FORM 10-Q
		      SECURITIES AND EXCHANGE COMMISSION
			    WASHINGTON, D.C. 20549

				  Form 10-Q

(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, 1996
						OR
	     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:  0-15639



		   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 Identification Number)
incorporation or organization)


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


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


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     .         
<PAGE>

		   Balcor/Colonial Storage Income Fund - 86
		      (An Illinois Limited Partnership)
			       Balance Sheets
		     September 30, 1996 and December 31, 1995

							1996
						     (Unaudited)         1995
Assets
Cash and cash equivalents                           $    329,210      3,595,948
Accounts receivable, net of allowance for doubtful
   accounts of $12,079 at December 31, 1995                -             87,047
Other                                                      1,312         92,649
							 330,522      3,775,644

Mini-warehouse facilities: 
  Land                                                     -         16,925,647
  Buildings                                                -         36,597,146
  Furniture, fixtures, and equipment                       -            903,419
							   -         54,426,212
  Less accumulated depreciation                            -         12,657,526
    Mini-warehouse facilities, net of accumulated
       depreciation                                        -         41,768,686
						    $    330,522     45,544,330

Liabilities and Partners' Capital
  Accounts payable                                  $      -             15,967
  Due to affiliates                                       36,747         59,264
  Accrued liabilities                                     23,368        361,829
  Security deposits                                        -             72,678
  Deferred income                                          -            362,459
  Total liabilities                                       60,115        872,197

Partners' (deficit) capital:
   Limited Partners'(256,904 Limited Partnership
     Interests issued and outstanding)                  (119,424)    44,451,350
   General Partners'                                     389,831        220,783
							 270,407     44,672,133
						    $    330,552     45,544,330













See accompanying notes to financial statements.
<PAGE>

		   Balcor/Colonial Storage Income Fund - 86
		      (An Illinois Limited Partnership)
			    Statements of Income
       For the Three Months and Nine Months Ended September 30, 1996 and 1995
				(Unaudited)

				    Three Months            Nine Months
				   1996         1995        1996        1995
Income:
   Rental                      $     9,009   2,267,978    3,413,252   6,585,687
   Interest on short term 
   investments                       5,403      38,142      275,865     108,279
   Other                            18,795       -           18 795       -    
				    33,207   2,306,120    3,707,912   6,693,966
   
Expenses:
  Property operating                10,682     581,010    1,064,071   1,753,820
  Depreciation and amortization      -         378,558      644,980   1,135,676
  Property management fees           -         125,889      200,352     372,884
  Incentive management fees          -           -          625,305       -
  General and administrative        31,776     101,076      389,247     319,026
				    42,458   1,186,533    2,923,955   3,581,406
				    (9,251)  1,119,587      783,957   3,112,560
Gain on sale of mini-warehouse 
  facilities                         -           -       23,068,686       -
    Net (loss) income          $    (9,251)  1,119,587   23,852,643   3,112,560

Limited Partners' share of net 
  (loss) income ($(0.03) and 
  $4.31 per Interest for the 
  three months ended 
  September 30, 1996 and 1995,
  respectively, and $91.92 and 
  $11.99 per Interest for the 
  nine months ended 
  September 30, 1996 and 1995,
  respectively)                $    (9,158)  1,108,391   23,614,117   3,081,434
General Partners' share of 
  net (loss) income                    (93)     11,196      238,526      31,126
			       $    (9,251)  1,119,587   23,852,643   3,112,560

Distributions to Limited 
  Partners ($4.97 per Interest
  for the three months ended 
  September 30,1995 and $265.41
  and $14.60 for the nine months
  ended September 30, 1996 and 
  1995, respectively)          $     -       1,276,813   68,184,891   3,750,798

Distribution to 
  General Partners             $     -           -           68,478       -  





See accompanying notes to financial statements.
<PAGE>

		   Balcor/Colonial Storage Income Fund - 86
		      (An Illinois Limited Partnership)
			  Statements of Cash Flows
	       For the Nine Months Ended September 30, 1996 and 1995
				(Unaudited)

							 1996            1995
Operating activities:
  Net income                                        $23,852,643       3,112,560
  Adjustments to reconcile net income to net cash
    provided by operating activities:
      Depreciation and amortization                     644,980       1,135,676
      Gain on sale of mini-warehouse facilities     (23,068,686)          -
      Net change in:
	Net accounts receivable                          87,047          (4,076)
	Other assets                                     91,337          (7,109)
	Accounts payable                                (15,967)        (11,086)
	Due to affiliates                               (22,517)        (95,036)
	Accrued liabilities                            (338,461)        212,175
	Security deposits                               (72,678)        (15,019)
	Deferred income                                (362,459)         53,029
	  Net cash provided by operating
	    activities                                  795,239       4,381,114

