UNITED STATES SECURITIES AND EXCHANGE COMMISSION

				   Washington, D.C. 20549

					  FORM 10-K

(Mark One)
  X        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
	   EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995
				      OR
	   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
	   EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from            to             

Commission File Number:  0-15639

		   Balcor/Colonial Storage Income Fund - 86     
	   (Exact name of registrant as specified in its charter)

		Illinois                                          36-3435425   
     (State or other jurisdiction of                         (I.R.S. Employer
      incorporation or organization)                        Identification No.)


			 Balcor Plaza
    2355 Waukegan Road Suite A200 Bannockburn, Illinois                60015    
       (Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code:  (847) 267-1600

Securities registered pursuant to Section 12 (b) of the Act: NONE

Securities registered pursuant to Section 12 (g) of the Act: Limited 
											     Partnership Interests 
													 Title of class

Indicate by check mark whether the Registrant (1) has filed all reports 
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 
1934 during the preceding 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            

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 
of Regulation S-K is not contained herein, and will not be contained, to the 
best of Registrant's knowledge, in definitive proxy or information statements 
incorporated by reference in Part III of this Form 10-K or any amendment to 
this Form 10-K.                                           X       
<PAGE>


					PART I

Item 1.    Business

Balcor/Colonial Storage Income Fund - 86 (the "Registrant") is a limited 
partnership formed in May 1986 under the laws of the State of Illinois, which 
raised $64,226,000 from sales of Limited Partnership Interests.  The 
Registrant's operations consist exclusively of investment in and operation of 
income-producing mini-warehouse and office/warehouse facilities and all 
financial information included in this report relates to that industry
segment.

The principal purpose of the Registrant is to acquire and develop, own, 
maintain, operate, lease and hold for capital appreciation and current income, 
mini-warehouse facilities offering storage space for business and personal use 
and office/warehouses offering a combination of office and commercial
warehouse space.  The Registrant acquired four mini-warehouse properties in 
1986 and seven mini-warehouse properties in 1987, from affiliates of one of the 
General Partners.  In addition, the Registrant acquired from non-affiliated 
entities four mini-warehouse facilities in 1987 and nine mini-warehouse 
facilities in 1988.

The Registrant received two unsolicited offers for the purchase of Limited 
Partnership Interests ("tender offers") in January 1996.  The tender offers 
were made by Public Storage, Inc. ("Public Storage") and Everest Storage 
Investors, LLC ("Everest").  Both stated that their primary motive in making 
the offer was to make a profit from the purchase of the Interests.  The 
Registrant incurred administrative costs in responding to the tender offers and 
may incur additional costs if additional tender offers are made in the future.  
The General Partners cannot predict with any certainty what the impact of any 
future tender offers will have on the operations or management of the 
Registrant.

On March 6, 1996 the Registrant entered into a purchase contract with an
unaffiliated third party to sell the assets and liabilities related to all 
twenty four of its mini-warehouse facilities (the "Properties"), subject to 
certain contingencies, for cash of $67,100,000.  The contract contemplates that 
the sale of the Properties will be consummated on May 15, 1996, but may, under 
certain limited circumstances, be extended to not later than July 15, 1996.

The sale of the Properties is contingent upon, among other things, the 
completion of the purchaser's satisfactory review of survey, title and 
environmental matters.  Pursuant to the contract, the results of such review 
may cause adjustments to the final purchase price or, in certain events, could
result in the termination of the purchase contract.  Additionally, the 
Partnership Agreement requires the approval of the holders of a majority of the
then outstanding Interests for any such sale.  If such approval is obtained from
the Limited Partners, the Properties will be sold, all available proceeds will 
be distributed to the Partners in accordance with the Partnership Agreement and 
the Registrant will be dissolved.

The Partnership Agreement provides that the proceeds of any sale, financing, or 
refinancing, will not be reinvested in new acquisitions, except that net 
proceeds may be used to purchase or finance improvements or additions to the 
Registrant's properties.

The Registrant, by virtue of its ownership of real estate, is subject to 
federal and state laws and regulations covering various environmental issues.  
Management of the Registrant utilizes the services of environmental consultants
to assess a wide range of environmental issues and to conduct tests for
contamination as appropriate.  The General Partners are not aware of any 
potential liability due to environmental issues or conditions that would be 
material to the Registrant.

The officers, directors, and employees of Balcor Storage Partners-86 and 
Colonial Storage 86, Inc., the General Partners of the Registrant, and their 
affiliates perform certain services for the Registrant.  The Registrant 
currently has 5 full time and 56 part-time employees engaged in its operations.
<PAGE>


Item 2.    Properties

As of December 31, 1995, the Registrant owned the properties described below:

						     Net
						  Rentable
				 Land               Area               No. of
				 Area              (Square            Rentable
   Location                     (Acres)             Feet)              Spaces

