United States 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 March 31, 1998
                               
           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: 0-11779
                               
                               
                         S/M REAL ESTATE FUND VII, LTD.
              Exact Name of Registrant as Specified in its Charter


             Texas                                   75-1845682
 State or Other Jurisdiction of
 Incorporation or Organization             I.R.S. Employer Identification No.



5520 LBJ Freeway, Suite 500, Dallas, Texas               75240
Address of Principal Executive Offices                  Zip Code

                                 (214) 404-7100
               Registrant's Telephone Number, Including Area Code
                               
                               
                               
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 ____
                               
                               
                               
Balance Sheets                                     At March 31, At December31,
                                                          1998           1997
                                                    (unaudited)      (audited)
Assets
Real estate, at cost:
  Land                                             $   962,216    $   962,216
  Building and improvements                          7,663,486      7,663,486
                                                     8,625,702      8,625,702
  Less accumulated depreciation                     (5,293,059)    (5,199,331)

                                                     3,332,643      3,426,371

Cash and cash equivalents                              176,631        209,924
Cash held in escrow                                    113,267        201,966
Restricted cash - replacement reserve                  100,379         88,004
Accounts receivable                                      1,440          1,987
Other assets                                             5,571         13,928

     Total Assets                                  $ 3,729,931    $ 3,942,180

Liabilities and Partners' Deficit
Liabilities:
  First mortgage note payable                      $ 5,722,237    $ 5,738,101
  Second mortgage note payable (less
   unamortized discount based on imputed
   interest rate of 10.5% - $219,511)                  461,632        459,550
  Accounts payable:
    Trade                                               12,807          5,814
    Affiliates                                          40,664         40,664
  Accrued expense and other liabilities                111,051        210,422

     Total Liabilities                               6,348,391      6,454,551

Partners' Deficit:
  General Partners                                    (112,797)      (111,736)
  Limited Partners (11,080 units outstanding)       (2,505,663)    (2,400,635)

     Total Partners' Deficit                        (2,618,460)    (2,512,371)

     Total Liabilities and Partners' Deficit       $ 3,729,931    $ 3,942,180






Statement of Partners' Deficit (unaudited)
For the three months ended March 31, 1998

                                      General         Limited
                                     Partners        Partners           Total
Balance at December 31, 1997       $ (111,736)   $ (2,400,635)   $ (2,512,371)
Net loss                               (1,061)       (105,028)       (106,089)

Balance at March 31, 1998          $ (112,797)   $ (2,505,663)   $ (2,618,460)




Statements of Operations (unaudited)
For the three months ended March 31,                     1998            1997

Income

Rental                                             $  332,646      $  327,552
Interest and other                                      2,841           4,875

     Total income                                     335,487         332,427

Expenses
Property operating                                    170,348         158,256
Interest                                              153,611         154,890
Depreciation                                           93,729          93,010
General and administrative                             23,888          33,793

     Total expenses                                   441,576         439,949

     Net Loss                                      $ (106,089)     $ (107,522)

Net Loss Allocated:
To the General Partners                            $   (1,061)     $   (1,075)
To the Limited Partners                              (105,028)       (106,447)

                                                   $ (106,089)     $ (107,522)
Per limited partnership unit
(11,080 outstanding)                                  $ (9.48)        $ (9.61)



Statements of Cash Flows (unaudited)
For the three months ended March 31,                     1998            1997

Cash Flows From Operating Activities:
Net loss                                           $ (106,089)     $ (107,522)
Adjustments to reconcile net loss to net cash
used for operating activities:
  Depreciation                                         93,729          93,010
  Increase (decrease) in cash arising from
  changes in operating assets and liabilities:
    Cash held in escrow                                88,699         (15,483)
    Restricted cash - replacement reserve             (12,375)          6,532
    Accounts receivable                                   547             415
    Other assets                                        8,357           9,128
    Accounts payable                                    6,993           7,708
    Accrued expenses and other liabilities            (99,371)        (36,918)

Net cash used for operating activities                (19,510)        (43,130)

Cash Flows From Financing Activities:
Payments of principal on first mortgage
 note payable                                         (15,864)        (14,378)
Amortization of discount on second mortgage
 note payable                                           2,081           1,875

Net cash used for financing activities                (13,783)        (12,503)

Net decrease in cash and cash equivalents             (33,293)        (55,633)
Cash and cash equivalents, beginning of period        209,924         362,932

Cash and cash equivalents, end of period           $  176,631      $  307,299

Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest           $  153,611      $  154,890

Supplemental Disclosure of Non-Cash Investing Activities:
Write-off of fully depreciated
  building improvements                            $        _      $    5,783




Notes to the Financial Statements

The unaudited financial statements should be read in conjunction with the
Partnership's annual 1997 audited financial statements within Form 10-K.

