for the purpose of calculating interest due.

4.  Application of Payments.  If at any time Lender  receives,  from Borrower or
otherwise,  any amount  applicable  to the  Indebtedness  which is less than all
amounts due and payable at such time,  Lender may apply that  payment to amounts
then due and  payable in any manner and in any order  determined  by Lender,  in
Lender's  discretion.  Borrower  agrees that neither  Lender's  acceptance  of a
payment  from  Borrower in an amount that is less than all amounts  then due and
payable nor Lender's  application of such payment shall  constitute or be deemed
to  constitute  either  a  waiver  of  the  unpaid  amounts  or  an  accord  and
satisfaction.

5. Security.  The Indebtedness is secured,  among other things, by a multifamily
mortgage, deed to secure debt or deed of trust dated as of the date of this Note
(the "Security  Instrument"),  and reference is made to the Security  Instrument
for other rights of Lender as to collateral for the Indebtedness.

6.  Acceleration.  If an Event of Default has  occurred and is  continuing,  the
entire unpaid principal  balance,  any accrued interest,  the prepayment premium
payable under  Paragraph  10, if any, and all other  amounts  payable under this
Note and any other Loan  Document  shall at once become due and payable,  at the
option of Lender,  without  any prior  notice to  Borrower  (except if notice is
required by applicable  law,  then after such notice).  Lender may exercise this
option to accelerate regardless of any prior forbearance.

7. Late  Charge.  If any  monthly  amount  payable  under this Note or under the
Security  Instrument or any other Loan Document is not received by Lender within
ten (10) days after the amount is due (unless  applicable  law requires a longer
period of time before a late  charge may be imposed,  in which event such longer
period shall be  substituted),  Borrower  shall pay to Lender,  immediately  and
without  demand by Lender,  a late  charge  equal to five  percent  (5%) of such
amount  (unless  applicable  law requires a lesser  amount be charged,  in which
event such lesser amount shall be substituted).  Borrower  acknowledges that its
failure to make timely payments will cause Lender to incur  additional  expenses
in servicing and processing  the loan  evidenced by this Note (the "Loan"),  and
that it is extremely  difficult and  impractical to determine  those  additional
expenses.  Borrower  agrees  that  the  late  charge  payable  pursuant  to this
Paragraph  represents a fair and  reasonable  estimate,  taking into account all
circumstances  existing  on the date of this Note,  of the  additional  expenses
Lender will incur by reason of such late payment.  The late charge is payable in
addition  to,  and not in lieu of, any  interest  payable  at the  Default  Rate
pursuant to Paragraph 8.

8. Default Rate. So long as (a) any monthly  installment under this Note remains
past due for thirty  (30) days or more,  or (b) any other  Event of Default  has
occurred and is continuing,  interest under this Note shall accrue on the unpaid
principal  balance from the earlier of the due date of the first unpaid  monthly
installment or the occurrence of such other Event of Default, as applicable,  at
a rate (the "Default  Rate") equal to the lesser of four (4)  percentage  points
above  the rate  stated  in the first  paragraph  of this  Note and the  maximum
interest rate which may be collected from Borrower under  applicable law. If the
unpaid  principal  balance and all accrued  interest are not paid in full on the
Maturity Date, the unpaid principal  balance and all accrued interest shall bear
interest from the Maturity Date at the Default Rate.  Borrower also acknowledges
that its failure to make timely  payments will cause Lender to incur  additional
expenses in servicing and  processing the Loan,  that,  during the time that any
monthly  installment  under this Note is  delinquent  for more than  thirty (30)
days,  Lender will incur  additional costs and expenses arising from its loss of
the use of the money due and from the adverse impact on Lender's ability to meet
its other  obligations and to take advantage of other investment  opportunities,
and that it is extremely difficult and impractical to determine those additional
costs and expenses.  Borrower also  acknowledges  that, during the time that any
monthly installment under this Note is delinquent for more than thirty (30) days
or any other Event of Default has occurred and is  continuing,  Lender's risk of
nonpayment of this Note will be  materially  increased and Lender is entitled to
be compensated for such increased risk. Borrower agrees that the increase in the
rate of interest  payable under this Note to the Default Rate  represents a fair
and reasonable estimate,  taking into account all circumstances  existing on the
date of this Note,  of the  additional  costs and expenses  Lender will incur by
reason of the  Borrower's  delinquent  payment and the  additional  compensation
Lender is entitled to receive for the increased  risks of nonpayment  associated
with a delinquent loan.