201 Cobb Parkway
Marietta, Georgia                  3.1              47,980               431

6390 Winchester Road
Memphis, Tennessee                 2.3              39,444               360

5675 Summer Avenue
Memphis, Tennessee (1)             2.4              46,010               377

2064 Briarcliff
Atlanta, Georgia (2)               2.8              45,700               174

4333 Jackson Drive
Garland, Texas                     3.1              72,572               612

321 East Buckingham Road
Garland, Texas                     2.1              40,701               299

3218 South Garnett Road
Tulsa, Oklahoma                    3.7              57,540               464

5708 Fort Caroline Road
Jacksonville, Florida              3.7              67,925               768

3401 Avenue K
Plano, Texas (3)                   4.7              87,654               897

4301 and 4324 Poplar Level Road
Louisville, Kentucky (4)           4.1              81,892               798

2719 Morse Road
Columbus, Ohio                     4.3              62,190               518

5036 Cleveland Avenue
Fort Myers, Florida                5.0              65,086               583

3281 Western Branch Boulevard
Chesapeake, Virginia               5.5              75,201               747

2300 Kangaroo Drive
Durham, North Carolina             4.0              47,502               657

28 W 650 Roosevelt Road
Winfield, Illinois (5)             5.6              48,145               550

1131 Semoran Boulevard
Casselberry, Florida               3.9              67,159               641

36 Pine Knoll Road
Greenville, South Carolina (6)     4.2              50,325               446

750 East Third Street
Lexington, Kentucky                3.3              55,700               450

1900 U.S. Highway 19 South
Tarpon Springs, Florida            5.4              80,732               748

7415 West Dean Road
Milwaukee, Wisconsin (7)          11.7             205,190             1,107

W229 N590 Foster Court and
N5 W22966 Bluemound Road
Waukesha, Wisconsin (8)            3.0              49,632               219

3120 Breckenridge Lane
Louisville, Kentucky               2.1              34,490               329

2275 South Semoran Boulevard
Orlando, Florida                   1.9              30,050               345

11195 Alpharetta Highway
Roswell, Georgia                   9.1             113,310               680

       (1)     The property consists of 374 units of mini-warehouse space 
	       and 3 units of office/warehouse space.

       (2)     The property consists of 156 units of mini-warehouse space 
	       and 18 units of office/warehouse space.

       (3)     The property consists of 855 units of mini-warehouse space 
	       and 42 paved parking spaces.

       (4)     4301 and 4324 Poplar Level Road were purchased as one unit

       (5)     The property consists of 455 units of mini-warehouse space 
	       and 95 parking spaces.

       (6)     The property consists of 433 units of mini-warehouse space 
	       and 13 units of office/warehouse space.

       (7)     The property consists of 694 units of mini-warehouse space 
	       and 413 paved parking spaces.

       (8)     The property consists of 209 units of mini-warehouse space 
	       and 10 units of office/warehouse space.

In the opinion of the General Partners, the Registrant has provided for  
adequate insurance coverage for its real estate investment properties.
<PAGE>
Item 3.     Legal Proceedings

The Registrant is not subject to any material pending legal proceedings, nor 
were any such proceedings terminated during the fourth quarter of 1995.




Item 4.     Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of the Limited Partners of the
Registrant during 1995.
<PAGE>


				   PART II




Item 5.     Market for Registrant's Common Equity and Related Stockholder
	    Matters

There has not been an established public market for Limited Partnership 
Interests, and it is not anticipated that one will develop.  For 
information regarding previous distributions, see Statements of Partners'
Capital, page F-5, and Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources, below.

As of December 31, 1995, the number of record holders of Limited
Partnership Interests of the Registrant was approximately 8,950.

<PAGE>

Item 6.      Selected Financial Data



				   Year Ended December 31                                 
		     1995        1994        1993         1992         1991     

Rental income   $  8,821,564   8,385,428   7,703,850   7,174,918    6,837,782

Interest income $    145,334      96,709      59,644      76,739      133,419

Net income      $  4,268,952   3,909,878   3,149,115   2,650,263    2,338,757

Net income per 
Limited 
Partnership
Interest        $      16.45       15.07       12.14       10.21         9.01

Taxable
income          $  4,627,553   4,243,760   3,483,158   3,019,741    2,737,570

Taxable
income per
Limited
Partnership
Interest        $      17.83       16.35       13.42       11.64        10.55

Cash and
cash
equivalents     $  3,595,948   3,242,344   2,648,551   2,611,021    2,391,363

Total mini-
warehouse
properties, net 
of accumulated
depreciation    $ 41,768,686  43,075,131  44,253,257  45,388,343   46,764,159

Total assets    $ 45,544,330  46,504,585  47,121,971  48,385,013   49,914,775

Distributions 
to Limited
Partners        $  5,114,958   4,596,013   4,385,352   4,236,355    4,141,081

Distributions 
per Limited
Partnership
Interest         $     19.91       17.89       17.07       16.49        16.12

Properties
owned on
December 31               24          24          24          24           24
<PAGE>


Item 7.     Management's Discussion and Analysis of Financial Condition and
	    Results of Operations


Summary of Operations

Improved market conditions in cities where many of Balcor/Colonial Storage 
Income Fund-86's (the "Partnership") properties are located and increased rental
income resulting from ongoing capital improvement programs were primarily 
responsible for the increases in net income generated by the Partnership in 
1995, 1994 and 1993.  No material events occurred during these periods which 
significantly impacted the net income of the Partnership.  Further discussion of
the Partnership's operations is summarized below.

