I lived in a 1-bedroom apartment with an 18month and 4yo for a year. You can do it. The little one was in a crib and the 4yo and I shared my bed or I slept on the couch. It was just fine. It was nice to be so close while going through a nasty divorce. Moved into a bigger place the following year, which was obviously less "cozy."

Hang in there. It gets easier.