Since the garage was permitted, you should not tear it down. That permit gives you a bit of a fast track to converting it into an ADU. This is definitely more costly than tearing down and parking an airstream in place, you are exempt from lot-line setbacks and other restrictions that would exist if you were to try and build something from scratch. Though, since you already have a studio on the property, you may not be able to add density on your lot based on the zoning. A quick call to the city will give you that answer.
Generally, though, Oakland wants to see more legal dwelling units so there may be a way to work through this. I'd be happy to connect you with a few of my contacts and clients who have built ADUs and know the process. Feel free to DM me if you would like.