Operations

1995 Compared to 1994

Rental income during 1995 increased when compared to 1994 primarily due to 
increased rental rates in Georgia and Florida.  Property management fees, which 
are 6% of gross mini-warehouse rents and 5% of gross office warehouse rents, 
increased correspondingly.

Interest income on short term investments increased from 1994 to 1995 due to an 
increase in cash available for investment and higher interest rates.


1994 Compared to 1993

Rental income increased during 1994 as compared to 1993 due to increased 
occupancies and rental rates, particularly in Kentucky, Tennessee, Georgia and 
Florida.  As a result of this increase, property management fees also increased 
during this period.

Due to higher interest rates and amounts available for investment, interest 
income on short term investments increased during 1994 as compared to 1993.

Increased payroll and maintenance expenses resulted in an increase in property 
operating expenses for 1994 as compared to 1993.  Payroll expenses increased due
to an increase in incentive payments to property managers and an increase in 
salary rates for new employees.  Maintenance expenses increased due primarily to
snow removal in February and March at sites in Wisconsin, Illinois, Ohio, 
Kentucky and Virginia.

The full amortization of non-compete agreements in 1993 resulted in a decrease 
in depreciation and amortization expenses in 1994 as compared to 1993.

General and administrative expenses increased during 1994 as compared to 1993 
primarily due to an increase in accounting and asset management costs.


<PAGE>
Liquidity and Capital Resources

The cash position of the Partnership increased from December 31, 1994 to 
December 31, 1995. The Partnership's cash flow provided by operating activities 
in 1995 was generated primarily by the operations of the mini-warehouse and 
office-warehouse properties and interest income earned on the Partnership's 
short-term investments, which was partially offset by administrative expenses.  
This cash flow was used in investing activities to make capital improvements to 
the properties and in financing activities to provide distributions to the 
Limited Partners.

Accounts receivable net of the related allowance for doubtful accounts 
increased from December 31, 1994 to December 31, 1995 due to the level and 
timing of collection efforts.  The timing of collection efforts are determined 
by individual state law.  There have been no changes in the credit terms 
extended to the Partnership's customers nor in the method used to allow for 
doubtful accounts.

In January 1996, the Partnership paid $1,446,370 ($5.63 per Interest) to the 
Limited Partners, representing the distribution for the fourth quarter of 1995. 
Quarterly distributions increased from $5.31 per Interest for the third quarter 
of 1995 to $5.63 per Interest for the fourth quarter of 1995 due to improved 
operating results at several of the Partnership's mini-warehouse facilities.  
Including the January 1996 distribution, the Partnership has  distributed 
$147.19 per $250 Interest, of which $145.80 represents Net Cash  Receipts and 
$1.39 represents Net Cash Proceeds.  It is anticipated that, in the event the 
sale of the Partnership's mini-warehouse facilities as discussed in Item 1 is 
consummated, Net Cash Proceeds and remaining Net Cash Receipts will be 
distributed to the Limited and General Partners in accordance with the 
Partnership Agreement and the Partnership will be dissolved.  Should the sale 
not be consummated, the General Partners believe the cash generated from 
property operations should enable the Partnership to continue making quarterly 
distributions to Limited Partners.  However, the level of future cash 
distributions to Limited Partners will be dependent upon the amount of cash flow
generated by the Partnership's properties as to which there can be no assurance.
Pursuant to the Partnership Agreement, the General Partners are entitled to 10% 
of Net Cash Receipts available for distribution, subject to certain 
subordinations in the periods following the termination of the offering.  From 
the inception of the offering through December 31, 1995, the General Partners' 
share of Net Cash Receipts totaled approximately $4,040,000, of which $3,410,000
is subordinated.  The General Partners are entitled to receive such subordinated
amounts only from distributed Net Cash Proceeds.

The General Partners intend to retain on behalf of the Partnership cash 
reserves deemed adequate to meet working capital requirements as they may 
arise.

In 1995 the Financial Accounting Standards Board issued Statement SFAS No. 121 
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets 
to be Disposed Of".  SFAS No. 121 requires that long-lived assets and certain 
intangibles be reviewed for impairment whenever events or changes in 
circumstances indicate that the carrying amount of an asset may not be 
recoverable.  The Partnership periodically reevaluates the carrying amounts of 
its long-lived assets and the related depreciation and amortization periods as 
discussed in the notes to the Partnership's Financial Statements, and the 
Partnership believes that the adoption of SFAS No. 121 will not have a material 
effect on its financial statements.

Inflation has several types of potentially conflicting impacts on real estate 
investments.  Short-term inflation can increase real estate operating costs,  
which may or may not be recovered through increased rents and/or sales prices, 
depending on general or local economic conditions.  In the long-term, inflation 
can be expected to increase operating costs and replacement costs and may lead 
to increased rental revenue and real estate values.


Item 8.     Financial Statements and Supplementary Data

See Index to Financial Statements on Page F-1 of this Form 10-K.

The supplemental financial information specified by Item 302 of Regulation S-K 
is not applicable.

