How do I configure the Arduino IDE to look for source code in a subdirectory within the directory that holds my sketch?
The behavior of the Arduino IDE with this sort of thing has changed over time so it depends on which version of the Arduino IDE you're using. With recent versions you can put the files in a src subfolder of your sketch folder and then do:

#include "src/mylib1.h"


or:

#include "src/mylib1/mylib1.h"


depending on how you want to organize the folder structure.

When doing this you may find that Arduino libraries often use incorrect include syntax in their source code. For example in mylib1.cpp:


#include &lt;mylib1.h&gt;


although wrong, would still work if the library was located in one of the Arduino libraries folders but with the library located in the sketch folder this no longer works and you need to change it to:

#include "mylib1.h"