SecProbe.io

CORRESP
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Filed by Bowne Pure Compliance

RUSHALL & McGEEVER

    BRUCE J. RUSHALL

     A PROFESSIONAL LAW CORPORATION

    TELEPHONE: (760) 438-6855

    EILEEN L. McGEEVER

    6100 INNOVATION WAY

    FACSIMILE: (760) 438-3026

    LUCI M. MONTGOMERY

    CARLSBAD, CALIFORNIA 92009

    E-MAIL: rm@rushallmcgeever.com

December 30, 2008

United States Securities and Exchange Commission

450 Fifth Street NW

Mail Stop 4561

Washington, D.C. 20549

Attn: Ms. Kristina Aberg, Attorney-Advisor

    Re:

     NetREIT

Form 10

Filed May 6, 2008

File No. 001-39049

Ladies and Gentlemen:

This letter is in response to the Staff’s letter of September 26, 2008. The responses below
are presented in the same order as the Staff’s comments in that letter. Please note that
Registrant is filing a Form 10/A-2 in response to that letter. References in this letter to the
“Form 10” refer to that filing.

General.

1. Enclosed with this letter is a Certificate executed by Mr. Kenneth Elsberry, Registrant’s
Secretary, making the requested representations on behalf of Registrant.

2. We have filed the subject Amendment No. 2 as a 10-12B submission. EDGAR will not accept a
10-12G submission amendment if a 10-12G submission was not filed. As previously stated, we
inadvertently filed the Form 10 as a “10-12B”
submission. We have requested the EDGAR
Management Division to change the filing to the correct
“10-12G” submission. We have been advised by the Staff by
telephone that they cannot grant our requested post submission
change. We have requested the Staff’s guidance as how to best resolve
the error. We await the EDGAR Management Division’s response and will
proceed accordingly.

3. Registrant acknowledges the Staff’s comment regarding the requirements for Registrant’s
disclosure in its Form 10-QSB filing for the three months ended March 31, 2008 and the correction
to future filings will be made.

4. Registrant will be filing a 10-QSB/A-2 which includes revised certifications in compliance
with Item 308 of Regulation 8-K.

5. Set forth below is our analysis of (A) Registrant’s previous securities sales, (B) why
Registrant’s previous securities offerings should not be integrated, and (C) our analysis of
compliance with the 1933 Act should the offerings be integrated.

RUSHALL & McGEEVER

A PROFESSIONAL LAW CORPORATION

United States Securities and Exchange Commission

Attn: Ms. Kristina Aberg, Attorney-Advisor

December 30, 2008

Page 2

A. Prior Offerings of Securities.

1. Issuances Prior to 2005.

For the 6 months prior to January 1, 2005, Registrant issued securities only under its
Dividend Reinvestment Plan (“DRIP”). Registrant has sold its common stock to DRIP participants in
a continuous private offering which commenced in 2000 (the “DRIP PPO”). Prior to January 1, 2005,
sales in the DRIP PPO were made to a total of 69 different participants. We refer to these
participants as the “Original Participants”. These Original Participants are comprised mainly of
shareholders of CI Holding Company, an original
promoter of Registrant and an investor in Registrant’s common
stock. They were generally accredited investors and/or were registered
representatives and/or registered principals. These Original
Participants received common stock of Registrant in 2001
when CI Holding distributed Registrant’s common stock it owned as a dividend to its own common
stockholders. Original Participants also include Registrant’s officers and directors and
certain of its key employees. Registrant determined that 54 of the
Original Participants were
accredited investors and 15 were non-accredited investors. We refer to “accredited investor” as
being an accredited investor within the meaning of Reg. §
230.501 (a) of Regulation D and we refer to a
“non-accredited investor” as a person who is not an accredited investor.

2. Issuances Since January 1, 2005.

Since January 1, 2005, Registrant has issued its securities pursuant to one of four private
offerings as follows:

(a) Issuances under Registrant’s 1999 Flexible Incentive Plan (the “1999 FIP”).
Registrant issued securities under its 1999 Flexible Incentive Plan
(the “1999 FIP”) in a continuing private placement offering (the
“1999 FIP PPO”) as follows:

In
2005, Registrant issued Warrants for the purchase of
18,000 shares were issued to Registrant’s five (5) directors, including Mr. Heilbron who is also
Registrant’s CEO, and to Mr. Elsberry, its CFO. The Warrants were issued to Registrant’s
independent directors as compensation for services and to the other issuees as incentive
compensation. Mr. Elsberry is an accredited investor by reason of his income and net worth, and
each director is an accredited investor by definition under Rule 501.

Registrant issued no securities under the 1999 FIP PPO in 2006.

On January 1, 2007, Registrant issued a total of 14,237.35 shares of its restricted common
stock as follows: 1575 shares to each of its then 5 directors, including Mr. Heilbron, and its
CFO, Mr. Elsberry. Registrant issued the remaining 4,787.35 shares in varying amounts to 10 of its
employees.