9.    Limits on Personal Liability.

(a) Except as otherwise  provided in this  Paragraph 9,  Borrower  shall have no
personal  liability  under this Note, the Security  Instrument or any other Loan
Document for the repayment of the  Indebtedness  or for the  performance  of any
other  obligations  of Borrower  under the Loan  Documents,  and  Lender's  only
recourse for the  satisfaction of the  Indebtedness  and the performance of such
obligations  shall be Lender's  exercise of its rights and remedies with respect
to the Mortgaged  Property and any other  collateral  held by Lender as security
for the Indebtedness. This limitation on Borrower's liability shall not limit or
impair  Lender's  enforcement  of  its  rights  against  any  guarantor  of  the
Indebtedness or any guarantor of any obligations of Borrower.

(b) Borrower shall be personally liable to Lender for the repayment of a portion
of the Indebtedness equal to zero percent (0%) of the original principal balance
of this Note,  plus any other amounts for which Borrower has personal  liability
under this Paragraph 9.

(c) In addition to Borrower's  personal liability under Paragraph 9(b), Borrower
shall be personally  liable to Lender for the repayment of a further  portion of
the  Indebtedness  equal to any loss or damage suffered by Lender as a result of
(1) failure of  Borrower to pay to Lender upon demand  after an Event of Default
all  Rents to which  Lender  is  entitled  under  Section  3(a) of the  Security
Instrument  and the amount of all security  deposits  collected by Borrower from
tenants  then in  residence;  (2)  failure of  Borrower  to apply all  insurance
proceeds and condemnation  proceeds as required by the Security  Instrument;  or
(3)  failure of Borrower to comply  with  Section  14(d) or (e) of the  Security
Instrument relating to the delivery of books and records, statements,  schedules
and reports.

(d) For purposes of determining  Borrower's  personal  liability under Paragraph
9(b) and Paragraph  9(c), all payments made by Borrower or any guarantor of this
Note with respect to the  Indebtedness  and all amounts  received by Lender from
the  enforcement  of its rights under the Security  Instrument  shall be applied
first to the  portion of the  Indebtedness  for which  Borrower  has no personal
liability.

(e) Borrower shall become  personally  liable to Lender for the repayment of all
of the  Indebtedness  upon the  occurrence  of any of the  following  Events  of
Default: (1) Borrower's acquisition of any property or operation of any business
not  permitted  by  Section  33 of  the  Security  Instrument;  (2)  a  Transfer
(including,  but not  limited  to,  a lien or  encumbrance)  that is an Event of
Default  under  Section  21 of the  Security  Instrument,  other than a Transfer
consisting  solely of the  involuntary  removal or  involuntary  withdrawal of a
general  partner in a limited  partnership  or a manager in a limited  liability
company; or (3) fraud or written material  misrepresentation  by Borrower or any
officer,  director,  partner,  member or employee of Borrower in connection with
the  application  for or  creation  of the  Indebtedness  or any request for any
action or consent by Lender.

(f) In addition to any personal  liability for the Indebtedness,  Borrower shall
be  personally  liable to Lender for (1) the  performance  of all of  Borrower's
obligations   under  Section  18  of  the  Security   Instrument   (relating  to
environmental  matters);  (2) the costs of any audit under  Section 14(d) of the
Security  Instrument;  and (3) any  costs  and  expenses  incurred  by Lender in
connection  with the  collection of any amount for which  Borrower is personally
liable under this  Paragraph  9,  including  fees and out of pocket  expenses of
attorneys and expert witnesses and the costs of conducting any independent audit
of Borrower's  books and records to determine the amount for which  Borrower has
personal liability.

