Garage conversions are an interesting solution to add passive income, if you can decide where to put all the clutter that you have been storing there. This is one way to add an ADU that does not require taking up the backyard space.
As someone who lived in the 320 sf apartment for 11 years, of which 3 with two parents and a brother, and one with a friend, I know we can pack a lot into 300 square feet. Ours had a spacious multi-use room that was living room and bedroom depending on time of the day, we had a separate kitchen that doubled up as dining room, a nice size entry and a bathroom that doubled up as laundry.
Things you have to be super smart about in small spaces: storage, task lighting, patio (privacy?), functional furniture, laundry unit, kitchen appliances, air conditioning and heating.
If you are wondering what is possible in 300 sf, see the pre-designed unit by Modative – with plans, photos and even costs (though quoted for LA, they are indicative for the Bay Area as well).