RUSHALL & McGEEVER

A PROFESSIONAL LAW CORPORATION

United States Securities and Exchange Commission

Attn: Ms. Kristina Aberg, Attorney-Advisor

December 30, 2008

Page 3

On January 1, 2008, Registrant issued a total of 27,871 shares of its restricted stock as
follows: 3,000 shares to each of its then 5 directors, including
Mr. Heilbron, and to its CFO, Mr.
Elsberry. Registrant issued the remaining shares in various amounts to 9 of its employees.

The restricted common stock issued under the 1999 FIP is subject to a 3-year to 5-year vesting
schedule. Registrant relied on the exemption under Rule 701 and Section 402 of the 1933 Securities
Act for its issuances of securities under the 1999 FIP.

(b) Issuances of Common Stock, Series AA Preferred Stock and common stock purchase options
under a private placement offering which commenced on February 15, 2005 and terminated in October,
2007 (the “2005 PPO”). In the 2005 PPO, Registrant sold a total of $9,350,000 of its
securities to a total of 316 investors, eighteen (18) of whom were
non-accredited investors.

(c) Issuances of Common Stock under a private placement offering which commenced
immediately upon termination of the 2005 PPO in October 2007 and is continuing (the “2007
PPO”). In the 2007 PPO to date, Registrant has sold a total of $42,528,170 of its securities
to a total of 1,411 investors, one (1) whom is a
non-accredited investor.

(d) Issuances of Common Stock under Registrant’s DRIP PPO. From January 1, 2005
through October 31, 2008, Registrant issued a total of 231,904
shares of its common stock common under its DRIP PPO to the 69 Original
Participants, 15 of whom were non-accredited Investors, and to an additional 353 participants who purchased common stock in the 2005 PPO and the 2007 PPO (“New
Participants”). These issuances are summarized in the following table.

    Total No. of

    Total

    Total

    Total No. of

    Total No.

    New Non-

    No. of

    No. of New

    Different

    Common

    of New

    Accredited

    Original

    Non-Accredited

    Non-Accredited

    Year

    Shares Issued

    Participants

    New Investors*

    Participants

    Original Participants

    Investors

    2005

    717

    6

    None

    69

    15

    15

    2006

    15,328

    129

    9

    69

    15

    24

    2007

    96,949

    287

    None

    69

    15

    24

    2008
(through November 15)

    118,910

    353

    None

    69

    15

    24

Thus, from
inception of the DRIP PPO to the present, there have been a total of
422 issuees in the DRIP PPO, 24
of whom are non-accredited investors. We determine this as follows: From inception of the Plan in
2000 to the present, Registrant has sold common stock to a total of 69 Original Participants and
353 New Participants who purchased common stock in the 2005 PPO and/or the 2007 PPO. Of the
Original Participants, 47 were accredited investors and 15 were non-accredited investors. Of the
New Participants, all except 9 were accredited investors.

RUSHALL & McGEEVER

A PROFESSIONAL LAW CORPORATION

United States Securities and Exchange Commission

Attn: Ms. Kristina Aberg, Attorney-Advisor

December 30, 2008

Page 4

B. Argument against Integration of the Offerings.

(i) Integration of the 2005 PPO with the 2007 PPO. Registrant’s argument for not
integrating the 2005 PPO and the 2007 PPO is not strong based on the criteria for
integrating offerings set forth in Rule 502(a).

    •

    These offerings involved a similar plan of financing.

    •

    The same or similar class of equity securities was issued in both
offerings.

    •

    Securities were sold in the two offerings for the same type of
consideration, i.e, cash.

    •

    The financing plan for each offering was for the same general purpose; and

    •

    There was not a significant delay between the end of the first offering
and the start of the second.

(ii) Integration of the DRIP PPO with the
2005 PPO and the 2007 PPO. Registrant
believes that the DRIP PPO should not be integrated with the 2005 PPO and/or the 2007 PPO as it is a
separate and distinct offering because, among other factors:

    •

    The DRIP PPO involved a different plan of financing. The
securities were sold to existing shareholders.

    •

    Registrant did not pay commissions in the offering.

    •

    The purpose of the DRIP PPO is to save administrative costs of
paying cash distributions and to provide incremental amounts of cash to offset
operating costs. The purpose of the 2005 PPO and the 2007 PPO were to raise
substantial amounts of capital to expand Registrant’s capital investments.

    •

    The plan of distribution, plan of marketing and price for the
common shares under the DRIP PPO are different from both the 2005 PPO and the
2007 PPO.

    •

    The DRIP PPO is not part of a single plan of financing with
either the 2005 PPO or the 2007 PPO.