(g) To the extent that Borrower has personal  liability  under this Paragraph 9,
Lender may exercise its rights  against  Borrower  personally  without regard to
whether  Lender has exercised any rights  against the Mortgaged  Property or any
other  security,  or pursued any rights  against any  guarantor,  or pursued any
other rights available to Lender under this Note, the Security  Instrument,  any
other Loan  Document or  applicable  law. For purposes of this  Paragraph 9, the
term "Mortgaged Property" shall not include any funds that (1) have been applied
by Borrower as required or  permitted by the  Security  Instrument  prior to the
occurrence  of an  Event of  Default  or (2)  Borrower  was  unable  to apply as
required  or  permitted  by the  Security  Instrument  because of a  bankruptcy,
receivership, or similar judicial proceeding. To the fullest extent permitted by
applicable  law, in any action to enforce  Borrower's  personal  liability under
this  Paragraph  9,  Borrower  waives  any  right  to set off the  value  of the
Mortgaged Property against such personal liability.

10.   Voluntary and Involuntary Prepayments.

(a) A prepayment premium shall be payable in connection with any prepayment (any
receipt by Lender of  principal,  other than  principal  required  to be paid in
monthly installments pursuant to Paragraph 3(b), prior to the scheduled Maturity
Date set forth in Paragraph 3(c)) under this Note as provided below:

(1) Borrower may voluntarily  prepay all of the unpaid principal balance of this
Note on a Business Day  designated as the date for such  prepayment in a written
notice from  Borrower to Lender given at least 30 days prior to the date of such
prepayment.  Such prepayment shall be made by paying (A) the amount of principal
being prepaid,  (B) all accrued  interest,  (C) all other sums due Lender at the
time of such prepayment,  and (D) the prepayment premium calculated  pursuant to
Paragraph  10(c).  For all  purposes  including  the  accrual of  interest,  any
prepayment received by Lender on any day other than the last calendar day of the
month  shall be deemed to have been  received on the last  calendar  day of such
month.  For purposes of this Note,  a "Business  Day" means any day other than a
Saturday,  Sunday  or any other  day on which  Lender is not open for  business.
Unless expressly provided for in the Loan Documents, Borrower shall not have the
option to  voluntarily  prepay  less than all of the unpaid  principal  balance.
However,  if a partial  prepayment  is provided for in the Loan  Documents or is
accepted by Lender in  Lender's  discretion,  a  prepayment  premium  calculated
pursuant to Paragraph 10(c) shall be due and payable by Borrower.

(2) Upon  Lender's  exercise  of any  right of  acceleration  under  this  Note,
Borrower shall pay to Lender, in addition to the entire unpaid principal balance
of this  Note  outstanding  at the  time of the  acceleration,  (A) all  accrued
interest  and  all  other  sums  due  Lender,  and (B)  the  prepayment  premium
calculated pursuant to Paragraph 10(c).

(3) Any  application  by  Lender  of any  collateral  or other  security  to the
repayment of any portion of the unpaid  principal  balance of this Note prior to
the  Maturity  Date and in the absence of  acceleration  shall be deemed to be a
partial prepayment by Borrower, requiring the payment to Lender by Borrower of a
prepayment premium.

(b)  Notwithstanding  the provisions of Paragraph  10(a), no prepayment  premium
shall be payable with respect to (A) any prepayment  made during the period from
one  hundred  eighty  (180)  days  before  the  scheduled  Maturity  Date to the
scheduled  Maturity  Date,  or (B) any  prepayment  occurring as a result of the
application of any insurance  proceeds or condemnation  award under the Security
Instrument.

(c) Any prepayment premium payable under this Note shall be computed as follows:

            (1) If the  prepayment is made between the date of this Note and the
date  that is 180  months  after  the  first  day of the  first  calendar  month
following the date of this Note (the "Yield Maintenance Period"), the prepayment
premium shall be whichever is the greater of subparagraphs (i) and (ii) below:

            (i)   1.0% of the unpaid principal balance of this Note; or

            (ii)  the product obtained by multiplying:

                  (A)   the amount of principal being prepaid,
                  by
                  (B)   the excess (if any) of the  Monthly Note Rate  over the
                        Assumed Reinvestment Rate,
                  by
                  (C)   the Present Value Factor.