The net effect of the differences between the financial statements and the tax 
information is summarized as follows:

			       December 31, 1995          December 31, 1994     
			    Financial        Tax       Financial        Tax
			    Statements      Return     Statements      Return   

Total assets               $45,544,330   56,757,543    46,504,585   57,361,197
Partners' capital accounts:               
    General Partners       $   220,783      246,046       178,093      199,771
    Limited Partners       $44,451,350   55,641,300    45,340,046   56,174,980
Net income:
    General Partners       $    42,690       46,276        39,099       42,438
    Limited Partners       $ 4,226,262    4,581,277     3,870,779    4,201,322
    Per Limited Partnership
      Interest             $     16.45        17.83         15.07        16.35



Item 9.     Changes in and Disagreements with Accountants on Accounting and
	    Financial Disclosure

There have been no changes in or disagreements with accountants on any matter
 of accounting principles, practices or financial statement disclosure.


<PAGE>
				    PART III




Item 10.     Directors and Executive Officers of the Registrant

(a)     Neither the Registrant nor Balcor Storage Partners-86, one of the 
	General Partners, has a Board of Directors.

	The other General Partner, Colonial Storage 86, Inc., has a Board of
	Directors.  The sole member is James R. Pruett (see b, c, e, & f
	below) who has been a director since the formation of Colonial Storage
	86, Inc.

(b,c,
&e)     The names, ages, and business experience of the executive officers and
	significant employees of the General Partners of the Registrant are as
	follows:

	Balcor Storage Partners-86

		   TITLE                                      OFFICERS  

	Chairman, President and Chief                   Thomas E. Meador
	  Executive Officer                             
	Senior Vice President                           Alexander J. Darragh
	Senior Vice President                           Josette V. Goldberg
	Senior Vice President                           Alan G. Lieberman
	Senior Vice President, Chief                    Brian D. Parker
	 Financial Officer, Treasurer
	 and Assistant Secretary
	Senior Vice President                           John K. Powell, Jr.


	Thomas E. Meador (July 1947) joined Balcor in July 1979.  He is
	Chairman, President and Chief Executive Officer and has responsibility
	for all ongoing day-to-day activities at Balcor.  He is a Director of
	The Balcor Company.  He is also Senior Vice President of American 
	Express Company and is responsible for its real estate operations 
	worldwide.  Prior to joining Balcor, Mr. Meador was employed at the
	Harris Trust and Savings Bank in the commercial real estate 
	division where he was involved in various lending activities.  Mr.
	Meador received his M.B.A. degree from the Indiana University Graduate
	School of Business.

	Alexander J. Darragh (February 1955) joined Balcor in September 1988
	and is responsible for due diligence analysis and real estate advisory
	services for Balcor and American Express Company.  He also has  
	supervisory responsibility of Balcor's environmental matters.  Mr. 
	Darragh received masters' degrees in Urban Geography from Queen's 
	University and in Urban Planning from Northwestern University.

	Josette V. Goldberg (April 1957) joined Balcor in January 1985 and has
	primary responsibility for all human resources matters.  In addition,
	she has supervisory responsibility for Balcor's MIS functions.  Ms. 
	Goldberg has been designated as a Senior Human Resources Professional 
	(SHRP).

	Alan G. Lieberman (June 1959) joined Balcor in May 1983 and is
	responsible for the Balcor's property sales and capital markets 
	functions.  Mr. Lieberman is a Certified Public Accountant.
 
	Brian D. Parker (June 1951) joined Balcor in March 1986 and, as Chief 
	Financial Officer and Chief Accounting Officer, is responsible for 
	Balcor's financial, legal and treasury functions.  He is a director of 
	The Balcor Company.  Mr. Parker is a Certified Public Accountant and 
	holds an M.S. degree in Accountancy from DePaul University.
 
	John K. Powell, Jr. (June 1950) joined Balcor in September 1985 and is
	responsible for portfolio and asset management matters relating to
	Balcor's partnerships.  Mr. Powell also has supervisory responsibility
	for Balcor's risk management and investor services functions.  He
	received a Master of Planning degree from the University of Virginia.
	Mr. Powell has been designated a Certified Real Estate Financier by
	the National Society for Real Estate Finance and is a full member of
	the Urban Land Institute.


	Colonial Storage 86, Inc.

	     Name                                       Title   

	James R. Pruett                 President, Vice President, Director
	James N. Danford                Secretary, Treasurer



	James R. Pruett (September 1942) received his Bachelor of Science 
	degree from McMurry College in Abilene, Texas, in 1965. Mr. Pruett is 
	President and a Director of Colonial Storage 85, Inc., which serves as
	a General Partner of Balcor/Colonial Storage Income Fund - 85 
	(BCSIF-85).  Mr. Pruett developed the first Atlanta, Georgia, Colonial 
	Self Storage mini-warehouse facility in 1972.  Since that time, he has 
	handled substantially all business aspects of mini-warehouse
	development, construction, operation, and management.  Mr. Pruett has 
	directed the site selection and development or acquisition of numerous 
	locations for mini-warehouses and office warehouses.  Mr. Pruett is 
	President and a Director of Colonial Storage Management 85, Inc.
	("CSM-85) and Colonial Storage Management 86, Inc.("CSM-86), which 
	manage the properties of BCSIF-85 and the Registrant, respectively. 
	
