Look hard to find bikes that are especially cheap (garage sales, thrift stores). Buy parts in bulk (like handlebar tape and ball bearings) on the internet. Private citizen bike flippers also seems to just love fixing up old bikes, it isn't a hugely profitable thing. Some people seem to do ok though.
Stores that sell used bikes, at least around here, charge way too much. It's what you pay for the privilege of not searching on craigslist and going to check out the bike yourself.