            For purposes of subparagraph  (ii), the following  definitions shall
            apply:

            Monthly Note Rate: one-twelfth (1/12) of the annual interest rate of
            this Note, expressed as a decimal calculated to five digits.

            Prepayment Date: in the case of a voluntary prepayment,  the date on
            which the  prepayment  is made;  in the case of the  application  by
            Lender of  collateral  or  security  to a portion  of the  principal
            balance,  the date of such  application;  and in any other case, the
            date on which Lender  accelerates  the unpaid  principal  balance of
            this Note.

            Assumed  Reinvestment Rate:  one-twelfth (1/12) of the yield rate as
            of the date 5 Business  Days  before  the  Prepayment  Date,  on the
            9.250% U.S.  Treasury  Security due February 1, 2016, as reported in
            The Wall Street Journal,  expressed as a decimal  calculated to five
            digits.  In the event that no yield is published  on the  applicable
            date  for the  Treasury  Security  used  to  determine  the  Assumed
            Reinvestment  Rate,  Lender,  in its  discretion,  shall  select the
            non-callable  Treasury  Security  maturing  in the same  year as the
            Treasury Security specified above with the lowest yield published in
            The  Wall  Street  Journal  as  of  the  applicable   date.  If  the
            publication  of such  yield  rates in The  Wall  Street  Journal  is
            discontinued  for any reason,  Lender shall select a security with a
            comparable rate and term to the Treasury  Security used to determine
            the  Assumed  Reinvestment  Rate.  The  selection  of  an  alternate
            security  pursuant  to this  Paragraph  shall  be  made in  Lender's
            discretion.

            Present Value Factor: the factor that discounts to present value the
            costs  resulting  to Lender from the  difference  in interest  rates
            during the months remaining in the Yield Maintenance  Period,  using
            the Assumed  Reinvestment  Rate as the discount  rate,  with monthly
            compounding, expressed numerically as follows:

                                     [OBJECT OMITTED]

            n = number of months remaining in Yield Maintenance Period

            ARR = Assumed Reinvestment Rate

            (2) If the  prepayment  is made  after the  expiration  of the Yield
Maintenance  Period but before the period set forth in Paragraph 10(b)(A) above,
the  prepayment  premium shall be 1.0% of the unpaid  principal  balance of this
Note.

(d) Any  permitted  or  required  prepayment  of less than the unpaid  principal
balance of this Note shall not extend or postpone the due date of any subsequent
monthly  installments or change the amount of such  installments,  unless Lender
agrees otherwise in writing.

(e) Borrower  recognizes that any prepayment of the unpaid principal  balance of
this Note,  whether  voluntary or  involuntary  or  resulting  from a default by
Borrower,  will result in Lender's incurring loss, including  reinvestment loss,
additional expense and frustration or impairment of Lender's ability to meet its
commitments  to third  parties.  Borrower  agrees to pay to Lender  upon  demand
damages  for the  detriment  caused by any  prepayment,  and  agrees  that it is
extremely  difficult  and  impractical  to ascertain the extent of such damages.
Borrower  therefore  acknowledges  and agrees that the  formula for  calculating
prepayment  premiums set forth in this Note represents a reasonable  estimate of
the damages Lender will incur because of a prepayment.

(f) Borrower further acknowledges that the prepayment premium provisions of this
Note are a material part of the  consideration  for the Loan,  and  acknowledges
that the terms of this Note are in other  respects more favorable to Borrower as
a  result  of the  Borrower's  voluntary  agreement  to the  prepayment  premium
provisions.

11.  Costs and  Expenses.  To the  fullest  extent  allowed by  applicable  law,
Borrower  shall pay all expenses  and costs,  including  fees and  out-of-pocket
expenses  of  attorneys  (including  Lender's  in-house  attorneys)  and  expert
witnesses  and  costs of  investigation,  incurred  by Lender as a result of any
default under this Note or in connection  with efforts to collect any amount due
under  this  Note,  or to  enforce  the  provisions  of any of  the  other  Loan
Documents,  including those incurred in post-judgment  collection efforts and in
any  bankruptcy  proceeding  (including any action for relief from the automatic
stay of any  bankruptcy  proceeding)  or  judicial or  non-judicial  foreclosure
proceeding.