	James N. Danford (January 1959) received his Bachelor of Business
	Administration degree from The University of Texas at Arlington. 
	Mr. Danford was a senior accountant with a public accounting firm
	prior to joining Colonial Storage Centers in June of 1986. 
	Mr. Danford is a Certified Public Accountant, member of the Texas
	Society of Certified Public Accountants, and is chief financial
	officer of CSM-86, Registrant, BCSIF-85 and CSM-85.

	The sole director of Colonial Storage 86, Inc. is not a director in
	any company with a class of securities registered pursuant to Section
	12 of the Securities Exchange Act of 1934 or subject to the
	requirements of Section 15 (b) of the Act or any company registered as
	an investment company under the Investment Company Act of 1940, but is
	a director of one other corporation which acts as a general partner of
	a limited partnership which has a class of securities registered
	pursuant to Section 12 of the Act.

(d)     There is no family relationship between any of the foregoing officers
	or director.

(f)     To the best of the Registrant's knowledge, there have been no events
	under any bankruptcy act, no criminal proceedings, and no judgments
	or injunctions material to the evaluation of the ability and integrity
	of any current director or executive officer of Colonial Storage
	Management 86, Inc., Colonial Storage 86, Inc., or any current
	executive officer of Balcor Storage Partners-86, during the past five
	years.

Item 11.     Executive Compensation

(a,b,c,
d&e)    The Registrant has not paid and does not propose to pay any
	remuneration to the executive officers and directors of the General
	Partners.  Certain of these officers receive compensation from The
	Balcor Company and Colonial Storage 86, Inc. (but not from the
	Registrant) for services performed for various affiliated entities,
	which may include services performed for the Registrant.  However, the
	General Partners believe that any such compensation attributable to
	services performed for the Registrant is immaterial to the Registrant. 
	See Note 2 of Notes to Financial Statements for the information
	relating to transactions with affiliates.


Item 12.     Security Ownership of Certain Beneficial Owners and Management

(a)     As of December 31, 1995 no person owns of record or is known by the 
	Registrant to own beneficially more than 5% of the outstanding Limited
	Partnership Interests of the Registrant.

(b)     Balcor Storage Partners-86 and Colonial Storage 86, Inc. and their
	officers and director own no Limited Partnership Interests in the
	Registrant.

	Relatives and affiliates of the officers or director of the General
	Partners own no Limited Partnership Interests in the Registrant.

(c)     Registrant has executed a contract for the sale of all of the 
	Registrant's properties.  The Registrant is currently in the process
	of preparing the documents necessary to obtain the approval of the 
	Limited Partners for this transaction.  If such approval is obtained 
	from the Limited Partners, the properties will be sold, all available 
	proceeds will be distributed to the Partners in accordance with the 
	Partnership Agreement and the Registrant will be dissolved.

Item 13.     Certain Relationships and Related Transactions

(a &
b)      See Note 1 of Notes to Financial Statements for information relating
	to the Partnership Agreement and the allocation of distributions and
	profits and losses.

	See Note 2 of Notes to Financial Statements for additional information
	relating to transactions with affiliates.

(c)     No management person is indebted to the Registrant.

(d)     The Registrant has no outstanding agreements with any promoters.

<PAGE>
				    PART IV




Item 14.     Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)  (1&2)   See Index to Financial Statements on page F-1 of this Form 10-K.

     (3)     Exhibits:

	     (3)    The Amended and Restated Agreement and Certificate of
		    Limited Partnership set forth as Exhibit 3 to Amendment No.
		    1 to the Registrant's Registration Statement on Form S-11
		    dated October 10, 1986, (Registration No. 33-6669) is
		    incorporated herein by reference.

	     (4)    Form of Subscription Agreement previously filed as Exhibit
		    4.1 included in the Amendment No. 1 to the Registrant's
		    Registration Statement on Form S-11, dated October 10, 
		    1986, (Registration No. 33-6669) and Form of Confirmation  
		    regarding Interests in the Registrant set forth as Exhibit
		    4.2 to the Registrant's Report on Form 10-Q for the quarter
		    ended June 30, 1993 (Commission File No. 0-15639) are
		    incorporated herein by reference.


	     (27)   Financial Data Schedule of the Registrant for the year 
		    ended December 31, 1995 is attached hereto.


(b)  Reports on Form 8-K.

     No reports on Form 8-K were filed by the Registrant during the quarter
     ended December 31, 1995.


(c)  Exhibits:  See Item 14 (a)(3) above.


(d)  Financial Statement Schedules:  See Index to Financial Statements on
     Page F-1 of this Form 10-K.


<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange 
Act of 1934, the Registrant has duly caused this Report to be signed on its 
behalf by the undersigned, thereunto duly authorized.

				   BALCOR/COLONIAL STORAGE INCOME FUND -86



				   By:     /s/ James N. Danford             
					       James N. Danford
					       Secretary/Treasurer (Principal
					       Financial and Accounting
					       Officer) of Colonial Storage 86,
					       Inc., a General Partner
Date:  March 19, 1996           


Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.