Investing activities:
  Proceeds from sale of mini-warehouse facilities    66,800,000           -
  Closing costs paid on sale of 
   mini-warehouse facilities                         (2,533,255)          -
  Additions to mini-warehouse facilities                (74,353)       (186,219)
    Net cash provided by (used in) 
     investing activities                            64,192,392        (186,219)

Financing activities:
  Distributions to Limited Partners                 (68,184,891)     (3,750,798)
  Distribution to General Partners                      (69,478)           -
    Net cash used in financing activities           (68,254,369)     (3,750,798)

Net change in cash and cash equivalents              (3,266,738)        444,097
Cash and cash equivalents at beginning of period      3,595,948       3,242,344
Cash and cash equivalents at end of period         $    329,210       3,686,441














See accompanying notes to financial statements.
<PAGE>

		   Balcor/Colonial Storage Income Fund - 86
		      (An Illinois Limited Partnership)
			Notes to Financial Statements




1)     Summary of Significant Accounting Policies

       In the opinion of management, all adjustments necessary for a fair
       presentation have been made to the accompanying statements for the
       three months and nine months ended September 30, 1996, and all such
       adjustments are of a normal and recurring nature.

2)     Sale of Mini-Warehouse Facilities

       In May, 1996 the Partnership sold to an unaffiliated third party 
       all twenty four of its mini-warehouse facilities for a net cash sales
       price of $66,800,000.  From the proceeds of the sale, the Partnership
       incurred closing costs of $2,533,255 including sales commissions of
       $2,004,000 paid to affiliates of the General Partners.  The basis in the
       properties was $41,198,059, which is net of accumulated depreciation of
       $13,302,506.  The sale resulted in a gain for financial statement
       purposes of $23,068,686.

3)     Transactions With Affiliates

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

       Fees and expenses paid and payable by the Partnership to affiliates
       for the nine months ended September 30, 1996 are:
					       Paid                  Payable
       Property management fees              $  241,728              $   -  
       Incentive management fees (A)            625,305                  -
       General and administrative expenses      204,857               36,747
       Sales Commissions (B)                  2,004,000                  -

       (A)  The General Partners are entitled to 10% of Net Cash Receipts
       available for distribution, subject to certain subordination levels
       following the termination of the offering.  During June 1996, the
       General Partners received $694,783; $625,305 as its incentive management
       fee and $69,478 as its distributive share of Net Cash Receipts.  From
       the inception of the offering through September 30, 1996 the General
       Partners' share of Net Cash Receipts totaled approximately $4,825,000 of
       which $3,863,000 was not paid.

       (B)  In accordance with the Partnership Agreement, affiliates of the 
	    General Partners received sales commissions in connection with the
	    sale of the mini-warehouse facilities.


4)     Subsequent Event

       In May, 1996 the Partnership sold all twenty-four of its mini-warehouse 
       facilities.  In October, 1996, the Partnership distributed $144,404 
       ($0.56 per Interest) to Limited Partners representing the final 
       distribution of proceeds remaining from the sale.  On October 31, 1996, 
       the Partnership was dissolved and the Partnership's registration under 
       Secuities and Exchange Act of 1934 was terminated.
<PAGE>

		    Balcor/Colonial Storage Income Fund - 86
		      (An Illinois Limited Partnership)
		     MANAGEMENT'S DISCUSSION AND ANALYSIS




Balcor/Colonial Storage Income Fund - 86 (the "Partnership") is a limited 
partnership formed in May 1986.  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 raised 
$64,226,000 through the sale of Limited Partnership Interests and utilized 
these proceeds to acquire from affiliates 4 mini-warehouse facilities in 
December 1986 and 7 mini-warehouse facilities in March 1987.  Additionally, 
the Partnership acquired from non-affiliated parties 4 mini-warehouse 
facilities in 1987 and 9 mini-warehouse facilities in 1988.  In May, 1996, the 
Partnership sold all 24 of its mini-warehouse facilities. 
 
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1995 for a more complete understanding of the
Partnership's financial position.