12.  Forbearance.  Any  forbearance  by Lender in exercising any right or remedy
under  this  Note,  the  Security  Instrument,  or any other  Loan  Document  or
otherwise  afforded by applicable  law, shall not be a waiver of or preclude the
exercise of that or any other right or remedy.  The  acceptance by Lender of any
payment after the due date of such  payment,  or in an amount which is less than
the required payment,  shall not be a waiver of Lender's right to require prompt
payment  when due of all other  payments or to exercise any right or remedy with
respect to any  failure to make  prompt  payment.  Enforcement  by Lender of any
security for  Borrower's  obligations  under this Note shall not  constitute  an
election by Lender of remedies so as to preclude the exercise of any other right
or remedy available to Lender.

13.  Waivers.  Presentment,  demand,  notice  of  dishonor,  protest,  notice of
acceleration,  notice of intent to demand or  accelerate  payment  or  maturity,
presentment  for  payment,  notice  of  nonpayment,   grace,  and  diligence  in
collecting  the  Indebtedness  are  waived by  Borrower  and all  endorsers  and
guarantors of this Note and all other third party obligors.

14. Loan Charges. Neither this Note nor any of the other Loan Documents shall be
construed  to create a contract for the use,  forbearance  or detention of money
requiring  payment of interest at a rate greater than the maximum  interest rate
permitted to be charged under applicable law. If any applicable law limiting the
amount of interest or other charges  permitted to be collected  from Borrower in
connection  with the Loan is  interpreted  so that any  interest or other charge
provided for in any Loan  Document,  whether  considered  separately or together
with other charges  provided for in any other Loan Document,  violates that law,
and Borrower is entitled to the benefit of that law,  that interest or charge is
hereby reduced to the extent necessary to eliminate that violation. The amounts,
if any,  previously  paid to Lender in excess of the permitted  amounts shall be
applied by Lender to reduce the unpaid  principal  balance of this Note. For the
purpose  of  determining  whether  any  applicable  law  limiting  the amount of
interest or other  charges  permitted  to be  collected  from  Borrower has been
violated,  all  Indebtedness  that  constitutes  interest,  as well as all other
charges made in connection with the Indebtedness that constitute interest, shall
be deemed to be allocated  and spread  ratably over the stated term of the Note.
Unless otherwise required by applicable law, such allocation and spreading shall
be  effected  in such a manner  that the rate of interest so computed is uniform
throughout the stated term of the Note.

15.  Commercial  Purpose.  Borrower  represents  that the  Indebtedness is being
incurred  by  Borrower  solely for the  purpose  of  carrying  on a business  or
commercial enterprise,  and not for personal,  family, household or agricultural
purposes.

16.  Counting  of  Days.  Except  where  otherwise  specifically  provided,  any
reference in this Note to a period of "days" means  calendar  days, not Business
Days.

17. Governing Law. This Note shall be governed by the law of the jurisdiction in
which the Land is located.

18.  Captions.  The captions of the paragraphs of this Note are for  convenience
only and shall be disregarded in construing this Note.

19.   Notices;   Written   Modifications.   All   notices,   demands  and  other
communications  required or permitted to be given by Lender to Borrower pursuant
to this  Note  shall be given in  accordance  with  Section  31 of the  Security
Instrument.  Any  modification  or amendment  to this Note shall be  ineffective
unless  in  writing  signed  by  the  party  sought  to  be  charged  with  such
modification or amendment;  provided,  however,  that in the event of a Transfer
under  the  terms  of  the  Security  Instrument,  any  or  some  or  all of the
Modifications  to Multifamily Note may be modified or rendered void by Lender at
Lender's option by notice to Borrower/transferee.

20. Consent to  Jurisdiction  and Venue.  Borrower  agrees that any  controversy
arising under or in relation to this Note shall be litigated  exclusively in the
jurisdiction  in which the Land is located (the  "Property  Jurisdiction").  The
state and federal  courts and  authorities  with  jurisdiction  in the  Property
Jurisdiction  shall have exclusive  jurisdiction  over all  controversies  which
shall arise under or in relation to this Note. Borrower  irrevocably consents to
service,  jurisdiction,  and venue of such  courts for any such  litigation  and
waives  any other  venue to which it might be  entitled  by virtue of  domicile,
habitual residence or otherwise.

