We even have cute little cards all over the house with surprise cool things we did to the house etc.

She has a social, a green card, and a job here in the US. 

You can ACH the rent directly out of their account, you can charge a credit card ... paysimple.com is the first hit on google for ACH .  

Last Christmas, I gave two of my best renters $50.00 gift cards to spend however they wished.

SO the question is how soon should I be creating an entity, LLC, creating a website, printing up business cards, marketing, etc.?

Leave your credit cards and any money in your wallet at home.

As soon as he points the finger that it's actually your house and you just had this arrangement in order to get money from the bank for doing work on your own house, your whole house of cards will come tumbling down.  

I think credit card debt is probably the obvious category that needs to be kept a little to zero balance due to typically high rates, but what about auto loans?

Either he or she or they, probably him, got mad and took it out on the property, if you knew about it sometime ago, you should have terminated the lease, committing a crime or assault or having a lover's spat isn't a free card to destroy the property anywhere.

I came out of the deal with 15k in equity but in the process I ran into a lot of unforseen issues that resulted in me maxing out my credit cards just to obtain the occupancy permit and to start prepping the house for resale.