	Signature                          Title                     Date
					   

		       President and Chief Executive Officer
		       (Principal Executive Officer) of Balcor
/s/ Thomas E. Meador   Storage Partners-86, a General Partner    March 19, 1996
    Thomas E. Meador

		       Senior Vice President, Chief
		       Accounting and Financial Officer
		       (Principal Accounting and Financial
		       Officer) of Balcor Storage Partners-86,
/s/ Brian D. Parker    a General Partner                         March 19, 1996
    Brian D. Parker



		       President and Director of Colonial
/s/ James Pruett       Storage 86 Inc., a General Partner        March 19, 1996
    James Pruett



		       Secretary/Treasurer (Principal Financial
		       and Accounting Officer) of Colonial
/s/ James N. Danford   Storage 86, Inc., a General Partner       March 19, 1996
    James N. Danford

<PAGE>
			 Index to Financial Statements 



								      Pages

Independent Auditors' Report                                           F-2

Financial Statements:

    Balance Sheets as of December 31, 1995 and 1994                    F-3
    
    Statements of Income, years ended December 31, 1995, 1994 
      and 1993                                                         F-4
    
    Statements of Partners' Capital, years ended December 31, 1995, 
      1994 and 1993                                                    F-5

    Statements of Cash Flows, years ended December 31, 1995, 1994 
      and 1993                                                         F-6

    Notes to Financial Statements                                  F-7 to F-10

Schedules are omitted for the reason that they are inapplicable or equivalent 
information has been included elsewhere herein.


<PAGE>
Financial Statements and Supplementary Data 

			 INDEPENDENT AUDITORS' REPORT


The Partners
Balcor/Colonial Storage Income Fund - 86:

We have audited the financial statements of Balcor/Colonial Storage Income 
Fund - 86 (an Illinois Limited Partnership) as listed in the accompanying 
index.  These financial statements are the responsibility of the Partnership's 
management.  Our responsibility is to express an opinion on these financial 
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.  
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial 
statement presentation.  We believe that our audits provide a reasonable basis 
for our opinion.

In our opinion, the financial statements referred to above present fairly, in 
all material respects, the financial position of Balcor/Colonial Storage Income
Fund - 86 as of December 31, 1995 and 1994, and the results of its operations 
and its cash flows for each of the years in the three-year period ended 
December 31, 1995, in conformity with generally accepted accounting principles.




					  KPMG Peat Marwick LLP


Fort Worth, Texas
February 9, 1996, except as to
Note 3 which is as of March 6, 1996


<PAGE>
		   Balcor/Colonial Storage Income Fund - 86
		      (An Illinois Limited Partnership)

				Balance Sheets

			  December 31, 1995 and 1994

							 1995           1994    
Assets  (note 3)
Cash and cash equivalents                           $  3,595,948      3,242,344
Accounts receivable, net of allowance for 
  doubtful accounts of $12,079 and $20,781 in 
  1995 and 1994, respectively                             87,047         72,413
Other                                                     92,649        114,697
						       3,775,644      3,429,454

Mini-warehouse facilities:
  Land                                                16,925,647     16,925,647
  Buildings                                           36,597,146     36,456,425
  Furniture, fixtures and equipment                      903,419        815,712
						      54,426,212     54,197,784
  Less accumulated depreciation                       12,657,526     11,122,653
  Mini-warehouse facilities, net of 
     accumulated depreciation                         41,768,686     43,075,131
						    $ 45,544,330     46,504,585

Liabilities and Partners' Capital (note 3)
Accounts payable                                    $     15,967         11,086
Due to affiliates (note 2)                                59,264        154,794
Accrued liabilities, principally real estate taxes       361,829        382,684
Security deposits                                         72,678         93,321
Deferred income                                          362,459        344,561
  Total liabilities                                      872,197        986,446

Partners' capital (256,904 Limited Partnership 
   Interests issued and outstanding)                  44,672,133     45,518,139
						    $ 45,544,330     46,504,585
















See accompanying notes to financial statements

<PAGE>

		   Balcor/Colonial Storage Income Fund - 86
		      (An Illinois Limited Partnership)

			    Statements of Income

		 Years ended December 31, 1995, 1994 and 1993

					      1995         1994         1993    
Income:         
   Rental                               $   8,821,564    8,385,428    7,703,850
   Interest                                   145,334       96,709       59,644
					    8,966,898    8,482,137    7,763,494
   
Expenses:
   Property operating                       2,262,621    2,207,178    2,118,600
   Depreciation and amortization            1,534,873    1,508,081    1,704,614
   Property management fees (note 2)          495,531      477,153      447,627
   General and administrative (note 2)        404,921      379,847      343,538
					    4,697,946    4,572,259    4,614,379
      Net income                        $   4,268,952    3,909,878    3,149,115

Limited Partners' share of net income 
  ($16.45, $15.07 and $12.14 per 
   Interest for 1995, 1994 and 1993, 
   respectively)                        $   4,226,262    3,870,779    3,117,624
General Partners' share of net income          42,690       39,099       31,491
					$   4,268,952    3,909,878    3,149,115

























See accompanying notes to financial statements.

