Where is this located? I want to make items from bone but need netch leather and haven't come across that at all in Skyrim so far. Any ideas where I could find some?

Kill Netches
Buy from Glover mallory
buy from the guy who moans about the East Empire Company. Something Alor is his name.

It's an item specific to Solstheim.

Like Michael said, you can kill the big floating Netches. They're relatively slow, but hit hard if they get close. Arrows from range aught to do the trick if you've got a decent Archery score or relative magical ability.

You can also buy them from the merchants on Raven Rock.

Other than that, random loot is the only way to get it, but Netch Leather won't appear in Skyrim proper, it's only going to appear on Solstheim.

Ah, fortunately I play on pc and have the Solstheim add on. I was going to head there to finish some uncompleted quests. Guess I have a reason to do them now. Thanks for the tips, guys!

No problem, and good hunting, Serjo!