21. WAIVER OF TRIAL BY JURY.  BORROWER AND LENDER EACH (A) AGREES NOT TO ELECT A
TRIAL  BY JURY  WITH  RESPECT  TO ANY  ISSUE  ARISING  OUT OF  THIS  NOTE OR THE
RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT
BY A JURY AND (B) WAIVES  ANY RIGHT TO TRIAL BY JURY WITH  RESPECT TO SUCH ISSUE
TO THE EXTENT THAT ANY SUCH RIGHT  EXISTS NOW OR IN THE  FUTURE.  THIS WAIVER OF
RIGHT  TO  TRIAL  BY JURY IS  SEPARATELY  GIVEN  BY EACH  PARTY,  KNOWINGLY  AND
VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL.

      ATTACHED EXHIBIT.  The following Exhibit is attached to this Note:

            -----
             X       Exhibit A     Modifications to Multifamily Note
            -----

      IN WITNESS WHEREOF, Borrower has signed and delivered this Note under seal
or has  caused  this  Note to be signed  and  delivered  under  seal by its duly
authorized representative. Borrower intends that this Note shall be deemed to be
signed and delivered as a sealed instrument.

                    [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>


                                    NATIONAL PROPERTY INVESTORS 7, LTD., a
                                       California limited partnership

                                    By: NPI Equity Investments, Inc., a Florida
                                        corporation, its general partner




                                        By: ___________________
                                           Patti K. Fielding
                                           Senior Vice President


                                   95-4106139
                                   Borrower's Social Security/Employer ID Number


<PAGE>


PAY TO THE ORDER OF FEDERAL HOME LOAN MORTGAGE  CORPORATION,  WITHOUT  RECOURSE,
THIS ____ DAY OF AUGUST, 2001.

GMAC COMMERCIAL MORTGAGE CORPORATION, a
   California corporation



By:_________________________________
   Robert D. Falese, III
   Vice President


<PAGE>


                                    EXHIBIT A

                        MODIFICATIONS TO MULTIFAMILY NOTE

1.    The first sentence of Paragraph 8 of the Note  ("Default  Rate") is hereby
      deleted and replaced with the following:

            So long as (a) any monthly  installment under this Note remains past
            due for more than thirty (30) days or (b) any other event of Default
            has  occurred  and is  continuing,  interest  under  this Note shall
            accrue on the unpaid  principal  balance from the earlier of the due
            date of the first unpaid  monthly  installment  or the occurrence of
            such other Event of Default, as applicable,  at a rate (the "Default
            Rate")  equal to the lesser of (1) the maximum  interest  rate which
            may be  collected  from  Borrower  under  applicable  law or (2) the
            greater of (i) three  percent (3%) above the  Interest  Rate or (ii)
            four percent  (4.0%) above the  then-prevailing  Prime Rate. As used
            herein,  the term  "Prime  Rate"  shall  mean  the rate of  interest
            announced by The Wall Street Journal from time to time as the "Prime
            Rate".

2. Paragraph 9(c) of the Note is amended to add the following subparagraph (4):

(4)            failure  by  Borrower  to pay the  amount  of the water and sewer
               charges, taxes, fire, hazard or other insurance premiums,  ground
               rents,  assessments or other charges in accordance with the terms
               of the Security Instrument.

3.    Paragraph 19 is modified by deleting:  "; provided,  however,  that in the
      event of a Transfer  under the terms of the  Security  Instrument,  any or
      some or all of the  Modifications  to Multifamily  Note may be modified or
      rendered   void   by   Lender   at   Lender's    option   by   notice   to
      Borrower/transferee" in the last sentence of the Paragraph;  and by adding
      the following new sentence:

            The  Modifications  to Multifamily  Note set forth in this Exhibit A
            shall be null and void  unless  title to the  Mortgaged  Property is
            vested in an entity whose  Controlling  Interest(s)  are directly or
            indirectly  held by AIMCO  REIT or AIMCO OP. The  capitalized  terms
            used in this paragraph are defined in the Security Instrument.