<PAGE>
		   Balcor/Colonial Storage Income Fund - 86
		     (An Illinois Limited Partnership)

		      Statements of Partners' Capital

		 Years ended December 31, 1995, 1994 and 1993

				       Limited        General
				       Partners       Partners        Total     

Balance at December 31, 1992        $ 47,333,008      107,503       47,440,511

Net income                             3,117,624       31,491        3,149,115

Cash distributions 
   ($17.07 per Interest)              (4,385,352)       -           (4,385,352)

Balance at December 31, 1993          46,065,280      138,994       46,204,274

Net income                             3,870,779       39,099        3,909,878

Cash distributions 
   ($17.89 per Interest)              (4,596,013)       -           (4,596,013)

Balance at December 31, 1994          45,340,046      178,093       45,518,139

Net income                             4,226,262       42,690        4,268,952

Cash distributions 
   ($19.91 per Interest)              (5,114,958)       -           (5,114,958)

Balance at December 31, 1995        $ 44,451,350      220,783       44,672,133





















See accompanying notes to financial statements.

<PAGE>
		   Balcor/Colonial Storage Income Fund - 86
		      (An Illinois Limited Partnership)

			  Statements of Cash Flows

		 Years ended December 31, 1995, 1994 and 1993

					      1995         1994        1993     
Operating activities:
   Net income                             $ 4,268,952    3,909,878   3,149,115
   Adjustments to reconcile net income to 
     net cash provided by 
      operating activities:
      Depreciation and amortization         1,534,873    1,508,081   1,704,614
      Net change in:
	 Net accounts receivable              (14,634)      10,490      12,330
	 Other assets                          22,048       22,563     (50,844)
	 Accounts payable                       4,881       (7,063)      7,442
	 Due to affiliates                    (95,530)     102,881      10,402
	 Accrued liabilities                  (20,855)     (11,587)    (63,197)
	 Security deposits                    (20,643)     (37,415)    (27,874)
	 Deferred income                       17,898       21,933      46,422
	   Net cash provided 
	      by operating activities       5,696,990    5,519,761   4,788,410
	 
Investing activities:
   Additions to mini-warehouse facilities    (228,428)    (329,955)   (365,528)
	   Net cash used in 
	      investing activities           (228,428)    (329,955)   (365,528)
   
Financing activities:
   Distributions to Limited Partners       (5,114,958)  (4,596,013) (4,385,352)
	   Net cash used in financing
	      activities                   (5,114,958)  (4,596,013) (4,385,352)
   
Net change in cash and cash equivalents       353,604      593,793      37,530
Cash and cash equivalents at 
   beginning of year                        3,242,344    2,648,551   2,611,021
Cash and cash equivalents at 
   end of year                            $ 3,595,948    3,242,344   2,648,551













See accompanying notes to financial statements.

<PAGE>
		   Balcor/Colonial Storage Income Fund - 86
		      (An Illinois Limited Partnership)

			Notes to Financial Statements

		      December 31, 1995, 1994 and 1993



(1)     Summary of Significant Accounting Policies

	(a)     Description of Partnership

		Balcor/Colonial Storage Income Fund - 86 (the
		"Partnership"), is a limited partnership formed in May 1986. 
		The Partnership Agreement provides that Balcor Storage
		Partners-86 (an Illinois general partnership) and Colonial
		Storage 86, Inc. (a Texas corporation) are the General
		Partners of the Partnership and provides for the admission
		of Limited Partners through the sale of up to 400,000
		Limited Partnership Interests at $250 per Interest, of which
		256,904 ($64,226,000) Limited Partnership Interests were
		sold prior to the termination of the offering.

		The principal purpose of the Partnership is to acquire,
		develop, own, maintain, operate, lease and hold for capital
		appreciation and current income, mini-warehouse facilities
		offering storage space for business and personal use and
		office/warehouses offering a combination of office and
		commercial warehouse space.  The Partnership acquired
		from affiliates four mini-warehouse facilities in 1986 and
		seven mini-warehouse facilities in 1987.  Additionally, the
		Partnership acquired from nonaffiliated parties four mini-
		warehouse facilities in 1987 and nine mini-warehouse 
		facilities in 1988.  These properties are located in various
		markets within the United States

	(b)     Allocation of Net Income and Profits

		The Partnership Agreement provides that net income (after
		a deduction for any incentive management fees) from
		operations shall be allocated 99% and 1% to the Limited
		Partners and General Partners, respectively.

		Additionally, when a property is sold or otherwise disposed
		of, the General Partners will be allocated profits equal to
		the greater of 1% of total profits or the amount of Net
		Cash Proceeds distributable to the General Partners from
		the sale (in excess of subordinated Net Cash Receipts,
		note 1(c)).

		The remainder of the profits will be allocated to the Limited
		Partners.

<PAGE>

		   Balcor/Colonial Storage Income Fund - 86
		      (An Illinois Limited Partnership)

			Notes to Financial Statements

	(c)     Cash Distributions

		Net Cash Receipts available for distribution from operations
		shall be distributed 90% to the Limited Partners and 10% to
		the General Partners, 9% as a partnership incentive
		management fee and 1% as their distributable share from
		operations.  Distributions from operations to the General
		Partners are subordinated to receipt by the Limited Partners
		of a Cumulative Distribution of 6% of Adjusted Original
		Capital ($63,868,903 at December 31, 1995) during the first
		twelve month period following the termination of the
		offering of Interests, 8% during the second twelve month
		period following the termination of the offering of Interests,
		and 10% during each twelve month period thereafter.