Operations

Summary of Operations

In May, 1996 the Partnership sold all of its mini-warehouse facilities to an 
unaffiliated third party.  This sale significantly impacted the net income of 
the Partnership for 1996.  Further discussion of the Partnership's operations 
is summarized below.

1996 Compared to 1995

Due to the sale of the Partnership's mini-warehouse facilities, rental income, 
property operating expenses, depreciation and amortization expense and property 
management fees decreased for the quarter and nine months ended September 30, 
1996 as compared to the same periods in 1995.

As a result of the investment of sale proceeds prior to distribution to 
partners, interest income on short-term investments increased for the nine 
months ended September 30, 1996 as compared to the same period in 1995, and 
decreased for the quarter ended September 30, 1996 as compared to the same 
period in 1995 due to the June, 1996 distribution to Partners of sales proceeds.

The Partnership incurred legal and other professional fees and printing and 
postage costs in connection with the tender offers during 1996.  As a result 
administrative expenses increased for the nine months ended September 30, 1996 
as compared to the same period in 1995.  Administrative expenses decreased for 
the quarter ended September 30, 1996 as compared to the same period in 1995 due
to reduced administrative requirements after the sale of the Partnership's 
mini-warehouse facilities in May, 1996.

Incentive management fees of $625,305 were earned by the General Partners 
during 1996 in accordance with the Partnership Agreement.  See Note 3 of Notes 
to Financial Statements for further information.



Liquidity and Capital Resources

The cash position of the Partnership decreased by approximately $3,267,000 from
December 31, 1995 to September 30, 1996.  The Partnership's cash flow provided 
by operating activities of $776,000 was generated primarily by the operations of
the mini-warehouse properties and interest income earned on the Partnership's 
short-term investments, which was partially offset by administrative expenses.
Investing activities consisted primarily of net sale proceeds received totaling
approximately $64,267,000 from the sale of the Partnership's mini-warehouse 
facilities.  Financing activities included distributions to the Limited and 
General Partners of approximately $68,254,000.

In May, 1996 the Partnership sold to an unaffiliated third party all of its 
mini-warehouse facilities for a net cash sales price of $66,800,000.  Sales 
proceeds were used to pay closing costs, including sales commissions of 
$2,004,000 paid to affiliates of the General Partners, totaling $2,533,255.
The majority of the proceeds, together with working capital reserves, were 
distributed to Limited Partners in June 1996.

In October 1996, the Partnership paid $144,404 ($0.56 per Interest) to Limited 
Partners.  This distribution represents the final distribution of sales 
proceeds.  Including the October distribution, Limited Partners received 
distributions of Net Cash Receipts of $154.23 and Net Cash Proceeds of $253.29 
totaling $407.52 per $250.00 Interest.  

Pursuant to the Partnership Agreement, the General Partners are entitled to 10%
of Net Cash Receipts available for distribution, subject to certain 
subordination levels.  The Limited Partners received distributions equal to the
subordination level for 1996 (distributions paid in July and October 1995, and 
January, April and June 1996).  The General Partners received $694,783 in June, 
1996 ($625,305 as its incentive management fee and $69,478 as its distributive 
share of Net Cash Receipts).  From the inception of the offering through 
September 30, 1996 the General Partners' share of Net Cash Receipts totaled 
approximately $4,825,000 of which $3,863,000 was subordinated.

On October 31, 1996, the Partnership was dissolved and Partnership's 
registration under the Securities and Exchange Act of 1934 was terminated.
<PAGE>

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

			  Part II - Other Information




Item 6.    Exhibits and Reports on Form 8-K

	   (a)   Exhibits:


		 (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 September 30, 1992
		       (Commission File No. 0-15639) are incorporated herein
		       by reference.

		 (27)  Financial Data Schedule of the Registrant for the
		       nine months ended September 30, 1996 is attached hereto.

	   (b)   Reports on Form 8-K:
		 There were no reports on Form 8-K filed during the quarter
		 ended September 30, 1996.

<PAGE>

				  SIGNATURES


       Pursuant to the requirements 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/ Thomas E. Meador
				Thomas E. Meador,
				President and Chief Executive Officer 
				(Principal Executive Officer) of Balcor 
				Storage Partners-86, a General Partner




			By: /s/ Jayne Kosik   
				Jayne Kosik,
				Chief Accounting and Financial Officer 
				(Principal Accounting Officer) of Balcor
				Storage Partners-86, a General Partner



					      
			By: /s/ James Pruett
				James Pruett,
				President and Director of Colonial
				Storage 86, Inc., a General Partner





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


November 12, 1996