How can I turn a rare item into a rare magic item?

I turned a silk vest into a rare, and then later found that I could not change it into a magic item, because it isn't normal.

Is there a way to turn a rare item into a magic item?

It was normal before I made it rare, so I think that if I had known before hand, I would have been able to make it magic, and then make it rare. I only started playing the game recently, so I have no idea of how things work.

The reason I was trying to turn it into a magic item is because when I used an orb of augmentation on it the message said "failed to apply item: target is not magic", I also tried to use an orb of alteration and it said the same thing.

While Samyam's answer is full of good information, it doesn't fully answer the question, which is "can I turn a Rare (yellow) item into a Magic (blue) item?".

The answer is yes, but it takes two steps:

1. Use an Orb of Scouring on the rare item to remove all properties from the item, turning it into a normal (white) item.
2. Use an Orb of Transmutation to upgrade the normal item into a magical (blue) item.

This process will not change the item's quality, sockets, or links.

POE item tiers are pretty simple:

• Normal Items - Has 1 or no implicit modifier for the item.
• Magical Items - Has 2 additional modifiers for the item.
• Rare Items - Has upto 6 modifiers for the item.

You can use the following Orbs for modifying item rarity -

• Normal - Magical : Orb of Transmutation.
• Magical +1 Affix : Orb of Augmentation.
• Magical Reroll: Orb of Alteration
• Normal - Rare : Orb of Alchemy
• Magical - Rare: Regal Orb (Adds only 1 affix and leaves other affix slots open. Used in crafting)
• Rare Reroll: Chaos Orb
• Rare +1 Affix: Exalted Orb

You can read more here - http://pathofexile.gamepedia.com/Magic#Items