I specialize in the condo and loft markets so I will only direct my answer to your question with regards to the condo market. Are 1 bedroom condos a bad investment..absolutely not! There is always a market for first time buyers that cannot afford to pay anymore than what 1 bedroom units are priced at. The key to any investment is timing! Perhaps the advice you have gotten comes from someone that just had bad timing with their purchase? When you are making a purchase, what is the inventory like? Are there many properties on the market where sellers are competing to get their unit sold? As an example, last week a small 630 square foot unit in South Waterfront went on the maket and was sold in 2 days and had 3 offers. Why? Because there are not many units like that on the market.
Keith below made a good comment about the time frame you are looking to hold it for. If it is very short term, you should not be looking for a strong return on your money...it could happen, but not likely. You should look at your purchase as a place where you will be living and a place you love to come home to at night. Sure, you want to make a great investment when you do make your purchase, and as an agent, my goal is to find you a great place at a good price.
Too many people the last10 years or so started to look at their home solely as an investment. Instead, it shoud be a place of enjoyment and relaxation. As for the investment side of things, I think your timing will be fine. Yesterday the Wall Street Journal published a report about if we have hit the "bottom" of the market? You can read more on this on my blog at http://www.TheCondoPulse.com
So, if a one bedroom is what you can afford and you also find the condo of your dreams at a good price... you will do just fine!
...and to Dirk, with no "disrespect" Ellie was looking for advice, not a report that may...or may NOT be more valuable than what people here have to say.