At first I thought it was all in his head but looking back it seems to me to be a mix of fantasy and reality. Here is how I saw it when I watched the movie (haven’t read the book yet)
REALITY- The stained sheets that he brings to the dry cleaners (whoever he killed I’ve forgotten who it was). The homeless guy. The model he picks up in the nightclub (he’s playing with a lock of her hair)
FANTASY- Paul Allen (still sort of on the fence on this one) The prostitutes, the little old lady by the Atm, the cops, and the gard at the one building (this whole sequence just seems a little off, when he blew up the cop car even he looked suprised)