+1 on Craigs List. While my experience selling on Craigs List has been mixed at best (a lot of no shows), buying on Craigs List is a great option. If you watch it for a couple of weeks, you will quickly begin to figure out which bikes are the deals. There are always a lot of flat bar bikes on there, even if later you figure out it was a mistake, that can get you started. You should be able to find a good flat bar bike around $100, often even less.

Thrift stores are even cheaper yet, but you can end up looking for a while before anything decent appears. Garage sales are about the same as thrift store, really good deals when they are out there, but it can take a while.... My last garage sale bike buy was $10, for a pretty good bike that needed some TLC.