Having the cot in our room worked well for us. I co-slept until DS was about 9 months, but then he got too wiggly and restless and I thought it was probably hindering our sleep more than helping. I moved his cot into our room (which is tiny too. I had to move out the bedside table on that side and push our bed up against the window) and put it right up against our bed. When I put him down at night, I could lay on our bed with my hand through the rail touching his hand until he would drift off. I really think he was ready to move into his own bed and he started sleeping longer almost straight away. A month later he was sleeping through and we could actually leave the room when we put him down and he would settle himself off to sleep! That was a real novelty when that started to happen!!
He slept in our room for about 4-5 months and then I moved is cot back to his own room and we've never looked back.