Old t-shirts or new ones on clearance can be a great cheap source of quality knit fabrics. Here are a few ideas to get the creativity flowing!
Reverse Appliqué Skirt(and other items) – Alabama Stitch book
Oh and a little secret…I buy my t-shirts from Rivers Online Clearance Shop. I know they are not used and some people like to do projects like this to be able to reuse something they or someone else was going to throw away but the quality of the Rivers fabric is great and they are cheap and i can get multiple shirts in the same colour for larger projects! Buy men's 3XL or the largest women's size you can find for lots of fabric to work with. If you keep an eye out you can even get them on sale…I got mine for $4 each a couple of weeks ago! Bargain!