The unaudited financial statements include all normal and reoccurring
adjustments which are, in the opinion of management, necessary to present a
fair statement of financial position as of March 31, 1998 and the results of
operations and cash flows for the three months ended March 31, 1998 and 1997
and the statement of partners' deficit for the three months ended March 31,
1998. Results of operations for the period are not necessarily indicative of
the results to be expected for the full year.

No significant events have occurred subsequent to fiscal year 1997, and no
material contingencies exist which would require disclosure in this interim
report per Regulation S-X, Rule 10- 01, Paragraph (a)(5).






Part I, Item 2.  Management's Discussion and Analysis of Financial Condition
                 and Results of Operations.

Liquidity and Capital Resources

The Partnership executed a modification and extension agreement (the
"Modification Agreement") on May 30, 1996 with Federal National Mortgage
Association (the "Lender"), the lender of the first mortgage secured by the
Partnership's sole remaining property, the Fifth Avenue Apartments located in
San Antonio, Texas (the "Property").  At the time the Modification Agreement
was executed the first mortgage had an aggregate balance of $7,111,142,
representing $5,830,000 in original principal and $1,281,142 in accrued
interest.  In accordance with the terms of the Modification Agreement, the
balance of the first mortgage remained $5,830,000, the interest rate was
reduced from 10.125% to 9.875%, and the first mortgage's maturity date was
extended five years to June 1, 2001 (the "New First Mortgage").  Pursuant to
the terms of the New First Mortgage, the Partnership is required to make fixed
monthly payments of principal and interest in the amount of $52,464.

As a condition of the New First Mortgage, the Partnership entered into a
Replacement Reserve and Security Agreement (the "Replacement Agreement") with
the Lender providing that, concurrently with the execution of the Replacement
Agreement, the Partnership was required to deposit with the Lender the sum of
$49,500 into a reserve account ("Replacement Reserve").  Per the terms of the
Replacement Agreement, on each date that a regularly scheduled payment of
principal or interest is due under the New First Mortgage, the Partnership
deposits with the Lender the applicable monthly deposit of $4,125.  On a
quarterly basis, provided that no default exists under the Replacement
Agreement, upon written request from the Partnership, the Lender shall disburse
amounts from the Replacement Reserve necessary to reimburse the Partnership for
the actual approved costs of replacements as determined by the Lender.  The
Replacement Reserve is reflected as "Restricted cash - replacement reserve" on
the Partnership's balance sheets.

The accrued interest on the first mortgage in the amount of $1,281,142 was
converted into a second mortgage which is coterminous with the New First
Mortgage (the "New Second Mortgage").  Upon execution of the Modification
Agreement, the Partnership made a $300,000 payment to the Lender, at which time
the Lender reduced the New Second Mortgage balance to $681,142. The New Second
Mortgage is non-interest bearing and is scheduled to be fully amortized over
the five-year term and is prepayable at any time.  Under the terms of the New
Second Mortgage, payments of principal, in monthly installments of $3,333 are
due on the first day of every month, commencing on July 1, 1996, and continuing
through June 1, 1998.  After that date, principal is payable in monthly
installments of $5,000 on the first day of every month, beginning July 1, 1998
and continuing through June 1, 2000.  After that date, principal is payable in
monthly installments of $8,333 on the first day of every month, beginning
July 1, 2000 and continuing until maturity on June 1, 2001.  The sum of the
total minimum monthly payments over the term of the New Second Mortgage is
$300,000. Pursuant to the Modification Agreement, if $500,000 in principal
payments have been received unconditionally and irrevocably by the Lender, the
New Second Mortgage's remaining unpaid principal in the amount $181,142 of
unpaid principal will be forgiven by the Lender.

It is anticipated that the Partnership will operate at a cash flow deficit
during 1998 in light of capital replacement reserve requirements at the
Property and general and administrative expenses of the Partnership.  It is
expected that cash flow deficits will be funded by the Partnership's existing
cash balances.  However, there can be no assurance that the Partnership will
have sufficient cash to fund such deficits.