		Net Cash Proceeds from sales or refinancings shall be
		distributed first to the Limited Partners until they have
		received an amount equal to their Original Capital plus any
		deferred portion of the Cumulative Distribution.  If the
		receipt of any portion of the General Partners' 10% share of
		Net Cash Receipts from operations has been deferred
		(approximately $3,410,000 has been deferred as of
		December 31, 1995), then available Net Cash Proceeds shall
		thereafter be distributed to the General Partners to the
		extent of such deferred amounts.  Thereafter, remaining Net
		Cash Proceeds shall be distributed 85% to the Limited
		Partners and 15% to the General Partners.

	(d)     Cash and Cash Equivalents

		The Partnership considers all highly liquid investments with
		maturities at date of purchase of three months or less to be
		cash equivalents.


	(e)     Mini-Warehouse Facilities

		Costs associated with the appraisal and acquisition of mini-
		warehouse facilities are capitalized.

		The buildings, furniture, fixtures and equipment are
		depreciated using the straight-line method over their
		estimated useful lives ranging from 5 to 25 years.

		Maintenance and repairs are charged to expense when
		incurred.  Expenditures for improvements are charged to the
		related asset account.  

		The Partnership records its investments in real estate at cost,
<PAGE>                  
		  Balcor/Colonial Storage Income Fund - 86
		      (An Illinois Limited Partnership)

			Notes to Financial Statements

 
		and periodically reevaluates the propriety of the carrying
		amounts of its properties as well as the amortization period to 
		determine whether current events and circumstances warrant 
		adjustments to the carrying amounts or a revised estimate of the 
		useful life.  The Partnership compares the undiscounted future 
		net cash flows expected to result from the use of each of its 
		properties to the carrying amount of that property to determine 
		whether the Partnership shall recognize an impairment loss.  The 
		Partnership believes that no impairment has occurred and that no 
		reduction of the estimated useful lives is warranted.

		When properties are disposed of, the related costs and
		accumulated depreciation will be removed from the
		respective accounts, and any gain or loss on disposition will
		be recognized in accordance with generally accepted
		accounting principles.

	(f)     Income Taxes

		Taxable income or loss of the Partnership is includable in
		the income tax returns of the individual partners; therefore,
		no provision for income taxes has been made in the
		accompanying financial statements.

		The tax bases of the Partnership's assets and liabilities
		exceeded the amounts recorded in the Financial Statements
		at December 31, 1995 and 1994, by $11,213,213 and
		$10,856,612, respectively.

	(g)     Use of Estimates

		Management of the Partnership has made a number of estimates 
		and assumptions relating to the reporting of Assets and
		Liabilities to prepare these financial statements in conformity
		with Generally Accepted Accounting Principles.  Actual results 
		could differ from those estimates.

	(h)     Fair Value of Financial Instruments
    
		In accordance with the reporting requirements of Statement on
		Financial Accounting Standards No. 107, "Disclosures about Fair
		Value of Financial Instruments," the Partnership calculates the
		fair value of its financial instruments and includes this
		additional information in the notes to the financial statements
		when the fair value is different than the carrying value of 
		those financial instruments.  When the fair value reasonably 
		approximates the carrying value, no additional disclosure is 
		made.
<PAGE>
		  Balcor/Colonial Storage Income Fund - 86
		      (An Illinois Limited Partnership)

			Notes to Financial Statements


(2)     Transactions With Affiliates

	The Partnership has an agreement with Colonial Storage Management 86,
	Inc., an affiliate of Colonial Storage 86, Inc., a General Partner, to
	supervise and direct the business and affairs associated with the mini-
	warehouse and office/warehouse facilities for a fee of 6% and 5%,
	respectively, of the gross revenues of the facilities.

	Certain general and administrative expenses are reimbursed to 
	affiliates of the General Partners to cover administrative requirements
	of the Partnership.

	Fees and expenses paid and payable by the Partnership to affiliates for
	the years ended December 31, 1995, 1994 and 1993, are:

			      1995                1994              1993        
			Paid     Payable    Paid     Payable    Paid    Payable

	Property
	management
	fees          $ 573,655    40,619   396,555   118,743  444,086   38,145

	General and
	administrative
	expenses      $ 122,269    18,645   226,199    36,051  218,301   13,768


(3)     Subsequent Events

	On March 6, 1996 the Partnership entered into a purchase contract with 
	an unaffiliated third party to purchase the assets and liabilities
	related to all twenty four of its mini-warehouse facilities (the
	"Properties"), subject to certain contingencies, for cash of
	$67,100,000.  The contract contemplates that the sale of the Properties 
	will be consummated on May 15, 1996, but may, under certain limited 
	circumstances, be extended to not later than July 15, 1996.

	The sale of the Properties is contingent upon, among other things, the
	completion of purchaser's satisfactory review of survey, title and 
	environmental matters.  Pursuant to the contract, the results of such
	review may cause adjustments to the final purchase price or, in certain
	events, could result in the termination of the purchase contract. 
	Additionally, the Partnership Agreement requires the approval of the
	holders of a majority of the then outstanding Interests for any such 
	sale. If such approval is obtained from the Limited Partners, the 
	Properties will be sold, all available proceeds will be distributed to 
	the Partners in accordance with the Partnership Agreement and the 
	Partnership will be dissolved.