(iii) Integration of the
1999 FIP PPO with one or more of the other three PPOs. Registrant believes
that integration of the 1999 FIP PPO with any of the other PPOs is not warranted because:

    •

    The issuances of warrants and restricted stock under the 1999
FIP PPO are
not part of a single plan of financing with either the 2005 PPO or
the 2007 PPO;

    •

    Securities sold in the 1999 FIP PPO either did not include the same class of securities
(i.e., warrants versus immediate stock purchase) or included common
stock subject to
substantial restrictions (i.e., a multiple year vesting period);

RUSHALL & McGEEVER

A PROFESSIONAL LAW CORPORATION

United States Securities and Exchange Commission

Attn: Ms. Kristina Aberg, Attorney-Advisor

December 30, 2008

Page 5

    •

    The consideration for the securities sold is substantially
different. The other PPOs required cash consideration, while consideration for
the restricted stock was service compensation and incentive for services; and

    •

    The sales of securities in the 1999 FIP PPO was for a different
purpose. Sales under the 1999 FIP PPO were for the sole purpose of providing
compensation or providing incentive for future services to Registrant’s board of
directors, chief executive officer, and chief financial officer. Sales of
securities in the other PPOs were generally for the purpose of raising capital to
fund Registrant’s investments and/or operations.

Registrant believes that issuances made under the 1999 FIP PPO prior to Registrant’s
registration under Section 12 of the 1934 Act were also exempt pursuant to Rule 701.

C. 1933 Act Compliance if Offerings Integrated.

The only securities Registrant issued during the 6 months prior to January 1, 2005 were under
the 1999 FIP PPO and the DRIP PPO. From January 1, 2005 to the present, Registrant has continued
to issue securities in each of these offerings and under the 2005 PPO and then the 2007 PPO. Thus,
these four offerings constitute all of the offerings which are subject to possible integration
since January 1, 2005.

    •

    1999 FIP PPO. For reasons discussed above, the 1999 FIP
PPO should not be integrated with the others. Also, sales under the FIP PPO should not be integrated with one of more of the other PPO’s by reason
of Rule 502(a) of Regulation D as they constituted sales under an employee benefit plan defined under Rule 405 under the 1933 Securities Act.

    •

    DRIP PPO. As described above, sales of common stock under
the DRIP PPO have been made from its inception to the present to a total of
fifteen (15) non-accredited investors, not including the non-accredited investors
who purchased securities in the 2005 PPO and/or the 2007 PPO.

    •

    2005 PPO. There were a total of eighteen (18)
non-accredited investors.

    •

    2007 PPO. There was a total of one (1) non-accredited
investor.

Based
on the foregoing, Registrant believes that only the DRIP PPO, the
2005 PPO and the 2007 PPO could potentially be
integrated. If these 3 offerings are integrated, the combined offering would still have been made
to no more than 35 non-accredited investors in total, that is 15 non-accredited purchasers under
the DRIP PPO, 18 non-accredited purchasers under the 2005 PPO and one non-accredited purchaser under the
2007 PPO.

RUSHALL & McGEEVER

A PROFESSIONAL LAW CORPORATION

United States Securities and Exchange Commission

Attn: Ms. Kristina Aberg, Attorney-Advisor

December 30, 2008

Page 6

Moreover, the other requirements of Rule 506 would have been met for each sale of securities
because:

    •

    Participants in the DRIP PPO and the 2005 PPO and 2007 PPO received
a Private Placement Memorandum meeting the requirements of Rule 501.

    •

    The private placement memorandums for both the 2005 PPO and the
2007 PPO described and covered issuances of additional common stock under
the DRIP.

    •

    A copy of the DRIP was included as an exhibit
to each of the private placement memorandums.

    •

    Each of these 3 offerings is being made and/or was made in
compliance with each of the other requirements of Rule 506 of Regulation D.

6. The Form 10 includes updated information, where appropriate, to a recent practicable date
under Risk Factors, Business Risk Factors, Directors and Executive Officers, Description of
Registrant’s Securities to be Registered and elsewhere.

Item 1A. Risk Factors.

Our common stock is subordinate to our Preferred Stock in rights to distributions, page 6.

7. The Form 10 now correctly and consistently refers to the liquidation of Series AA Preferred
Stock as $25.00 plus accrued dividends.

Terrorist attacks, such as the attacks that occurred in New York . . . ., page 11.

8. The Form 10 includes a discussion specific to risks to Registrant from the war on terrorism
and possible future terrorist attacks.

Item 2. Financial Information.

Management’s Discussion and Analysis of Financial Condition . . ., page 17.

9. The last sentence of the preamble of the MD&A at page 17 of the Form 10 is completed.

Overview and Background, page 17.

10. Page 17 of the Form 10 includes an explanation that the increase in Registrant’s capital
was due to the sale of Registrant’s stock and that the increase in Registrant’s investment
portfolio was due to Registrant’s use of funds provided by the increase in its capital and the
increase in notes payable.

RUSHALL & McGEEVER

A PROFESSIONAL LAW CORPORATION

United States Securities and Exchange Commission

Attn: Ms. Kristina Aberg, Attorney-Advisor

December 30, 2008

Page 7

Other Liquidity Needs, page 25.

11. Page 25 of the Form 10 includes an explanation that the cash distributions Registrant paid
during the year 2007 did not exceed net cash Registrant realized from operating activities and
proceeds Registrant received from the sale of real estate. During the year 2006 and prior periods,
Registrant paid cash distributions in excess of cash p