Cash and cash equivalents totaled $176,631 at March 31, 1998, compared to
$209,924 at December 31, 1997.  The $33,293 decrease is primarily attributable
to cash used for operating and financing activities.

Cash held in escrow decreased from $201,966 at December 31, 1997 to $113,267 at
March 31, 1998.  The $88,699 decrease is primarily attributable to payments for
insurance and real estate taxes exceeding escrow contributions for insurance.

Restricted cash - replacement reserve increased to $100,379 at March 31, 1998,
from $88,004 at December 31, 1997.  The $12,375 increase is primarily
attributable to contributions to the replacement reserve, which were partially
offset by the release of replacement reserve funds to the Property, in
accordance with the terms of the Modification Agreement.

Other assets decreased from $13,928 at December 31, 1997, to $5,571 at
March 31, 1998.  The decrease is primarily due to a lower amount of prepaid
insurance.

Accounts receivable totaled $1,440 at March 31, 1998, compared to $1,987 at
December 31, 1997.  The decrease is primarily attributable to the timing of
tenant rental receipts.  Accounts payable totaled $53,471 at March 31, 1998,
compared to $46,478 at December 31, 1997.  The increase is primarily
attributable to the timing of payments associated with repairs and maintenance
for apartment preparation and replacements.

Accrued expenses and other liabilities totaled $111,051 at March 31, 1998,
compared to $210,422 at December 31, 1997.  The change is primarily
attributable to the timing of payments for real estate taxes, audit and tax
fees, and administrative costs.

Results of Operations

Results of operations resulted in a net loss of $106,089 for the three-month
period ended March 31, 1998, largely unchanged from a net loss of $107,522 for
the three-month period ended March 31, 1997.

Rental income at the Property totaled $332,646 for the three- month period
ended March 31, 1998, compared with $327,552 for the three-month period ended
March 31, 1997.  The increase is due primarily to higher average occupancy at
the Property during the 1998 period.  Occupancy at the Property averaged
approximately 95% for the three-month period ended March 31, 1998, compared to
approximately 94% for the corresponding period in 1997.  The average rental
income per occupied square foot at the Property was $8.25 for the three- month
period ended March 31, 1998, compared to $8.33 for the corresponding period in
1997.

Interest and other income totaled $2,841 for the three-month period ended
March 31, 1998 compared to $4,875 for the three- month period ended March 31,
1997. The decrease is primarily attributable to a lower average invested cash
balance during 1998.

Total expenses for the three-month period ended March 31, 1998 were $441,576
compared to $439,949 for the three-month period ended March 31, 1997.  The
increase is due to higher property operating expenses,  which were partially
offset by lower general and administrative expenses.

Property operating expenses consisted primarily of on-site personnel expenses,
utility costs, repair and maintenance costs, property management fees,
advertising costs, insurance and real estate taxes.  Property operating
expenses for the three-month period ended March 31, 1998 were $170,348 compared
to $158,256 for the three-month period ended March 31, 1997.  The increase is
primarily attributable to higher real estate taxes and personnel expenses,
which were partially offset by lower repairs and maintenance expenses and
administrative costs.

Interest expense totaled $153,611 for the three-month period ended March 31,
1998, largely unchanged from $154,890 for the corresponding period in 1997.

General and administrative expenses for the three-month period ended March 31,
1998 were $23,888 compared to $33,793 for the three-month period ended March
31, 1997.  The decrease is due primarily to lower administrative costs,
printing costs and professional fees.



Part II       Other Information

Items 1-5     Not applicable.

Item 6        Exhibits and reports on Form 8-K.

              (a)  Exhibits -

                   (27)  Financial Data Schedule

              (b)  Reports on Form 8-K - No reports on
                   Form 8-K were filed during the quarter ended
                   March 31, 1998.





                                   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.



                          S/M REAL ESTATE FUND VII, LTD.

                     BY:  SM7 APARTMENT INVESTORS INC.
                          General Partner
                               
                               
                               
Date:  May 14, 1998
                     BY:  /s/ Jeffrey C. Carter
                   Name:  Jeffrey C. Carter
                  Title:  Director and President



Date:  May 14, 1998
                     BY:  /s/ Timothy E. Needham
                          Timothy E. Needham
                          Vice President and Chief Financial Officer